Small businesses shun hi-tech banking

MOST small businesses are ignoring technological developments and dealing with banks in the time-honoured fashion of visiting or telephoning their branch, according to research from consultants at KPMG.

The survey, carried out by NOP for the financial sector consultancy arm of KPMG as part of its work on distribution channel strategy in the sector, found that in firms with a turnover of less than pounds 1m, 90 per cent of banking business is conducted through visits or through telephone calls to branches. Only 2 per cent of the 1,300 businesses surveyed late last year have used internet banking, only 5 per cent have banked using a personal computer and only 17 per cent use telephone banking.

However, businesses in the south of England and in Scotland have been faster to adopt technology. Six per cent of such enterprises use PCs, while in the South 3 per cent use the internet and in Scotland and the North 2 per cent.

Telephone banking, whether through an operator or via a keypad, is the most popular form of electronic banking in the small business sector. But the numbers are still relatively small. Professional services are the leaders, with the manufacturing sector close behind, each with more than 15 per cent take-up. On the other hand, the catering and leisure industries appear slow to change, with less than 10 per cent taking up each of the methods.

The report shows that the younger the business the more likely it is to take advantage of the cost and time-saving benefits of using advanced technology to manage finances.

Philip Middleton, head of banking strategy at KPMG, said: "Small businesses can achieve great efficiency gains by using electronic banking, but the real lesson in this survey is for the banks themselves."

Up to half of the businesses surveyed were willing to consider PC and internet banking and even more were prepared to do their banking over the telephone, but small businesses were worried about the lack of personal contact and the security of systems, he added.

"This is the real dilemma for the banks. Electronic banking is potentially cheaper for them and keeps costs down for customers, but many customers like to have regular face-to-face contact with people who know them and understand their businesses. Many banks have created special centres to work with small business customers, but the survey shows that only 36 per cent of businesses have ever been to one.

"The banks that win will be those who do the most to help people understand how to work the technology, show them the benefits to be gained and, above all, work the hardest at keeping the personal touch alive ."