Small business relationship manager deployment picks up pace

The economic slowdown has done nothing to curb the enthusiasm of bankers for growing market share in the small business segment.

The latest East & Partners business banking customer satisfaction monitor shows rapid growth in the number of relationship managers being assigned to small business customers.

Business customers like dealing with relationship managers and there is a high correlation between customer satisfaction and access to an RM.

The East & Partners data, based on interviews with 346 small business owners (turnover of $5 to $25 million), shows the number of SMEs with relationship managers increasing from 30.4 to 51.4 per cent in the year to June.

The number of SMEs with RMs is approaching the number of middle market businesses ($25 million to $105 million of turnover) with RMs, which stands at around 60 per cent and has been growing much more slowly over the past year.

More than 90 per cent of large businesses in the survey report that they have relationship managers.

It is not hard to see why banks are using relationship managers to build share. Asked to rank their satisfaction with different banking channels, businesses put relationship managers and product specialists well ahead of online services, call centres, and branches.

Leading the charge has been Commonwealth Bank, which has increased the number of SME customers with a relationship manager or dedicated business banker from 7.7 to 38.3 per cent over the past year.
 
ANZ has also been active in this area, increasing the number of SME customers with RMs or dedicated business bankers from 13.5 to 35.7 per cent over the past year.
 
They both have a long way to go before they catch up with St George, which has 97 per cent of its SME customers assigned to an RM, and National Australia Bank, at around 72 per cent.

Westpac is the odd one out, having cut the number of SME customers with RMs or dedicated business bankers from 25 to 12.5 per cent over the past year.

DBM Consultants managing director Dhruba Gupta said his research confirmed the view that the way to heart (and wallet) of an SME customer was through a relationship manager.

Gupta sad: "The banks have got that right. SMEs with a relationship banker are more satisfied and more loyal than similar sized businesses without a relationship banker."

But Gupta said there are some execution problems. Respondents to a DBM survey of 6000 SMEs complained that at the micro business end of the scale many business banking relationships operated in name only, with very little follow-up contact.

Others complained that because SME relationship managers had large client numbers they tended to be reactive rather than proactive.

Gupta said: "There are big rewards for banks that can increase the level of proactive relationship management.

"We found that banks which proactively manage their small business relationships attract an average 91 per cent share of wallet, compared to 79 per cent among those with a reactive banker."

East & Partners analyst Robert Morgan agreed: "One of the reasons banks like SME customers is that they tend to be holistic bankers. If they like the bank they will give it most of their business."

In the overall satisfaction ratings banks continue to lose ground with business customers. In the East & Partners survey the average score fell from 4.89 in May to 4.85 in June. Overall scores have been trending down since peaking last August.

The latest TNS business banking customer satisfaction report, published yesterday, shows a similar trend. Overall satisfaction with financial institutions has fallen 4.7 percentage points over the past six months to 73.4 per cent.

TNS points out that ratings have not fallen as low as they did during the last economic downturn, in 2002.

Causes for the change in sentiment show up clearly in the East & Partners survey as higher interest rates and cost of banking, and the increased difficulty in dealing with banks.