When bankers and SMEs break bread

I have had pretty interesting experiences over the past couple of months within the financial services sector.

From ending up investing in an equity crowdfunding business, which sought me out through this column, to my being asked to invite some amazing SME peers of mine to attend a lunch with senior executives at St George Bank, a dinner with St George Bank chief executive George Frazis and, just yesterday, a lunch with the CEO, Scott Tanner, and his executive team at the Bank of Melbourne.

Being in attendance and also being personally responsible for bringing together a diverse group of business owners into the boardroom, had my nerves jangling at first. Would either side see eye to eye? Would it be constructive? Would my SME peers think I had wasted their time? Would the bank think I was clinically insane to bring such a diverse, passionate group of small businesses in to have lunch and dinner with them, especially with two CEOs of banks in attendance?

First I think there was a registered shock from my peers that the bank had opened its doors of power to a diverse group of small business owners. There was a subtle shift in the chairs from our corporate hosts as the SMEs sat down at the boardroom…the moment quickly passed and a healthy degree of robust debate and opinion was shared unequivocally by all parties.

Some of the most interesting observations I gathered from Chris Screen, national head of SME for St George Banking Group (St George Bank, Bank of Melbourne, BankSA) was how struck he was by the sheer diversity of views, perceptions, requirements and attitudes that the SME community harnesses. At the same time, a highly loyal degree of peer-to-peer support and commitment to one another within the community, almost like a gated community from the powers of brands seeking them out. 

“Listening to SME owners in a raw real one-to-one environment, as opposed to a controlled research environment offered real insights into the numerous variables and needs of this sector. I didn’t think I would be surprised, but I was and I learnt a lot”, said Chris.

With all banks now prioritising SME as a top segment to chase (it’s become the new “women’s segment, they were chasing last year!), there is an absolute dichotomy between how the banks segment and how the segment operates itself.

In all three sessions, frank discussion that benefitted both sides of the table was observed. Neil Slonim, ex-banker and now corporate consultant, SME advocate and founder of The Bank Doctor blog challenged.

He wanted to know “if the banks were going to keep talking to each other or talking the talk, but when would they DO?” Adding to this, “how could we as SMEs trust the banks?” He referenced outgoing NAB CEO Cameron Clyne, who articulated that, simply, customers don’t trust banks.  

With integrity, trust and participation critical to SME relations, Bec Derrington, founder of SourceBottle.com.au was keen to add trust was about participation and also about the banks behaving without self-interest, but with an interest in helping small businesses perform better.

Fred Schebesta, founder of Finder.com.au, serial successful entrepreneur and millionaire said, “I don’t want to hurt your feelings” when George Frazis, CEO of St George Banking Group, asked Fred about his position on banks. They left the evening as such firm friends. It was an amazing outcome of shared alternate views.

Given the Australian economy is dominated by SMEs, it is common sense that the better SMEs perform and survive in the market, the better the banks, and Australia, will perform.

With SMEs dominating the Australian economy, it is a serious challenge for any bank, or any provider to this market, to reach a group of such diversity, who simply won’t be put in a segment box and who are also so cynical about financial services, as well as the many other brands targeting the sector.

I sought out Chris Screen for his opinion after the lunch yesterday. Certainly he agreed that the bank had to work with its people to educate them on consistency and on the intricate inside machinations of how small business owners operate.

With 22 years’ experience in banking, Chris said his own focus has always been on relationships and building close relationships with small business owners.

However, with only so many business bankers to build those relationships with the SME community, it was a challenge. St George was turning to technology to enable a wider capacity to reach customers with a more personal service. Areas such as continuous investment in video conferencing capability and social outreach, as well as new investments in technology innovation had been an overwhelming focus for Chris for the past few years.

After 22 years in traditional banking, taking on new diverse ways of running business banking relationships and rolling them out across a business branch network and online is an achievement in itself.

“But you still need investment in your people and the right people” Chris said.

He went on to talk to me about not having “two heads” where a bank (it happens in all banks) performed well over here, to fail in the process over there.

His passion was focused on his people having the ability to be able to deliver to customers with a real understanding of the mindset of a small business owner.

“They need to understand the passion, that in a SME, it is so personal and so driven. That if you say no to a business loan, you are saying no only to someone’s passionate belief, you are saying no to them as a person. You need to give more explanation and offer other avenues. We need to get under the bonnet of SMEs and really go beyond traditional insights and segments. This is the way to build trust and integrity, by participating and developing deep understanding of the needs and values of this sector” he said.  

As any SME would expect when they have the CEO of a bank in front of them, the inevitable question of funding and security comes up.

Taking a general scenario: A young, bright person with a great startup with no security? How do they go about funding?

Funding a business idea does come with a degree of risk and the banks are regulated to follow responsible lending practices that often stop desperately needed investment in the Australian startup sector.

I suggested to Chris that could there be a banking definition of “a take-off component” in regard to financial performance. If a business could show fundamental capabilities, financial literacy, show ability for growth and required capabilities to make it succeed. How could the banks help?

Could funding be split? Is there a role for banks to look at a mix of funding for a business? For example –$x loan / OD $x credit from the bank plus add equity crowdfunding components and introductions the bank can make to an angel investor.

In this scenario, a business banker can take a holistic view of what funding is available. This gets over self-interest and limitations and risk profiles. The bank therefore moves to a position where if they think a business is viable – but doesn’t fit their risk profile, are they willing to provide avenues with other alternative providers who are prepared to take on that risk profile?

Chris agreed this scenario would build long-term relationship of genuine value exchange without self-interest and delivers on the trust and “do” challenge that Neil and Bec cited. However, there would be a need to educate and facilitate that opportunity with his staff.

At the moment I don’t know too many bankers in general who would have enough information or education on say crowdfunding or angel investment right now. But providing that education on both sides would seem a sensible move to me. It would position a bank as a holistic trusted business advisor, while providing financial literacy education to customers.

A couple of the key things that I personally learnt from these peer sessions with the banks and their senior executives, is that both sides were mutually curious of the other.

Being there in a physical business manner, “Corporate beings to SME beings”, there was a genuine and equal desire on both sides to learn more about the other. It felt strangely a very new experience for both groups that became enjoyable and quickly developed a sense of camaraderie you don’t see often.

Add to that listening and challenging both sides respectfully, it certainly gave all of us more than enough food for thought on how banking is developing and has the potential to help develop the SME community in the future for mutual benefit. 

Declaration: Bendalls Group does have a commercial arrangement with St. George Banking Group, this article however was an independent, personal reflection on a series of business meetings I was asked to organize and attend as an SME business owner.