We spoke to the ANZ's general manager for small business banking about where he plans to take the bank and its customers is the coming years
Jacob: Where can you see small business banking heading in the next five years? We've had some pretty big developments over the past six months with Commonwealth Bank and its social media platforms. Do you see this as the general direction for small business banking?
Nick: ANZ along with the other banks are all very, very keen to address this market appropriately and invest in this segment. Commonwealth Bank and the other banks as well, are certainly investing heavily in social initiatives, so I see that the small business sector and the small business banking market are only going to get more intense over the next few years.
We and all the other banks, are trying to meet the changing needs of small business customers when it comes to online and mobile services and I can only see this focus becoming more and more important over time.
For example we've got a LinkedIn community and social media community through Facebook and Twitter, but it’s our LinkedIn community that has the biggest presence as it’s a little more professional than the pure, consumer-driven social media sites like Facebook.
We've got over 3,000 customers on our small business hub LinkedIn community. The small business hub is going gangbusters at the moment, part of its success comes from the fact that it’s not only aimed at our customers, any small business out there can join.
And it's a community where a lot of information, advice and direction are provided by other businesses and other companies to support each other. That's just one sign of the adoption of social media in a more collaborative, rather than a pure promotional sense. It's actually a support and advice sense and that's pretty evident that that's going to continue to grow over the next few years.
Jacob: What are small business looking for in a banking experience?
Nick: It depends a little bit on the size of the business, but at the micro business end it is someone local who understands small business, their needs and can execute on that quickly, easily and relatively cost-effectively.
As you get up the scale of into bigger businesses turning over $2-$5 million, their needs become more complex and the knowledge, advice and direction that our relationship managers can provide becomes more important.
A knowledgeable banker who understands small business needs and has input into the banking relationship is a lot more important than a banker who just simply executes transactions. Small businesses are looking for a banker who can work with them to grow their business and take ownership over providing effective banking solutions and innovation - this is what we’re trying to provide.
An example of how ANZ are addressing their customer’s needs is a tool called Business Insight. It's the aggregation of about 20 million credit card and debit card transactions from small business all over Australia. The information goes into a database and ANZ allows its customers access to these figures. It gives our customers a range of data that allows them to judge the performance of their business relative to their competitors.
We don't give it down to the competitor across the road. We do it down to an aggregate of five or more competitors in your local market. If you're a hairdresser in Bondi, we can give you access to how your business compares to an aggregate of five or more hairdressers in your suburb and if there's five hairdressers in Bondi, which there probably is, it would go to the next larger local market - so it could be Bondi plus the other close suburbs. Business Insight provides information on market share, it has Google maps, it has average ticket size, it has time of day sales and you can find trends and patterns in the market. For instance, if you were to find a pattern where a competitor was making a lot of money between 8 and 9am, it can be inferred that if you’re business isn’t open in those hours, then it should be.
In addition to that, core banking needs like managing cash flow are also important to our small business customers - in fact it’s probably the biggest issue our small business customers face. Cash flow in the sense of funding, cash flow in the sense of just basically making sure that the incoming funds and outgoing funds are working in a streamlined way and most efficiently as possible for businesses, they're on top of their collection activities of the people that owe them money and our guides are pretty skilled at working with businesses to make sure that they're on top of that type stuff.
Jacob: Do you think you could provide an example please of something ANZ has coming up?
Nick: We've recently announced an accelerator program for start-ups called Innovyz START.
We've modeled the program off an American initiative which is in the top two accelerator programs in the States. These are programs where roughly ten businesses are selected to be intensely mentored for three months. The program basically enables start-ups to come in and get mentored by 45 small business experts from around the world.
After three months of mentoring the startups will have to pitch the mentors for capital. We had our first pitch event in Adelaide a few weeks ago at the town hall and had 400 people turn up, businesses essentially seeking capital.
But it's another way that we can support the startup community and it's one where we believe we're doing a lot to support despite some criticism that banks get and we're absolutely focused on the startups and entrepreneurship. About 28% of our lending goes to start-ups, which is a lot and we're very focused on growing that space; the ANZ Innovyz start-up program is one other way we can do that.
We also just announced another program to run in the new year and we've also announced a series of three-day leadership forums in Sydney, Melbourne and Brisbane to enable a shorter version of the Innovyz START program to be run over a few days; the best startups from three-day forums will go on to the longer program.
Jacob: Was there anything else that you had on the horizon that you were striving towards?
Nick: We're pretty keen to grow our market share strongly. We're third or fourth depending on the how you look at the market and we're very keen to be the leading bank in the small business market, so we've got an aggressive strategy to grow strongly over the next few years. This year alone we'll grow by around 30,000 customers net, that's net of attrition, so that's a strong growth in the small business market and we are looking to continue that momentum over the next few years. Our goal is ultimately, when customers think about a small business bank and who they want to go to, we want them to think ANZ.
Jacob: What challenges do you see in achieving this?
Nick: Look, not from an internal perspective. We certainly have a strong commitment from all stakeholders within ANZ to grow the small business banking share of market. There are some challenges externally; the economy is one and regulation is another, but I believe we're adaptable and can deal with all the challenges that come along.
Jacob: What sort of businesses are out there are performing well and what isn't?
Nick: At a very high level, we've had some challenging times in retail. Retail continues to struggle relative to other parts of the small business market. Transport and construction are having some challenges at the moment too. These sectors are compared that to areas like services, which could be everything from sort of accounting to legal to other professional services - they’re all doing quite well.
In additional to that, on a regional basis, regional Australia is continuing to outperform metro Australia and you've obviously got the mining states of Western Australia and Queensland that are outperforming some of the other states, like Victoria and New South Wales, although we are seeing New South Wales starting to pick up which is good, not to a leading position but starting to show some signs of improvement which we're very pleased about.
Jacob: I would like to get your view on what you think about Australians turning to overseas companies like Amazon first as opposed to Australian websites.
Nick: As a consumer myself, it's hard to sort of take a parochial view of domestic businesses when you can find something cheaper, possibly higher quality from overseas. The Australian dollar has certainly helped this dramatically and there are number of our local businesses that are really struggling to compete. I think the US businesses in particular, but also some of the other regions in Asia and UK are developing new propositions faster and even despite some of the shipping costs, you can get something sent to Australia for significant discount to what you can get here.
I'd love to see the competitiveness of the Australian businesses lift in relation to their overseas counterparts. I don't think the broader population wants to send money offshore but with the lower cost and some of the better services that are provided with online experience, the experience for the user can be pretty good.
We would like see competitiveness improve and I'll leave the debate for the government to sort of decide on. We don't necessarily, like the fact that money goes offshore, but it's a competitive market and a globally-connected market now with the web and mobile, so I think it's not going away and we just have to get used to it and/or try to provide incentives for the local businesses to compete and provide the environment which is where the government can help and certainly ensuring that the cost of doing businesses in Australia are kept to a minimum.
ANZ small business banking insights
The following is taken from the September ANZ Small Business Sales Trends Report:
- Small business sales increased by 0.4% y/y in September and by 2.5% y/y in the
three months to September.
- Sales growth was particularly strong in the mining states of WA (+5.8% y/y) and
NT (+4.3% y/y) in the three months to September.
- Growth in NSW (+2.6% y/y) was relatively better than the remaining states but still
soft. Sales were particularly weak in Tasmania (-1.0% y/y).
- Sales of food and travel-related services continued to outperform, with sales at
restaurants, hotels and bars growing by around 5% y/y in the three months to
September. Sales of ‘traditional’ retailers such as those selling appliances, clothing
and homewares remained weak.