In the October edition Business Moneyfacts explored the murky world of bank charges. This month, in our biggest ever mystery shop, we look at the service a potential new business could expect to receive when shopping around for its business bank. Lisa Taylor reports. Additional research by Samantha Skate.
On average SMEs pay around £51 per month in bank fees for their general day-to-day banking; so the big question on most businesses lips is where does this money go? Is it, as the banks would like you to believe, to manage the complex account structure a business may have or does it go towards providing businesses with excellent service? Or, if we are being a little controversial, does it go to further line the pockets of the banks fat cats or to subside the free banking and services offered to personal consumers?
The supply-demand equilibrium that makes the world of economics go round, infers a price consumers are willing to pay for a commodity or service, usually reflecting a negative relationship between the quantity demanded and price. However business banking seems to follow a slightly different model. In a nutshell, because a business will always need a bank, the bank can charge what it likes. The ongoing investigation of the Big Four's complex monopoly by the Competition Commission reinforces this.
Unless businesses switch providers, there is often little room to negotiate the price they pay for their banking services. Our research has shown that in fact only 14% of businesses have switched providers in the last three years, so a start-up business will probably be a long standing customer to the bank it first joins. They should therefore prove to be a valuable commodity to the bank, unlike much of the personal sector where aggressive pricing means we see canny consumers throwing brand loyalty to the four winds and the creation of the 'rate tart'.
Business banks have always insisted that the Competition Commission et al have got it wrong that service is the issue - not pricing. Fair point, as far as it goes. What seems to be overlooked is that fees are being charged without the service being delivered. I suspect few would baulk at a paying bank charges if they felt that they were receiving an excellent level of service. What people object to is paying for an excellent service, and receiving a shoddy one. And if a shoddy service is all they are going to receive, then frankly they'd rather not have to pay for it.
Barclays recently revealed that the number of start up businesses increased by 9% in the last quarter of 2005 and with SMEs making up for 99% of all businesses (according to the Forum of Private Business), there is already a large and expanding customer base up for grabs. Business banking offers a healthy profit margin for the banks, it is estimated that SME banking contributes around one fifth of each of the group earnings of RBS, Barclays and Lloyds in the first half of 2005, which is not a figure to be sniffed at when you consider the profits of the Big Four are in excess of £1.5bn per annum. So with all this stacked up, you would think that they would be fighting to win a some of this potentially profitable business. But what is the service offered by the main banks like? We decided to take a look.
We felt there was no single preferred method for a new start-up business to research its business bank, so we looked at the main options for first contact - internet, telephone and the branch. We surveyed eight business bank account providers: the big four; Barclays Bank, HSBC, Lloyds TSB and NatWest, and four of the other larger business providers; Abbey, Alliance & Leicester Commercial Bank, Bank of Scotland and Royal Bank of Scotland. We must note at this stage that any survey of this nature is somewhat subjective; however we do also stress that banks only get one chance to impress, so we may have been a new customer won or lost - first impressions do count!
Website SurveyOur research team visited each of the banks' websites, spending no more than 30 minutes on each site, assessing the sites usability, content, both product based and general business information, and also whether the site gave clear direction of what to do next should we which to proceed further.
All eight sites were of a satisfactory standard, from which a new business could with varying degrees of difficulty and volumes of information make a decision.
The Bank of Scotland's was however excellent in all areas; it was comprehensive yet still easy to navigate, containing useful interactive business planning tools and tariff calculators. The HSBC and Alliance & Leicester sites were also highly commendable with the Knowledge Network and downloadable business software demonstrating the true customer focus of these sites.
Telephone & Branch VisitsOur researcher both telephoned and took an ad hoc visit to the branches of our eight banks, and this was to be where the true colours of customer service began to show. Both were accessed on the same criteria: the initial response we were given, the adviser's willingness to help and knowledge, and finally any information provided and any follow up discussed.
Our joint winners for the telephone service were Abbey and Alliance & Leicester Commercial Bank; both set themselves above the rest by offering us relevant tailor-made information, in a simple, friendly and knowledgeable manner without us having to probe.
Customer service seemed to fall on its face when we had to wait for a call back to speak to someone. HSBC could only provide very limited factual information on the phone, and incorrectly called our shopper 'Mother', and when Lloyds tried to connect me to a local business manager, after a good few minutes on hold I was advised that the office site had closed and ended up speaking to my 'local' contact who was based over 50 miles away.
Despite calling the Bank of Scotland dedicated start up line, being on hold for three minutes and transferred twice we still had to explain the purpose to two advisers. The product information line at RBS was also unable to provide us information directly, operating a call back structure.
Within the branch environment NatWest offered an outstanding performance, I was able to sit and discuss my business and was offered solutions by a 'real life' business manager. Alliance & Leicester should also be highly commended for its branch service and knowledge, especially as it does not offer branch based banking for SMEs.
As for most other visits, we were left with a feeling of little enthusiasm for our business and we often came away with no information. Although HSBC was not able to provide any information, the service we received meant that we would consider paying it a second visit. Barclays, however, left me with the feeling that I was interrupting an important tea break. It isn't necessarily what information is provided, but service with a smile that makes the difference.
All providers had some good and some not so good features, and in most cases it was the finishing touches that were missing. I can't say it enough: "Bring back the personal service". If any provider had truly taken the time to show a genuine interest in my business, it would have won the account hands down.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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