Small and medium-sized enterprises (SMEs) are the backbone of the Australian economy, representing a diverse and dynamic segment that drives innovation, employment, and growth. For commercial banks, SMEs are both a strategic growth opportunity and a customer group with unique needs and expectations. Yet, recent research reveals a paradox: while satisfaction levels among Australian SMEs are high, most perceive little differentiation between banks, and loyalty is fragile. This presents both a challenge and a significant opportunity for banks ready to rethink their approach.
Australian SMEs report high nominal satisfaction with their banks—95% are at least somewhat satisfied. However, this satisfaction is not rooted in exceptional service or innovative offerings. Instead, it reflects a market where most banks offer similar products and experiences, leading to a sense of inertia. Nearly 41% of SMEs say they have seen no improvement in their banking relationship since the Royal Commission, a figure that rises to 75% among sole traders. This lack of perceived progress and differentiation means that customer loyalty is shallow and can be easily disrupted by negative experiences, such as cyber-attacks or poor service.
Trustworthiness and service quality are the most important factors for SMEs when choosing a business bank, far outweighing technology or innovation. In fact, 79% of SMEs cite trust and service as their top priorities, while digital innovation ranks much lower. This suggests that while digital transformation is essential, it must be balanced with a relentless focus on building trust and delivering high-quality, convenient service.
Australian SMEs are increasingly digital in their banking preferences. Across all business sizes, a strong majority prefer digital channels for most interactions—ranging from 74% of medium businesses to 88% of sole traders. However, the story is more nuanced. Despite this digital preference, 59% of SMEs still value physical branches for certain services, and 54% would consider switching banks if their local branch closed. This highlights a critical tension: while digital is the default for many, the option of personal, in-person service remains a key component of perceived value and loyalty.
Banks that move too aggressively to close branches or eliminate physical services risk alienating a significant portion of their SME customer base. The lesson is clear: digital transformation must not come at the expense of personal service. Instead, banks should focus on creating seamless, omnichannel experiences that allow SMEs to choose how and where they engage, blending the efficiency of digital with the reassurance and flexibility of human support.
Despite the rise of digital payments—78% of SMEs express a preference for them—cash remains a significant part of the SME economy. Half of SMEs receive more than a quarter of their revenue in cash, and more than half expect banks to continue offering cash services for at least another decade. Larger businesses, in particular, report higher cash turnover. This underscores the importance of maintaining flexible, omnichannel payment and cash management solutions, even as digital adoption accelerates.
Banks must recognize that for many SMEs, the value of cash services is as much about security and choice as it is about practicality. Removing cash services too quickly could create operational challenges and erode trust. Instead, banks should support SMEs in transitioning to more efficient digital methods while ensuring that cash remains available for those who need it.
To win in the Australian SME market, banks must move beyond undifferentiated offerings and focus on the following strategic imperatives:
The Australian SME banking market is at a crossroads. While satisfaction is high, it is fragile and rooted in a lack of differentiation. Banks that can combine digital innovation with authentic, high-quality service—and that respect the ongoing role of physical channels and cash—will be best positioned to build lasting loyalty and capture growth. The opportunity is clear: by putting SME needs at the center, balancing digital and personal service, and investing in omnichannel and data-driven experiences, banks can move from being just another provider to becoming a trusted partner in the success of Australia’s SMEs.
Publicis Sapient stands ready to help banks navigate this transformation, leveraging deep regional expertise and proven frameworks to deliver the next generation of SME banking experiences.