Thinking about leaving your current bank for another one? Join the club. According to a recent survey by financial-services research firm Greenwich Associates, an historically high number of small and midsize companies have put their banking business out for bid.
In the first half of 2010, 20% of midsize companies and more than 15% of small businesses issued requests for proposals (RFPs) for a new bank, and another 19% of midsize companies and 16% of small businesses plan to do the same in the coming year.
Those RFPs aren’t merely in search of add-on or complementary services: 39% of small businesses and 37% of midsize companies are in the market for a new, comprehensive banking provider.
Greenwich calls the numbers “truly striking,” given that, typically, only about 10% of companies switch banks in a given year. In the first half of 2009, only 4% of small and midsize businesses were seeking a new bank, says Greenwich.
The primary driver is companies’ desire to reduce banking fees, along with unhappiness with the current level of customer service (which was the top driver for small businesses) and access to new sources of capital (a particular issue for more than one-third of midsize companies).
Reuben Daniels, managing partner at EA Markets, a capital-markets advisory firm, says many of the firm’s clients are “just not getting covered by the banks with the focus and creativity the companies are accustomed to receiving. Banks generally don’t view lending as a profitable activity, so many don’t invest the time, effort, and resources to help clients get great results.”
Another factor behind CFOs’ willingness to switch banks is the change in the banking landscape that followed the credit crisis. Companies’ needs are often no longer aligned with the capabilities of their banks. “Many bank groups have changed materially over the past 18 months, given the consolidation, capital constraints, and shifts among banks that are lending versus those that aren’t,” says Daniels.