How the rise of mobile is reshaping business banking for UK SMEs

The backbone of the British economy is held together by entrepreneurial small business owners.

The expectations of business customers are shifting, with mobile banking on the rise among UK SMEs

According to research conducted by the Federation of Small Businesses (FSB), small and medium-sized enterprises (SMEs) account for 60% of employment and half of all turnover in the private sector.

In 2023, there were 5.6 million total SMEs in the UK, and this figure is rising. As such, business banking services have developed over the decades to support this section of the economy. Now, attitudes around what businesses expect from their banking providers are shifting, and financial institutions must take note if they are to successfully keep up with the changing landscape.

It’s easy to imagine a small business completing its accounting behind a desk and large monitor, but new data shows this presumption is incorrect for most cases. According to Curinos eBenchmarkers, mobile banking has become the predominant channel to service business bank accounts, overtaking desktop banking. In the month of May 2024, just over 60% of business banking customers used mobile banking, compared to less than 55% using desktop. Note that the overlap in total percentages here is due to dual users of both channels.

This shift is significant, as it will impact how banks choose to move forward and where they invest their resources. Last month, challenger business-only brand Tide acquired payroll solution provider Onfolk with the aim of integrating their complete accounting, payroll, and pension system into Tide’s business banking app. ‘Tide Payroll’, as it will now be known, will allow full functionality within Tide’s existing mobile-first platform.

But there is another side to this mobile banking trend beyond simply customer preference. It’s also the case that part of this switch was led by digital-only challenger banks like Monzo and Revolut launching their own business banking products, forcing incumbents and high-street brands to respond and enhance their own business banking offerings. The availability of better mobile functionality will naturally lead to greater mobile adoption, shifting users’ expectations of how they can manage their business finances.

The switch to mobile dominance for retail customers already occurred some years ago, and mobile banking is now an expected component of core retail banking services. It’s fair to say that business banking customers have now reached the point where some level of basic mobile functionality is expected.

Like all trends, there are some nuances and areas for further context. Dominance of mobile holds more so for lower turnover companies, with high turnover businesses still leaning towards desktop. But Curinos eBenchmarkers data shows long-term growth in mobile usage also holds true for these larger businesses, albeit to a lesser extent. Of those businesses with a turnover less than £50,000, just less than 50% use desktop banking in any capacity. For sub-£10,000 turnover businesses, it sits even lower at 33%. This desktop usage figure rises to around 70% for businesses with a turnover above £50,000. That is still 30% of these larger businesses opting to not use desktop at all, and the data reported by banks since 2019 suggests this figure will rise further.

A further nuance appears when considering what users are using each channel for. Currently, the overwhelming majority of transactions are still done on desktop, suggesting mobile apps are being used for other functionalities. This could be to view statements, amend business details, and upload receipts for expenses to name a few examples.

To understand what this looks like in practice, the Curinos Digital Banking Analyzer (DBA) tracks user journeys across multiple institutions. 56% of all UK business banks tracked by the DBA now offer only mobile onboarding journeys for their business banking current accounts. The move to provide mobile banking capabilities extends far beyond account openings too, with better functionality often being available on mobile than on desktop for some brands. If you’re a business who wants a cashflow forecasting tool (that’s built into the bank’s portal) for example, then you’ll find this is more readily available on mobile than desktop among the leading brands featured on the DBA.

Going a step further, Revolut and NatWest also provide innovative “tap to pay” functionality directly on phones, with no extra hardware or terminals needed. Revolut even offers a dedicated point of sale (PoS) iPad app for SMEs to manage their sales, staff, and operations. Furthermore, user management tools are popular across multiple brands, allowing bosses to manage their employees’ access to cards and services, setting spending limits and setting up virtual cards. While these features are common among challengers, Lloyd’s Bank is currently the only high-street bank to offer user management on both mobile and desktop. In line with all of this, Santander UK’s team released a brand-new app for their business banking customers last year, setting themselves up to add further functionality as things develop.

So, what does the future look like, and how should banks position their offerings from here on out? It should be obvious by now that those banks lacking in mobile functionality need to do more to keep up. However, at the same time, they must not neglect their desktop portals, which remain important to larger businesses, especially for certain transactional and administrative tasks.

The ideal solution is to strive for complete channel parity, making all functionalities accessible on both channels. This would mean channel usage is dependent only on customer preference, and not limited by availability. Of course, this requires more investment, and so understanding exactly which functionality is important to have where is also key. At a bare minimum, where a particular functionality isn’t available on mobile, signposting to show how users can access it via desktop is tremendously useful, lending itself to a better omnichannel experience.

As business banking develops further, expect more services beyond core banking on offer. Value-add services and functionality, such as connections to third-party accountancy software, are already commonplace, and banks are set to compete on this front. An influx of start-ups deciding who to begin their banking relationship with will be determined by which brands can provide the most value to their ever-evolving needs. The expectations of customers are shifting, and banks must do more to better service their users if they want to remain relevant.

About the author:

Ebrahim Daji is a Senior Analyst at Curinos’ eBenchmarkers division, working within their Small Business Banking team. Curinos helps institutions better navigate and anticipate the financial services industry through data and analytics.