European businesses’ outdated financial services are holding back growth

European business decision-makers feel they are being treated as second-class customers by financial providers, according to new research by CRIF.

The research finds that four in ten European businesses (41%) say a lack of innovation in financial services is stifling their company’s growth potential, rising to more than half in Ireland (52%). Alongside these growth concerns, almost half of European businesses (45%) said they feel treated as a secondary priority by financial providers, rising to 56% in Ireland and 50% in Italy, with four in ten (43%) saying business financial services receive less innovation than consumer-focused services.

That gap is creating friction, with 57% of businesses saying financial services are faster and simpler for consumers than for companies, 56% reporting more paperwork and manual processes in business banking, and 52% saying it is harder to meet eligibility requirements for business finance than in their personal lives.

As a result, more than half (54%) say they wish they could access business financial services as easily as personal finance services, such as through an app, while two in five (40%) say digital services for businesses are poor compared with what they use personally.

In the UK specifically, progress on bringing business banking in line with consumer standards has been mixed.  The CMA’s retail banking market investigation, launched in 2014, set out specifically to improve banking for SMEs, with CRIF’s research showing there has been progress. Two thirds of UK businesses (66%) say lending decisions have become faster over the past decade, while 52% of UK SMEs say access to finance has improved.

However, CRIF’s research finds that 44% of UK businesses feel it is fintech and alternative lenders that are now more responsive to their business needs compared with traditional banks, against just 16% who disagree. More than a third (36%) of UK businesses feel banks and other financial providers do not understand the needs of businesses like theirs.

Despite improvements to business banking, the gap with consumer services remains. Six in ten (61%) UK businesses say financial services are faster and simpler for consumers, while in the last 12 months one in ten (11%) UK businesses say they have taken out a business loan from an alternative lender.

Sara Costantini, Regional Director for the UK & Ireland at CRIF, said: “Financial services have been transformed for consumers over the past decade, but businesses have not benefited from the same pace of innovation. What is most concerning for the sector, and indeed policymakers, is that so many businesses in Europe now see this directly constraining their growth.

“In the UK specifically, businesses can see the progress made, from faster decisions and better digital tools to improved access to credit, reflecting the maturity of the UK sector. But the gap with consumers persists. Business owners judge their experience against what they get in their personal lives, and by that measure business banking still lags behind.

“Businesses across Europe are clear that they want the same standard of digital financial services for their company as they get in their personal lives. Providers that close this gap will be best placed to retain and attract customers, while crucially supporting growth across the continent.”