While the lack of outright detractors is a good outcome, banks should reflect on the uniformity of responses across the industry. Every bank has a large vanguard of happy customers, a second cohort of somewhat satisfied 'fence sitters', and a small trailing group of detractors, in almost identical proportion. This means that, although 95% of SME customers are nominally satisfied, it is not necessarily due to the quality of any individual bank's products and services. It shows that average maturity levels across the board are good, but also that there is a sense of inertia in the industry.
Most banks offer indistinguishable services and customers see little difference or reason to switch. Indeed, 41% of survey respondents said they have perceived no improvements in their relationship with their bank since the Royal Commission, rising to 75% among sole traders. As a market segment that most banks are targeting for growth, this apathy should be a concern.
SME customers care most strongly about the trustworthiness of their business bank, and the overall quality and convenience of services. Despite the pervasiveness of digital banking today, technology and innovation still rank low in shaping SME customers’ opinions of their business bank. Traditional customer experience factors are the predominant drivers of positive opinion and higher customer satisfaction. These SME responses may explain why banks are competing on customer experience, while products and services remain undifferentiated due to lower emphasis on digital innovation.
Australian banks are offering SMEs an adequate but undifferentiated service. This leaves banks in a precarious situation, where any perceived damage to service quality – such as a cyber-attack, system outage or poor customer experience – could quickly lead to customer churn. For example, 60% of cyber-attack victims found their bank to be less than completely helpful in the aftermath. Banks who can build a more compelling, secure and supportive experience have an opportunity to make themselves the primary destination for SME switchers.
When asked about their preference for business banking, the majority of SMEs across all sizes prefer digital channels:
There remains a preference for mostly physical experiences among approximately 20% of SMEs. Banks should not take the preference for digital payments as a green light to shift exclusively to digital channels. Even among those SMEs who favour digital banking, 59% still recognise the importance of physical branches for certain services. What’s more, 54% of SMEs would consider switching bank if their local branch closed. A further 28% indicate that they would stay, but would be unhappy about the change. In total, 82% are effectively 'at risk' if their local branch closes.
Physical reliance poses a significant risk for banks. The reluctance to give up in-person banking services should be a concern for banks who don’t balance their branch closures with an adequate digital business transformation program. Customer retention in the SME segment is not based on deep loyalty, but on convenience.
One of the reasons why branch closures are so emotive for Australian customers is the sense that they are losing the option of ‘personal service’. To address this tension, banks must successfully recreate the benefits of personal service – authenticity, humanity, flexibility and active listening – on digital channels.
For example, 68% of SME customers report having sometimes used their bank’s chatbot service, with 91% finding it helpful. Artificial Intelligence can play a role here, helping banks to deliver convenient, accessible customer experiences across channels and at scale, while remaining cost-effective.
Retaining choice through omnichannel experiences remains important. The other element of traditional banking which still has a strong emotional resonance with customers – including SMEs – is access to physical cash. Half of SMEs (49%) receive more than a quarter of their revenue in cash. Somewhat counterintuitively, cash intake as a percentage of revenue was higher for larger businesses. This cash turnover is consistent with the services that SMEs use in physical branches too, where cash deposits and withdrawals (57%) and ATM services (38%) are the most common reasons to visit in person. More than half of SMEs (52%) also expect banks to continue offering cash services for at least another 10 years.
When it comes to eliminating cash services from bank branches, SMEs are almost evenly split in their attitudes, with 51% supporting and 49% opposing any move to stop offering cash services. Despite a desire for cash services availability to continue, most SMEs prefer to be paid via digital channels (78%). In fact, businesses who receive a higher percentage of their revenue in cash are more likely to prefer digital payments. This inverse correlation suggests that the concept of cash – especially the physical security that comes with it – is still strong, although perhaps in a nostalgic rather than practical sense. The more businesses are exposed to the operational burdens of managing cash, the more likely they are to recognise it as a challenge. But while digital channels may represent the future, it’s still important for banks to cater to all SME preferences, giving them the choice to bank however they prefer.
Cash services should be part of an omnichannel banking experience, even if actual usage continues to decline. This would promote a ‘channel of choice’ service strategy, help avoid any reputational damage to banks from prematurely removing popular services, and ultimately support customers to transition to payment methods that are more effective and efficient for everyone.
Breakdown of SME payment preferences:
We conducted this research into Australian business banking to help organisations like yours get a better understanding of your SME customers’ behaviours and attitudes. The next step is turning these insights into actionable strategies.
The insights shared in this report are just a few of the highlights from our research. To find out more, book a workshop with one of our financial services experts, who can share a deeper cut of the findings and provide analysis on how these trends specifically relate to your bank. We’ll also help you to identify the actions you can take today to begin building a differentiated competitive advantage through digital banking, AI and omnichannel experience transformation.
Publicis Sapient can support you to build a strategy for the future, invest ahead of the curve, develop and deliver innovative experiences, and position yourself for a competitive edge.
Our survey collected perspectives on the Australian banking industry from small- and medium-sized enterprises (SMEs) in July 2024. The survey covered 2,013 primary financial decision-makers, with either a controlling ownership or an equal partnership stake in the company, and a management role. All figures in this report are rounded to the nearest digit. This rounding means some charts do not sum to exactly 100%.
Survey respondent breakdown by business size:
Survey respondent breakdown by state:
Industry sectors represented:
Tales Sian Lopes
Head of Financial Services, Australia & New Zealand
e: tales.sianlopes@publicissapient.com
Andrew Lam-Po-Tang
Managing Director, Management Consulting, Australia & New Zealand
e: andrew.lam-po-tang@publicissapient.com
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