Start-ups face early bank battles: Report
Thursday, January 12, 2012/
Small businesses with turnovers up to $5 million typically stay with their main bank for 13-14 years, according to DBM Consultants, although most dissatisfaction occurs in the first year.
According to results from DBM’s Business Financial Services Monitor, the relationship between business customers and their main bank follows a “predictable pattern of highs and lows”.
The BFSM is based on an annual survey of 19,250 decision-makers in business banking, covering micros, SMEs, and corporate and institutional businesses.
DBM chief statistician John Hinchy says the relationship between businesses and their main bank nearly always begins with a honeymoon period of above-average satisfaction.
“This is followed by a period of falling satisfaction as reality sets in, and then finally a partial rebound as businesses reconcile themselves to the strengths and weaknesses of their new bank,” Hinchy says.
“What was interesting was how short is the honeymoon, and differences in the cycle with different kinds of banks.”
According to Hinchy, small businesses with turnovers up to $5 million stay with their main bank for an average of 13-14 years.
“However, most of the decline in satisfaction has occurred in the first year, particularly with businesses with turnovers of $1‐5 million,” he says.
“Satisfaction levels then remain relatively low, reaching their lowest level after 5‐10 years.”
“Satisfaction levels after that 5‐10 year period begin to rise again, however this could [be] due to the least satisfied businesses beginning to move on to another bank.”
Hinchy says while this classic pattern applies to the big four banks, the disappointment phase among the allied banks – subsidiaries such as Bankwest and St George – is a bit deeper.
“[However,] the later reconciliation is much stronger. Not only is lost satisfaction won back, but long‐term customers of the allied banks are actually more satisfied than when they began,” he says.
“This could be because the allied banks tend to lose their less satisfied customers in larger numbers and earlier, leaving a smaller but more satisfied core group.”
For the regional banks, including Bank of Queensland and Bendigo Bank, the initial honeymoon is followed by the same disappointment phase, but there is no subsequent reconciliation.
“It seems that businesses choosing regional banks don’t eventually see both the strengths and weaknesses,” Hinchy says.
“Therefore, it is not surprising that the regionals have the shortest average tenure as main banks – only eight years with their small business customers.”
The final group of banks, independents such as AMP Bank and ME Bank, follow a different pattern again.
While there is no honeymoon period for the independents, satisfaction levels actually increase over the 1‐2 years when they are falling with the other banks.
This is followed by a shallow decline, then a further substantial increase in satisfaction after 5‐10 years, leaving their long‐term business customers among the most satisfied of all banks.
“This is a pattern that seems directed towards retaining customers long‐term,” Hinchy says.
“Given that many of the independents have been on the scene for much less time than the larger, more established banks, their retention profiles seem to support that conclusion.”