Micro businesses are the least loyal business banking customers, according to an East & Partners report, which shows corporates are by far the most loyal segment.
East & Partners’ Business Banking Index is a bi-monthly index of business customer behaviour toward their banks, based on interviews with more than 6,150 companies across four segments.
The segments are micro (with revenue from $1 million to $5 million), SMEs ($5-20 million), corporates ($20-530 million) and institutional businesses (upwards of $530 million).
The latest report reveals micro businesses are the least loyal to their “home” bank.
On a scale of 10 (not loyal) to 100 (very loyal), micro businesses scored 11.4 – only 1.4 points above the lowest possible loyalty score.
This score has fallen quite substantially. In May 2011, micro businesses scored 18.2 points, suggesting the banks have failed to win the hearts of their smallest business customers.
Micro businesses are followed by SMEs, which scored 16.3 points in May this year, down from 24.3 points in May 2011.
In contrast, loyalty among corporates has increased, from 47.9 points in May last year to 54.1 points in May this year.
But the trend didn’t continue – the loyalty score for institutional businesses fell from 29.5 points in May 2011 to 26.7 points last month.
East & Partners principal analyst Paul Dowling says there are large disparities across the business banking landscape.
“Corporate customers [are] between 4.7 and two times more loyal to their core banking relationship than other segments,” Dowling says.
“[That] clearly says something about the variation in experience that different kinds of customers are having with their banks.”
According to Dowling, there is an element of cynicism behind the loyalty measure, particularly among micro businesses.
“The other comment we hear a lot from the micro business segment is that they don’t feel a sense of trust in their banking relationship. It’s kind of broken,” he says.
“They’re also of the view that there is often no choice in a competitive sense, so it’s hard for them to shift banks, particularly if they have a credit relationship.”
“That kind of clumps the dynamics that sit behind this measure of loyalty.”
The news comes on the back of the latest Roy Morgan Research Business Banking in Australia Monthly Report for June.
Satisfaction among business customers of the four big banks was 63.5%, unchanged from May but slipping further behind the smaller banks who increased satisfaction by 0.4% to 65.9%.
In the micro business segment, Westpac remains the leader with 66.3%, followed by NAB (64.6%).
NAB has closed the gap considerably to Westpac over the last 12 months, having improved by 1.8% compared to a drop of 1.5% by Westpac.
The Commonwealth Bank currently ranks fourth in this segment (62%), which has a major impact on its overall performance in the business market due to the fact that almost 90% of businesses are in this segment.
It’s worth noting satisfaction among business customers remains well below the level of personal customers (around 14% lower) for all the major banks.
“The banks are doing a relatively poor job of meeting the more complex and potentially riskier needs of their business customers,” Roy Morgan’s Norman Morris says.