More than 40 per cent of businesses are likely to ditch their main financial institution, according to the results from a recent survey by Modus Research, highlighting a vulnerability for banks as they adjust to a new competitive environment.
The survey found that just 59 per cent of respondents said they were likely to continue using their main financial institution for their banking needs, leaving 41 per cent who were prepared to bolt.
"This is pretty shocking data," said Charlie Graves, chief executive officer of Modus Research. "When you have people who aren't in the 'very likely to continue' box, they're recognized as at-risk clients. They could flip out of the bank at any time."
The survey, the first of its kind by Modus, comes at a time when traditional banks are dealing with competitive pressures from new financial technology, or fintech, firms that are striving to undercut incumbent players with simple online services and transparent fees.
Some institutions scored considerably better than others in the survey, though Modus did not release any corporate names.
Credit unions enjoyed the best results, with just 22 per cent of their customers likely to leave. Among the biggest banks, though, the results ranged from a high of 48 per cent who are at risk of leaving to a low of 31 per cent.
"There are banks here that have almost half of their clients at risk," Mr. Graves said, adding the industry is already prone to churn. A third of business banking clients have been with their bank for fewer than five years.
While new fintech firms have yet to tap into the needs of large and sophisticated businesses, they have begun to offer short-term loans to small businesses, and some banks appear keen to strike partnerships with them. Canadian Imperial Bank of Commerce has partnered with Thinking Capital, while Bank of Nova Scotia recently began to offer Kabbage to its customers.
However, according to the Modus survey, the main source of frustration with business banking customers is that their banks do not understand their businesses. Just 49 per cent said their current financial institution had a good understanding, even though 77 per cent said the overall quality of service was good.
"Competence of staff appears to be a significant driver of whether or not they intend to stay with the bank," Mr. Graves said. "Things like the bank's online banking interface also seems to be a significant driver of intention to stay or leave."
The survey, conducted in July, drew from the responses of 868 panel members, drawn from a cross-section of managers and executives from a range of businesses, not-for-profit organizations and governments. The survey is considered accurate within 3.3 percentage points, 19 times out of 20.