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4 in 10 UK businesses plan to switch banks due to poor pandemic response

Business Insider logo Business Insider 6/2/2020 insider@insider.com (Rachel Green)

Over 40% of decision-makers at large and medium-sized UK businesses said they are planning to switch banks after receiving slow support during the coronavirus pandemic, per The Commentator. The survey of 200 decision-makers was conducted by Censuswide and commissioned by regtech Encompass. Forty percent of respondents said their bank's digital services and support during this crisis have been poor, while nearly half (49%) said their bank has yet to directly offer financial support.

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Banks have faced backlash over the slow disbursal of UK government relief loans. Forty-two percent of decision-makers surveyed said they'd waited over two weeks for a business loan application from their current banking provider.

Lenders have been critcized over the past two months by businesses that were finding it "near impossible" to access much-needed funds under the Coronavirus Business Interruption Loan Scheme (CBILS). And many complaints centered around a slow approval process, though banks said they were performing necessary checks and working overtime to disburse loans.

Banks risk turnover among business clients due to their limited ability to handle processes digitally during lockdown.

Banks that have been able to accommodate the demand during the pandemic stand to gain a crop of new customers. UK-based neobank Starling has stood out for its efforts throughout the crisis: It's become accredited under the two major UK government-backed relief programs — CBILS and the Bounce Back Loan Scheme (BBLS) — and has disbursed £363 million ($445 million) in loans through the latter program since May 11.

Even prior to the outbreak, Starling was aggressively working to build out its business-facing unit, which now includes 155,000 business accounts and a 6% share of the UK's small- and medium-sized business (SMB) banking market. The neobank's additional digital tools geared toward businesses — including a few specific to helping them weather the crisis — could give it staying power among SMBs that opened accounts with the specific intent of securing loans. The offerings could help Starling attract businesses that plan to switch banks as a result of the pandemic.

Banks that have seen backlash for not being able to handle volume on their digital channels will ultimately need to prioritize their digital transformation efforts. Many incumbents operate on legacy IT systems that weren't equipped to handle the massive volume of inquiries and applications around relief loans. And even for nondigital channels, like call centers, banks quickly became overwhelmed: NatWest, Lloyds, and Barclays customers have been frustrated by extremely long wait times.

In order to support customers through the continuing economic fallout of the pandemic, banks will need to ensure their digital channels are robust, as they'll remain the primary method of accessing bank services for some time. Prioritizing digital transformation efforts can help banks improve the quality of service they're able to extend to businesses, avoid raising customer frustration, and retain more customers in the long term.

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