SME Banking Best practice and case studies Retail Banking Research October 2010
TABLE OF CONTENTS ACKNOWLEDGEMENTS 5 About the author: David J Cavell FCIB 5 About the publisher: Retail Banking Research (RBR) 5 Confidentiality 5 Disclaimer 5 TABLE OF CONTENTS 7 TABLE OF FIGURES 11 EXECUTIVE SUMMARY 13 Economy and community 13 Getting closer? 13 Relationship management 14 Women entrepreneurs 15 Access to finance and risk management 15 Products 16 Education and support 16 Delivery channel strategy 17 Conclusion 17 BANKING PRODUCTS, CHANNELS AND RISK 19 1. Banking products and channels 21 1.1 The transaction, current or checking account 21 1.2 Savings and investments 21 1.3 Borrowing 21 1.4 Related services 22 1.5 The role of the branch 23 1.6 Self service 24 1.7 Internet banking 25 1.8 Other direct channels 26 1.9 Direct channels in Europe 26 2. Payment cards for SMEs 29 2.1 The business card 29 2.2 Debit cards 29 2.3 The travel and entertainment (T&E) card 30 2.4 The credit card 30 2.5 The professional card 30 2.6 The executive business card 31 2.7 The lodge card 31 2.8 Fleet and fuel cards 31 2.9 The multicard 32 2.10 Management information services 32 2.11 Developing the product 33 2.12 Card designs for business 34 Retail Banking Research 2010 Page 7
2.13 Mini-case study: The Universal Air Travel Plan (USA) 35 2.14 Conclusion 36 3. Risk management 39 3.1 Background 39 3.2 SMEs and profitable lending 39 3.3 Lending effectively 40 3.4 Commercial scoring and information services 41 3.5 Automated application processing close up 45 3.6 Workflow management 46 3.7 Ongoing customer management 48 3.8 Working for the SME 50 3.9 Conclusion 50 CASE STUDIES FROM AUSTRALIA 51 4. Australia & New Zealand Banking Group (Australia) 53 4.1 Background 53 4.2 Delivery channel strategy 53 4.3 ANZ and SMEs 55 4.4 Business education 55 4.5 Lending to SMEs 56 4.6 Conclusion 57 5. Bendigo and Adelaide Bank (Australia) 59 5.1 Background 59 5.2 The community banking model 60 5.3 Improving the business environment for the SME 62 5.4 Toora, Victoria State 62 5.5 A learning experience 63 5.6 Conclusion 64 CASE STUDIES FROM EUROPE 65 6. Caja Navarra (Spain) 67 6.1 Spanish banking 67 6.2 Caja Navarra positioning 67 6.3 Civic banking 68 6.4 Caja Navarra and SMEs 69 6.5 EURECAN 70 6.6 The Canchas and SMEs 71 6.7 Conclusion 72 7. The Sparkassen (Germany) 73 7.1 Background 73 7.2 Savings Banks Finance Group and the Mittelstand 74 Products and promotion 75 7.3 The international dimension 76 7.4 Understanding the business 77 7.5 Into the future 77 7.6 Conclusion 79 8. Lloyds TSB (UK) 81 8.1 A strong heritage 81 8.2 The SME difference 82 Page 8 Retail Banking Research 2010
8.3 Delivery channel strategy 82 8.4 Business clients and branches 82 8.5 The SME Charters 2008-2012 84 8.6 Further support 85 8.7 Conclusion 86 9. Short case studies from Romania, Belgium and Slovakia 87 9.1 Banca Transilvania (Romania) 87 9.2 Dexia Bank (Belgium) 89 9.3 Slovenska Sporitelna Erste Group (Slovakia) 91 10. Relationship management in Europe (including lending) 95 10.1 Independent research 95 10.2 Accountabilities and portfolio 95 10.3 Service, sales and acquisition 96 10.4 Credit assessment and management 96 10.5 Conclusion 97 11. The view from the customer 99 11.1 Background 99 11.2 Success in getting credit 99 11.3 Reasons for having been refused credit 101 11.4 Looking forward 102 12. SME banking on the UK high street 105 12.1 Background 105 12.2 The current situation 105 12.3 Specialism and design 106 12.4 HSBC branch strategy 106 12.5 Service visibility and presence 107 12.6 Conclusions 107 CASE STUDIES FROM NORTH AMERICA 109 13. Advanta (USA) 113 13.1 SMEs and the credit cycle 113 13.2 Introducing Advanta 113 13.3 Business development 114 13.4 The turning point 115 13.5 Risk management strategy 116 13.6 Conclusion 117 14. Ixe Banco (Mexico) 119 14.1 Background 119 14.2 The bank 119 14.3 Ixe banco and SMEs 120 14.4 Delivery strategy 120 14.5 Lending to SMEs 121 14.6 An evolving strategy 122 15. Key Bank (USA) 123 15.1 Background 123 15.2 Delivery channel strategy 123 15.3 Products, services and support 124 15.4 Women business owners 125 15.5 Formalising the bank s commitment 126 Retail Banking Research 2010 Page 9
15.6 Key4Women in action 127 15.7 Relationship management 128 15.8 Conclusion 129 16. TD Canada Trust (Canada) 131 16.1 Background 131 16.2 Delivery channel strategy 131 16.3 TDCT and small business 133 16.4 Local service and sales 134 16.5 Customers and their needs 135 16.6 Improving the customer experience at the branch 135 16.7 Conclusion 136 17. Wells Fargo (USA) 137 17.1 Background 137 17.2 Scale and diversity 138 17.3 Business education 140 17.4 The product set 140 17.5 Conclusion 141 18. Banks and SMEs in the USA 143 18.1 The Greenwich market pulse 143 18.2 Brand 143 18.3 Relationship management 144 18.4 Capital expenditure 146 18.5 Conclusion 146 APPENDIX: CONTRIBUTORS 149 Page 10 Retail Banking Research 2010
TABLE OF FIGURES Figure 1: Examples of the new generation of branches ANZ and Wells Fargo 23 Figure 2: Fully automated depository at SpareBank 1 (Photo courtesy of Scan Coin) 24 Figure 3: Depositories and change machines at Commonwealth Bank and NAB in Australia (Photos courtesy of Banking Automation) 25 Figure 4: Developing the right customer proposition (Source: MasterCard Europe) 33 Figure 5: Experian scorecard predictiveness 42 Figure 6: The new generation of ANZ branch with a strong corporate image 54 Figure 7: Celebrating community banking at Rosewood 60 Figure 8: Civic banking at the branches of Caja Navarra 68 Figure 9: Caja Navarra SME definitions 69 Figure 10: The new style LTSB branches serve both personal and SME clients 83 Figure 11: New generation Dexia branches 89 Figure 12: Concerns for SME businesses in the UK 99 Figure 13: Sources of credit for SME businesses in the UK 100 Figure 14: Reasons why SME businesses in the UK require credit 100 Figure 15: SME success in getting credit 101 Figure 16: Refusal rates by financing purpose and amount required 101 Figure 17: Reasons given for refusal of credit 102 Figure 18: Reasons why the business requires finance in 2010 103 Figure 19: Other main sources of alternative finance 103 Figure 20: HSBC out-of-town business banking branch 106 Figure 21: SME financing statistics for Canada 110 Figure 22: Distribution of businesses by size 112 Figure 23: Advanta corporate and business credit cards 115 Figure 24: Percentage of receivables and their FICO score at origination 117 Figure 25: The latest branch design from Ixe Banco 121 Figure 26: Breakdown of KeyBank retail branches by region 124 Figure 27: The Key4Women National Advisory Board at work 127 Figure 28: New generation branch banking in Canada 132 Figure 29: Simple, effective, modern branches at Wells Fargo 138 Figure 30: SME reasons for increasing capital expenditure 146 Retail Banking Research 2010 Page 11