Banks spend a small fortune and a vast amount of hot air marketing their ‘support for small businesses’.
They proclaim their love for the nation’s small businesses across billboards, in clunky sidebar ads, throughout their social media – every other advert from a bank is a testament to this supposed love.
Maybe banks really do love small businesses. But if so, they’re doing all they can to restrain them and block their international ambitions. A romantic might say ‘if you love something, set it free’ – well, a bank would disagree. They want to keep small businesses where they are.
To understand the problem, consider the state of the UK’s international small businesses. YouGov research finds that just 35% of British small businesses operate internationally – compare this to Singapore, where 70% operate abroad. Indeed, of the eleven countries polled, only the US and Japan have a lower proportion of their businesses active overseas.
Now, you may think there are obvious reasons for this. The UK has faced a turbulent few years, which may put off some businesses from expanding abroad. This has had some impact – of those British SMEs discouraged from expanding abroad, 28% cite taxes and tariffs as a deterrent, while 24% point to supply chain disruption.
But the most cited reason? Banks. Of those deterred from expanding overseas, 30% are concerned by the hassle of international banking, such as making payments, managing currencies and all the associated bureaucracy. And the problem isn’t just limited to those put off from expanding overseas. Of British SMEs already abroad, 22% said that international banking providers have made it harder to operate overseas. Only regulation scored higher – cited by 23% of respondents.
Something is broken – but what? Start with cost. Just 7% of Britain’s international small businesses say their bank offers value for money – a sad indictment. Indeed, it’s common to hear stories of businesses who avoid offering their product or service to a foreign market because the cost of money transfer fees make any profit negligible.
There’s far too much inefficiency, too. Payments take days to arrive, a nightmare for businesses that lack deep cash reserves. In a world in which emails can travel the globe in seconds, it makes no sense that money moves so slowly.
Plus, there’s endless bureaucracy. For instance, when entering a new market, businesses are expected to open local bank accounts, an exercise in paperwork, pain and process. This is an arbitrary and outdated requirement, which just adds to the hurdles small businesses face.
The UK’s small businesses deserve something better. Growing internationally can be one of the most powerful things a business can do. New markets open up, allowing access to new customers and suppliers, plus less tangible assets, such as new ways of thinking.
It’s time for banks to show some love – not through spouting more hot air, but by improving their services. To start, hidden exchange rate fees should be made transparent, international money transfers made cheaper and sped up. All that bureaucracy? Cut it.
And if they don’t – well, almost one-in-five (17%) of the UK’s international small businesses are using FinTechs. Unless small businesses start to feel some real bank-love, expect that number to grow.