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Banks, Lenders & Investors Cash Flow & Forecasting Finance General

No sign of improvement in shoddy banking services to SME customers

the wild west of shoddy banking servicesIt has been a year of IT meltdowns, continued closures of small branches and ATMs throughout 2018 with the main High Street banks seemingly still unwilling to listen to their SME customers.
At the end of last month the Government’s Treasury Select Committee finally launched an inquiry into the “astonishing” number of IT failures in the financial services sector.
This came shortly after the BSB (Banking Standards Board) had admitted to MPs that there had been little improvement in the UK’s poor banking culture since a parliamentary commission condemned poor standards.
However, whether the select committee will also look at the other frequent complaints about the closure of small branches and ATMS, especially in rural areas, remains to be seen.

Bank IT meltdowns

The most high profile meltdown of the year was suffered by TSB in April, when millions of customers, including SMEs were locked out of its online service and banking app following the failure of its attempt to migrate customers to a new computer system. Service was restored to private customers relatively quickly but I am hearing from a few SMEs that their problems are still not completely resolved.
By September, customers of Barclays, RBS, NatWest and Ulster Bank had also been affected by their banks’ IT issues and in November it was the turn of HSBC’s mobile apps for the fourth time in a month.
The FCA (Financial Conduct Authority) and the Bank of England’s Prudential Regulation Authority also published a discussion paper which suggested that they were considering policies that force banks to improve operational resilience. Among the suggestions were that there should be a maximum outage time of two days and that they should have back-up systems in place.
Banks were given until October 5 to respond. So far there has been a deafening silence on the results.

Small branch and ATM closures – more shoddy banking services

Perhaps more concerning is the numbers of small branches and ATM points being closed.
According to research by Which? a total of 757 branches have been closed or scheduled for closure in 2018 and January 2019.
Which? has been tracking bank branch closures since 2015. At least 2,961 branches have been shut down in the past four years, at a rate of 60-a-month.
The excuse given by the banks is that because more people are now using mobile or online banking it is uneconomic to maintain small branches. According to a report published by UK Finance, the trade body that represents banks, 71% of adults used online banking in 2017, representing 38 million people.
At the same time an estimated 250 free-to-use cash machines are disappearing a month as operators shut unprofitable ones, according to the network co-ordinator Link.
But all these cost saving measures by the banks seem to take no account of the difficulties faced by many SMEs and private customers in small towns and villages across the UK where broadband and mobile phone signals are far from reliable.
The situation has prompted the FSB (Federation of Small Businesses) chairman Mike Cherry to say: “We want to see banks properly justify reasons for closure.  Bank branches are vital to a lot of small business owners.”
And the final irony – a survey carried out by TSB in November found that 68% of small businesses believe their banking needs are being overlooked in favour of larger, more profitable companies.
The survey report said: “Banks must commit to providing face to face local business support in the real economy, not just metro economies, thereby ensuring that not just those that are digitally savvy or based in big cities are able to get the advice and services that can help grow their businesses.”

Automatic closure of accounts

While less reported in the press we are still coming across SME clients whose accounts have been automatically closed, many after years of being a customer of the bank without a record of breaching covenants, exceeding overdrafts or bouncing cheques. The banks try to hide behind claims of concern about money laundering where in practice it would seem that computer driven assessments automate the closures. And in every case we’ve heard of not even a phone call had been received.
So much for banks wanting to have a relationship with their SME customers or being customer orientated. You couldn’t make it up!

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Accounting & Bookkeeping Banks, Lenders & Investors Factoring, Invoice Discounting & Asset Finance Finance General

Fintech for SMEs

Fintech mobile phone bankingFintech is a topic much discussed in business publications, often in hyperbolic terms, but very few can define it precisely.
Initially, Fintech, short for financial technology, was the word for the technology used in the plumbing as the back-end of established consumer and trade financial institutions.
However, according to the online financial dictionary Investopedia, Fintech now denotes a range of technological innovations in the financial sector, including in financial literacy and education, retail banking, investment and crypto-currencies like bitcoin.
This wider definition more accurately describes the range of possibilities for SMEs to use financial services and engage with the financial sector especially as some Fintech services, we would argue, are revolutionary and open up services that were previously only available to large companies.
Part of the problem lies with the mainstream banks, lenders and most of the traditional suppliers of financial services including factoring, invoice discounting, fund raising and advice, who have remained deeply conservative in the way they do things and the way they charge for their services. Many have not benefited from the technology revolution, or if they have they haven’t passed on that benefit to SMEs.

How can SMEs benefit from Fintech?

SMEs can benefit from significantly reduced costs by bypassing traditional ways of using financial services, and in many instances by bypassing the traditional suppliers.
Fintech has done much to disrupt traditional models, for example, peer to peer lending via firms like Ratesetter and Zopa and equity crowdfunding via CrowdCube or Seedrs has grown. These online platforms now provide alternative sources of lending and investment to SMEs who no longer need to use their bank or finance brokers to fund their business.
Entrepreneurs can, via an online platform, pitch directly to the world for loans or investment in their companies and ideas. While they may still have to produce a sound business model and show that there is a market for their idea, online models can speed up the funding process dramatically.
Another benefit of Fintech has been mobile payment and currency conversion as innovative methods of swiftly and economically transferring funds across geographical borders. Online and cross border payments are undergoing a secondary Fintech revolution with Blockchain technology and crypto currencies like Bitcoin and Ethereum gaining traction.
Blockchain, as an open, distributed ledger system that records transactions between two parties efficiently in a verifiable and permanent way, is likely to fundamentally change the way we do business and offers opportunities that none of us have yet considered.
Payment systems, such as Go Cardless, Paypal and Stripe alleviate the cost and bureaucracy of invoicing and collecting payment, removing the need for debit cards, credit cards and expensive merchant service accounts.  This is of benefit both to consumers buying online and to businesses selling goods or services to consumers and to other businesses.
Other areas where Fintech offers fast and efficient services are in monitoring, tracking and managing accounts and financial transactions. Mobile technology provides users with information in their hand to provide accurate information and allows entrepreneurs to make timely decisions.
Finally, for those who have the skills and knowledge, the opportunities for developing ever more innovative and useful Fintech ideas and converting them into a viable business are only going to increase.