Regional independent banks top the majors for SMEs: Report

Customers are increasingly differentiating between independent banks and the majors, with independent regionals emerging as a rich alternative for small businesses, according to a new report.

The latest DBM Business Financial Services Monitor reveals satisfaction ratings among the big four banks, but also details the strength of independent regional banks, particularly among the micro and small business segments.

According to the report, ANZ has continued its upward climb in business satisfaction, with improvements in three of the four business banking segments.

In the micro business segment, which refers to businesses with less than a $1 million in annual turnover, ANZ recorded a satisfaction rating of 7.1 out of 10, putting it just 0.1 of a point behind long-time favourite Westpac.

DBM managing director Dhruba Gupta says six months ago, ANZ was ranked equal lowest among its competitors.

But Gupta says ANZ has been improving across a range of areas including service and brand reputation.

“ANZ has been able to reverse its position gradually and is now beginning to re-emerge among the leaders,” he says.

While Westpac has remained a strong performer, recording a score of 7.2 in the micro business segment, it appears to have some lost ground among large businesses.

Meanwhile, NAB’s “breakup” campaign doesn’t appear to have had any real impact on its core business customers, with a score of 6.7 within the micro business segment.

And while CBA continues to do well among bigger businesses, its smallest customers are holding it back from higher overall ratings, with a micro business segment score of 6.9.

However, there appears to be a significant difference, in average satisfaction scores, between the major banks and their independent regionals, and other banks.

“What is surprising is that the allied banks – those directly linked to a big four bank – have average satisfaction scores that, on average, are only marginally better than their big four parents,” Gupta says.

Allied banks include Bankwest and St George, which are owned by CBA and Westpac respectively, while independent regionals include Bendigo Bank and Suncorp.

AMP Bank and Macquarie Bank are classified as “others”.

“Businesses are making clear distinctions between non-big four banks allied with a major bank, and those that are independent regionals or another bank,” Gupta says.

“The results suggest that for a regional brand to deliver the higher levels of satisfaction, they need to be seen to have the true qualities of a regional bank.”

The analysis shows the strength of the independent regionals and other banks sits mostly with the micro and small business segments.

Gupta says micro business customers may feel they get more attention from the smaller independent banks as they have fewer customers.

“A large bank may have a couple of hundred customers per banker while a smaller bank may have half of that [per banker],” he says.

“Also, because smaller banks don’t necessarily have the full range of facilities, they try to make up for it with good service.”

The figures come in light of an announcement that the revived Bank of Melbourne will act independently of Westpac, despite being owned by the Westpac Group.

Bank of Melbourne chief executive Scott Tanner said the bank, which is expected to start opening branches in the next few weeks, will take market share from all the major banks including Westpac.

“We’re very independent; the business is being set up as a local bank and reports differently than Westpac,” he said.

“All the major banks, and indeed the other regional banks, will be our direct competitors… There hasn’t been a local regional bank of the strength that we’re talking about in the market for some time.”

This article first appeared on StartupSmart, Australia’s top site for running a business.