Data from GlobalData’s 2022 Financial Services Consumer Survey finds that UK small and micro business account holders chose their business account based on the simple account-opening and onboarding procedure (38%) over schemes and packages introduced by banks to help grow SMEs (7%). The onboarding process to obtain business bank accounts at traditional banks is known to be complex and less transparent as with fintech providers that offer business banking.

Traditional banks in the UK have heavily promoted their add-on services as part of their business banking services, for example the collaboration with Virgin Startup and Virgin Money that helps small businesses scale and grow quicker. NatWest offers tools such as Business Builder that can help SMEs around ESG and areas of business growth, but as our data suggests, the onboarding process is what matters most to business account holders.

The pandemic has changed the mindset of customers with personal accounts and the ways in which SME account holders manage their business. The expectations of digital banking are much higher, and consumers expect the onboarding UX to be just as seamless and transparent as the account management process.

Branch network advantage for incumbent banks

Access to a branch is the second top reason (33%) why respondents chose their business account provider. This suggests that there is still a need for a branch and in-person services. Traditional banks have an advantage here in comparison to digital providers that cannot offer the same type of services. However, with branch closures on the rise and reduced staff services, traditional banks may find themselves competing much more with alternative providers that have got the onboarding process right and are providing services whereby customers can still speak to an experienced business representative over a chatbot or iMessage. UK-based digital bank Starling offers free 24/7 UK support via the app, phone, or email with fast response times and portrays its business account as a ‘less admin, more control’ product for its business customers.

Frictionless customer onboarding is key

To have the most impact, traditional banks need to focus on the real needs of small and micro business, get the basics right (i.e., the onboarding), and then focus on the add-on features. Creating a frictionless customer onboarding journey is the key to starting a strong customer relationship and being a part of their banking journey as small and micro businesses start to scale and require financing.

Jaimini Pattani is an analyst, GlobalData Financial Services, Retail Banking