SMEs are being left behind by Big Four banks, says report

As JobKeeper ends, SMEs are in need of more agile support from banks

SMEs are being left behind by Big Four banks, says report


By Mike Wood

Small businesses are being left behind by the Big Four, according to a report released by fintech Judo Bank.

Their 2021 SME Banking Insights Report laid bare the problems that many SMEs have in reaching their banking partners, with just 15% of respondents saying that they had a “high quality” interaction with their bank and 19% saying that they had had zero contact at all.

The report, which is now in its third year, was commissioned by Judo and carried out by East and Partners, was the largest yet, taking in businesses up to $50m in turnover.

It involved 1750 SMEs from all over Australia, three quarters of whom said that they banked with one of the Big Four lenders.

“The pandemic exposed a serious flaw in the big banks’ industrialised, one-size-fits-all approach to SME lending where bankers are covering hundreds of customers and simply don’t have the capacity to attend to the individual needs of SMEs,” said a Judo Bank spokesperson.

“This has been a major issue for customers of the big banks during COVID-19, who have had no option other than to ring 1800 numbers and hope to get through to the right person.”

“The 2021 SME insights report found that 19% of SMEs had no interaction with their bank in 2020 whatsoever. Of those that did, only 15% described the interaction as ‘high quality’. 25% of SMEs reported banker accessibility as a top reason to switch banks, second only to debt funding flexibility at 36%.”

“It should be of no surprise to anyone that that the report found trust in the major banks to be at an all-time low, despite record numbers of loan deferral and stimulatory support. Trust extended to primary lenders decreased from 2.52 (out of 10) in 2018, to 2.40 in 2019 and now a new record low of 2.26 in 2020.”

The funding gap – which is the amount between what SMEs have and what they would like to spend – continues to grow, showing that credit and finance are not available to small businesses at the rate that they would like it to be.

“The 2021 SME Insights report found that for SMEs with a turnover of between $1 million and $20 million, the funding gap in 2021 has widened by $4.6 billion to $94.3 billion since 2019 - an increase of 5.1 per cent.”

“This annually increasing funding gap affecting SMEs is stifling growth potential at a critical time. Where Judo’s lending has increased, other banks have retreated, leaving SMEs out in the cold,” said the spokesperson.

“It should be noted that the 2021 SME Insights report found that at least a quarter of SMEs looking for finance to grow their businesses were turned away by the incumbent banks.”

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