According to data, more than a quarter of small and medium-sized businesses (SMEs) are thinking about switching to accounts provided by challenger banks.
Over half (51%) of SMEs want to switch banks this year, according to a poll of 500 senior decision-makers at SMEs conducted by the review website Smart Money People.
The findings showed that of these, 54% are thinking about switching to a challenger bank and 46% are thinking about switching to a conventional high street bank. According to the poll, 80% of SMEs presently employ the latter.
These challenger banks have low operating expenses and are user-friendly compared to regular ones. The rise of challenger banks has given rise to a new sector known as fintech, which operates with no branches and a small workforce thanks to technology and regulatory reforms.
However, clients frequently use them as a second spending account, conducting the majority of their banking with a sizable traditional bank while utilizing the digital bank for day-to-day purchases. They are also commonly thought of as banks for younger, more technologically advanced generations.
This is altering, however, as evidenced by the Competition and Markets Authority’s (CMA) ranking of SME business banking customer satisfaction from a year ago, which showed that digital challenger bank Starling topped the list in three of the four categories in which it was ranked for customer satisfaction.
According to Jacqueline Dewey, CEO of Smart Money People, these banks have been successful in luring customers, and companies may follow. According to our analysis, 2023 may be the year when small companies follow this pattern and switch to a banking solution that is frequently speedier and more practical. Dewey noted that the poll also revealed that SMEs are drawn to improved online banking facilities (33%) and better customer service (29%), in addition to cheaper fees (45%) and higher interest rates (33%), as the primary drivers of converting from a challenger bank to a business account.
As substantial investment continues to flow into the industry, more and more rivals are beginning to emerge. “In addition to the several well-known challenger banks and fintech, there are a rising number of even more recent suppliers, frequently dubbed “neo-banks,” who are also trying to draw in business clients,” she added.
The competitors have gained some credibility over the past ten or so years, but these neo-banks are still mostly unheard of in the small business banking sector.