Sub three percent business credit growth, resurgent small and medium enterprise (SME) export demand from a falling Australian dollar (AUD), wider proliferation of online payments and the continued advance of foreign banks’ transaction banking presence are key 2015 business banking predictions from East & Partners’ annual outlook.
Presenting the firm’s latest research and analysis in the Australian city of Sydney, E&P’s predictions extended to improving customer engagement by generating greater ‘mind share’ in addition to disruptive foreign exchange (FX) providers offering alternative technology intensive, innovative service and re-priced offerings.
Non-bank specialist FX providers are forecasted to achieve up to a 12% greater share of the spot FX market by the end of 2015.
Transaction banking firmly remains in the realm of Australia’s ‘big four’ banks, illustrated by results from E&P’s corporate transaction banking programme. Direct interviews with 897 chief financial officers (CFOs) and treasurers of corporate sized enterprises (annual turnover of A$25m – $725m) Australia-wide highlighted aggregate primary market share for the majors has jumped from 76.2% to 82.2% since 2009.
Combined with improving wallet share, foreign banks face a difficult task prising away core business banking relationships functions such as cash management and payment processing, reports E&P. The trend towards greater ‘big four’ primary transactional relationships looks to be running out of steam however as international banks step up their offering in Australia.
Leading with competitive trade finance product and service propositions backed by market leading mind share, international banks such as Citi and HSBC are building on their strong cross border payments pedigree by targeting further core transactional relationship growth.
The firm also expects SME export participation to jump by at least 20% as the Australian currency flatlines. Margins achieved offshore by exporting small businesses are forecasted to exceed domestic margins by up to 25%. Its research reveals liquidity and working capital constraints remain one of the largest inhibitors to further SME business activity, paving the way for a comeback by the broker channel offering perceived better pricing.
“Our research provides unrivalled insight into the perception business owners have of their bank, providing a great deal more than market wide monitors of business banking performance in terms of market share or customer satisfaction rankings,” said Martin Smith, E&P’s head of markets analysis.
“For example, the business banking index asked up to 1,000 CFOs and treasurers across Australia: ‘What industry sectors have you advocated companies from?’” Almost two thirds of all respondents happily advocated a company in the retail or food industry following a positive experience. After all, how often do you book a restaurant without reading a review?
“Advocacy rates for the finance sector have more than halved since 2011, from 5.1% to 2.0%. It is clear that banking and finance is really suffering in terms of customer sentiment and there is clearly a worrying disconnect forming between business owners and the banks in terms of expectations not meeting reality.”
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