Traditional banks have fallen behind when it comes to matching the level of customer experience and flexibility that virtual banking offers, particularly for small businesses.
Based on digital payments and online technology, virtual banks bring a host of benefits to small businesses, such as rapid and cost-effective fund transfers, the ability to manage finances via a computer or mobile device, and supporting a cashless approach to business.
While the vast majority of banks offer online banking, digital products and services that address the needs of small businesses have been notably absent. Established banks are now making efforts to catch up with virtual banks and other fintech players.
Here are some examples of the digital products, services and businesses that the major UK banks have come up with to make inroads into digital banking for small businesses:
Barclays digital invoicing
Barclays offers a free digital invoicing tool for SME customers, aimed at speeding up the invoicing process. Barclays Invoicing has been developed in-house and is being bundled with the core Barclays mobile banking app on iOS and Android devices.
It enables small business owners to create and send invoices straight from their smartphone. In addition, users can track, manage and reconcile their invoices in a single location. Users provide an invoice number, client name, dates, rate and VAT. This then generates an invoice or PDF file that can then be sent directly to the client.
Showing the power of digital technology, Ian Rand, CEO of Barclays Business Banking, said at the launch of the service that it should help small business owners save time and speed up the payment cycle “with just as few simple taps on their phone”.
RBS digital bank for SMEs
Royal Bank of Scotland (RBS) was the first large UK high-street bank to launch a standalone digital bank brand that offers a business-focused current account.
Mettle, which is accessed via a mobile app, is designed for small business customers and offers additional services such as invoicing and cash flow forecasting, alongside the current account. More features can be quickly added to the digital platform on which Mettle’s services are built.
According to RBS head of commercial and private banking, Alison Rose, the brand offers customers “a different choice” about how to bank, with new technology changing the behaviour and priorities of many small businesses.
Rose added that Mettle is a response to the way customers have said they’d like to interact with their bank. Business customers of RBS brand NatWest are also able to use Mettle.
HSBC and Santander’s secret digital SME bank projects
HSBC is reportedly working on a new digital bank to serve SMEs under the code name ‘Project Iceberg’. The Telegraph reported in September 2018 that more than 100 people were recruited to develop the bank, which could potentially launch as a beta version in early 2019.
Santander UK, meanwhile, is thought to be developing an open digital financial services platform for SMEs, although the service has not yet launched.
Clydesdale and Yorkshire Bank’s ‘B Works’
Clydesdale and Yorkshire Bank’s (CYBG) digital bank ‘B’, which also caters for SMEs, has put a new spin on bricks and mortar premises with a number of city centre hubs for SMEs.
B Works in Manchester, for example, offers SMEs a free coworking space, rooms for conference calls and meetings and a social media studio to help small businesses produce media content for Instagram or other platforms.
The venue has a weekly events programme, including workshops, talks and events designed to help SMEs grow. SMEs at the hub can also access expertise and guidance from external business experts.
Setting the agenda
Traditional banks won’t be able to make up the ground on emerging financial services companies any time soon. The signs are that fintech companies, including virtual banks, are now setting the agenda when it comes to small business banking. Traditional banks are eager for a piece of this action, ensuring this market segment will remain active.