BankingCorporate to Bank RelationshipsUK small businesses ‘prefer fintechs’ FX service to banks’

UK small businesses ‘prefer fintechs’ FX service to banks’

Banks’ share of the FX market is increasingly challenged as the fintech boom sees specialist providers launch rival services, claims WorldFirst.

UK banks face a fresh set of challenges from their financial technology (fintech) rivals, claims World First.

The foreign exchange (FX) services specialist say that a survey conducted on its behalf by Censuswide of over 1,000 senior decision makers at UK small- to medium enterprises (SMEs) found 87% reporting they receive a superior FX service from the fintech sector’s specialist providers than from the banks.

The survey also found that those using specialist providers felt they demonstrated a better understanding of their business’s needs (85%), delivered a more tailored proposition (94%) and provided greater transparency on fees (88%), suggesting that major banks face increasing competition from specialist and technology-led alternative FX service providers.

The company’s newly-published report, entitled ‘Don’t Bank On It: The FinTech FX’ also finds that of those UK SMEs using a specialist provider for their international currency transfers, 89% would recommend their services to another business against 35% of those using a bank.

However, World First also reports that despite the “high satisfaction among SMEs using a specialist FX provider for international payments”, lack of awareness remains a major issue with 31% of respondents unaware of alternative providers outside their traditional banks. The company says that 30% of SMEs stated instances where their bank was unable to meet their FX requirements, yet 88% of those affected didn’t switch to an alternative provider.

It suggests that with sterling having fallen 10% against the euro since December, and further volatility likely before and after the European Union referendum on June 23, having an effective currency strategy has become increasingly important. Despite this, 70% of those surveyed felt their business could be better prepared to protect themselves against exchange rate fluctuations.

“While SMEs have historically had to rely on the big banks for any sort of financial service, genuine innovation and technological development from the fintech sector has given rise to a wide range of truly compelling alternatives,” said Jonathan Quin, chief executive officer (CEO) and co-founder of World First.

“This new breed of specialist providers are often better placed to serve the needs of SMEs than traditional banks, offering greater flexibility for the user, more transparent pricing and, ultimately, better value.

“Currency market volatility is ever present, and with the EU referendum in June and the US election later in the year, is likely to continue. Therefore, much more must be done to raise awareness of currency risks to SMEs, as well as the benefits of using fintech specialist providers.

“This is particularly true for the mini-multinationals targeting business growth through international expansion. Until this awareness gap is addressed, UK SMEs – the engine of our economy – may be exposed to additional risk and cost, which could impact on them achieving their potential.”

The recent report, ‘Landscaping UK Fintech’, by EY and commissioned by UK Trade & Investment (UKTI) estimated that the market size by revenue of the UK fintech market for online payments and FX is £1.9bn. World First data suggests that the average UK SME trading overseas made international transfers to the value of £256,700 last year.

Related Articles

The effects of digital transformation on the bank–corporate relationship

Corporate to Bank Relationships The effects of digital transformation on the bank–corporate relationship

4d The Global Treasurer
Why Open Banking increases the need for enhanced security

Open Banking Why Open Banking increases the need for enhanced security

6d Eric van Vuuren
Mobile banking platform enhanced for treasurers

Banking Mobile banking platform enhanced for treasurers

2w Laura Noble
Liberis CEO on Open Banking and the future of SME funding

Open Banking Liberis CEO on Open Banking and the future of SME funding

2w GTNews
Two year technological forecast for European banks - an insiders account

Banking Two year technological forecast for European banks - an insiders account

4w Hans Tesselaar
The challenge that third party providers face: five important steps to becoming a TPP following PSD2

Open Banking The challenge that third party providers face: five important steps to becoming a TPP following PSD2

4w Tom Wijnen
Is disintermediation coming? A video case study into the emerging utility model

Banking Is disintermediation coming? A video case study into the emerging utility model

4w David Beach
What can banks learn from the TSB IT disaster?

Banking Risk Management What can banks learn from the TSB IT disaster?

1m Mark Hipperson