Small Talk: Firms must start to switch banks now it’s much easier

No bank is launching an introductory deal to entice small business customers

Good news for hundreds of thousands of small businesses that would benefit from a change of bank – the banking industry reforms that come into effect today make it easier to do so. New rules that require banks to ensure that individuals can complete the process of switching bank in only a week will also apply to all small businesses with annual sales of less than €2m (£1.68m).

The Federation of Small Business’s research suggests there is certainly an appetite among small businesses to change bank. In a recent survey of more than 2,300 of its members, only 4 per cent had switched account over the previous 12 months, but 15 per cent said they were considering doing so.

Three considerations tend to dominate for small businesses thinking about switching, the FSB’s research suggests. Price and customer service are almost equally important – cited by two thirds of small businesses – but one in two potential switchers is also looking for better local branch access. That reflects the poor deal many banks have offered their small business customers in recent years.

Business accounts are expensive and branch networks have been pared back. On service, several banks have finally begun working harder on their small business proposition, training more specialist staff and building better networks of advisers. Nonetheless, the banks still tend to score poorly in research into customer satisfaction and they are still dealing with the legacy of issues such as interest-rate swap mis-selling and the credit crunch.

The big question is whether the new account-switching rules will boost competition and force the banks to offer a better deal to their small business customers. This is the motivation for the reforms and the evidence from the personal current account market is encouraging. In that sector of the banking industry, these reforms are the latest in a series of regulatory overhauls; each of the previous exercises has lead to a rise in account switching and prompted banks to work harder to retain and attract customers.

So far, however, small businesses hoping the new rules would be the spur for a wave of introductory promotions or price cuts designed to win their custom will have been disappointed. While many banks are using today’s reforms as an opportunity to make a fresh assault on the personal account market, there has been no push on small business accounts.

No bank, for example, is launching a special introductory deal this week to entice small business customers. Nor is there any sign of banks cutting their charges, let alone the sort of price war seen in the personal sector. If anything, the trend on small business bank account charges is for higher fees.

The cynical explanation for this is that the banks know small businesses tend to be much more reluctant switchers than individual customers and that they therefore need to do less work to keep them. There are some good deals available to start-up businesses, but none of the banks are making much effort to win over established companies from their rivals. When churn rates are running at only 4 per cent, banks can afford to take a relaxed view.

The challenge for small businesses is to force a change of attitude. Were switching levels to move closer to 15 per cent, you can be sure the banks would offer more competitive deals.

Reaching that stage in the personal current account market has taken time – consumer groups have been encouraging individuals to change bank account more regularly for the best part of two decades. But small businesses have everything to gain from moving faster, particularly now the rules make switching so easy. It’s time to hold your bank to account.

Malaysian messaging firm poised for a float on Aim

Macromac is the latest Asian business to announce plans for a flotation on the Alternative Investment Market.

The Malaysian company will make its debut on Aim next Monday, with a market capitalisation of around £10m following the listing. The business is raising £450,000 of new money to cover the cost of the IPO.

Macromac is a telecoms business that specialises in mobile messaging. Its technology platform is used to deliver content to mobile phone users across Malaysia and Thailand. The business, founded in 2006, made a profit of around RM8m (£1.5m) last year and expects its domestic market to grow at rates of almost 7 per cent a year over the next five years.

Tighter telecoms regulation in Malaysia has prompted Macromac to push ahead with plans to expand into other Asian markets, beginning with Thailand, where smartphone penetration remains low and mobile phone users are therefore still heavily reliant on text messaging services.

Sun is setting for oil and gas investors

Disappointing returns from the oil and gas sector of the Alternative Investment Market have seen it fall from favour with investors in the junior sector according to new research published in Aim Journal.

While oil and gas company trades accounted for more than half of all share-dealing transactions on Aim in 2012, this year, the figure is down to a third.

The decline reflects the disappointing returns posted by companies in the sector over 2013, which have reflected a weak period for commodity prices. Mining stocks have also been less popular with investors.

Instead, technology stocks now account for a much more significant proportion of Aim transactions. More than 12 per cent of transactions on the market so far this year have been deals in the shares of technology companies, more than double the figures for 2012.

Small businessman of the week: Steven Greenall, Founder, Warwick Music

We founded our business making plastic trombones in 2007 – we said right from the beginning that these would be serious musical instruments, not toys. Brass instruments are heavy and expensive and the trombone has been dying out. But a plastic trombone is light, robust and it’s easy for smaller hands to hold.

It took a while to get the product right but what we have now sounds exactly like a brass trombone and looks identical externally. We launched the product online in 2010 with a production run of 200 instruments and sold out in 12 minutes. After another run with the same results, we approached Steinway, which now acts as our worldwide distributor.

We’ve now sold 90,000 plastic trombones, which makes us the world’s largest producer of the instrument. In the UK, we sell to schools, to junior orchestras and to families, as well as to professional musicians.

The arrangement with Steinway works well for us because we wanted to be free to focus on design and innovation. We’re currently working on a plastic trumpet that we hope will be just as successful. The trombone has just won Innovation of the Year at the Nectar Business Awards which is fantastic.