Banks meeting the needs of small business

Survey finds most small business owners have a positive relationship with their financial institution

For Immediate Release
October 24, 2008

Toronto, ON – A recent survey by The Strategic Counsel, commissioned by the Canadian Bankers Association, found that the majority (80 per cent) of small and medium sized enterprise (SMEs) owners in Canada hold a positive view of the relationship they have with their bank. The study, conducted in August 2008, surveyed SMEs from a diverse range of business sectors in provinces across the country about their experiences with their financial institutions.

“The results of this survey are a testament to the strong relationship and breadth of services banks provide to small business owners across the country,” said Nancy Hughes Anthony, President and CEO of the Canadian Bankers Association. “Banks in Canada act as trusted advisors as well as partners, providing advice and insight and adapting to meet the unique needs of their small business clients, particularly given the current economic challenges facing businesses today.”

According to the survey, the vast majority of SME owners identified access to credit (89 per cent) and having a face-to-face relationship (88 per cent) as the two most important factors contributing to their overall impression of their financial institution. Being highly technologically advanced was also identified as an important factor by 78 per cent of respondents.

The survey data shows that financial institutions are meeting the needs of small businesses, contributing to their positive views of their financial institutions. Seventy-two per cent of respondents have a credit relationship with a financial institution and, of those who do, 87 per cent report that it is a positive relationship. And that positive experience means that SMEs stay with their credit providers. More than half (51 per cent) have had a credit relationship with their main financial institution for more than 10 years and 26 per cent for more than 20 years.

More than just credit

While credit is important, the survey also found that many SMEs turn to their banks for many of the other services and advice provided to small businesses. The study found that the most used services at their financial institutions are deposit services (82 per cent), transaction accounts (65 per cent) and payment facilitation (52 per cent). Cash management services, payroll and general business advice were also listed.

“This research highlights the fact that the relationship between banks and business owners is based on more than just lending,” said Ms. Hughes Anthony. “It is a competitive marketplace and banks in Canada are introducing innovative new products and services to meet the needs of SMEs. Forty per cent of our survey respondents have made use of different banking products in the past five years, so clearly they want innovations from their banks, and that’s what they’re getting.”

Most SMEs stay with their banks, but competition is strong

The study further found that the majority of SME owners are satisfied with their current financial service provider, indicated by the fact that two–thirds of business owners had never switched financial institutions and 29 per cent have been with the same financial institution for more than 20 years.

Among the one-third that had moved to a new financial institution, 49 per cent reported that it was easier than they expected, while fewer than one-in-ten found switching to be difficult, indicating that that there is strong competition among banks for SME customers. For those who did switch, most did so for improved service and or to get a better deal on credit or other banking services and they will shop around to find what they need.

Online banking – more popular and adds to efficiency

Asked to name the channels most commonly used for their day-to-day transactions, 83 per cent identified face-to-face banking. However, SME owners have found that new technologies in banking are saving them time and making their banking more efficient. The research also found online banking increasing in popularity. Access to online banking was cited by 54 per cent of respondents as their second most commonly used transaction. Among those using online banking, 57 per cent reported that their use had increased in the past two years and 88 per cent said it had made their business more efficient.

Other survey highlights

• Almost three-quarters of business owners (72 per cent) identify a bank as their business’ main financial institution.
• Almost nine-in-ten SMEs with a credit relationship describe the relationship between their businesses and their main financial institution as “good” or “very good.” In fact, the majority (52 per cent) of respondents with credit relationships describe the relationship as “very good.”
• When establishing a relationship with the main financial institution, 31 per cent chose that institution primarily for their credit services while 62 per cent chose it for non-credit banking services.
• Among those using online or Internet banking, the majority (57 per cent) report that their use of online banking has increased in the past two years. About four-in-ten (39 per cent) report that it has not changed. Only two per cent report that their use of online banking services has declined in the same period.
• One-third (34 per cent) of all businesses participating in the survey report that they have switched from one financial institution to another for some or all of their banking needs. Urban business representatives are more likely than their rural counterparts to have switched main financial institutions (40 per cent vs. 27 per cent respectively).
• Among those who have switched financial institutions, 43 per cent report that they considered only one financial institution when making their switch.
• Almost half of all switchers (49 per cent) report that the switching process was easier than they expected. In fact, one-third (36 per cent) report that it was “much easier” than they expected. Fewer than one-in-ten (nine per cent) of switchers report that the task of switching financial institutions was more difficult than they expected.

Survey methodology

The survey was commissioned by the Canadian Bankers Association and conducted by The Strategic Counsel. The findings are based on a random, representative sample of 200 SME business leaders from across Canada. Respondents were interviewed by telephone from August 5 to 15, 2008. A sample of 200 is accurate within +/-6.9 percentage points, 19 times out of 20.

The Canadian Bankers Association works on behalf of 51 domestic chartered banks, foreign bank subsidiaries and foreign bank branches operating in Canada and their 257,000 employees to advocate for efficient and effective public policies governing banks and to promote an understanding of the banking industry and its importance to Canadians and the Canadian economy.

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For more information:
Andrew Addison, Canadian Bankers Association
Tel: (416) 362-6093, ext. 220
Cell: (416) 587-7733
E-mail: aaddison@cba.ca