In brief

In brief

  • 1,000 senior business decision makers in UK SMEs were surveyed to find out what they want from their commercial bank.
  • Most UK SMEs value their relationship manager but 77 percent say they need digital banking services. Banks will need to balance both well to be successful.
  • Four main findings highlight a need for commercial banks to balance two, often contradictory, forces: rapid change and traditional business models.

Today’s banking market for small- and medium-sized enterprises (SMEs) is being reshaped by two, often contradictory, forces. Together, these are creating a steady build-up of tensions that mean banks must serve SME customers in a new way—or risk losing out in this vital marketplace.

What forces are at play? In simple terms, commercial banks are having to find the balance between rapid change and traditional business models—as customers’ move to digital behaviours comes up against banks’ established model for serving SMEs.

SMEs want—and increasingly expect—the best of both worlds. It’s a conundrum—and one that incumbent banks must solve quickly, if they’re to stay ahead of the disruptive new entrants in SME banking.

Banks must harness new technologies in new ways

Banks are actively trying to respond to meet these shifting customer preferences. But this isn’t easy.

Our 2019 UK SME Banking Survey reveals four top-line findings that—in combination—illustrate how the underlying forces are playing out and creating tensions in the SME banking market:

  • The market won’t change through switching alone – Only about 15 percent of SME customers intend to switch bank within the next 12 months.
  • SME customers’ fundamental needs haven’t changed radically – 55 percent of SMEs consider their own banking needs to be "simple."
  • SMEs’ expectations about how their needs will be met are changing – over 60 percent of SMEs now see some clear advantages in AI compared to traditional human service.
  • SME banking can’t afford to lose the human touch completely – Only around 25 percent of SMEs would give up their RM for a "digital-only" alternative, even if it were cheaper.

Drivers for change are facing resistance

SME customers' expectations are changing. While their banking needs are remaining relatively consistent, their readiness to seek out and use digital banking services is rising. Yet they still want to know the human touch of a relationship manager is available when they need it.


of SMEs cite low business banking fees as the main reason for choosing a bank.


of SMEs say their business positively needs digital banking services.


of SMEs value relationship managers having an understanding of their business' needs.

Four imperatives to strike the right balance

The overarching challenge for banks is to get to know their SME customers in a more astute way that enables them to find the optimal blend between the new and the old—while also lowering cost to serve and providing customers with value for money. To all this, we think banks must harness new technologies in new ways via four steps:

  1. Blend RMs and digital to change the defaults—creating the "human + machine" colleague.
  2. Get to know your existing and target customers’ unique DNA.
  3. Re-architect IT to develop compelling new propositions, delivered at pace.
  4. Embed data-driven intelligence throughout the BAU lifecycle.

Stuart Chalmers

Managing Director – Commercial Banking, UK & Ireland

Tom Merry

Managing Director – Strategy, UK & Ireland

Leigh Goodwin

Banking Research Lead


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