(25 September 2008 – Australia) Despite having more embedded relationships with their trade financiers compared to larger companies, Australia’s small to medium businesses are more likely to shop around for a new provider during the next year.East & Partners’ latest Trade Finance report features detailed coverage of
the SME (A$5-20m annual turnover) segment, alongside the standard analysis of
the Institutional (top 500) and Corporate, or middle market, segments.
“There are a number of parallels that can be drawn between SMEs and trade
customers in the middle market, but there are also some fundamental differences
in the way SMEs interact with their financiers,” said East & Partners’ financial
markets analyst Zoran Knezevic.
“The need for liquidity support figures prominently on the wish list of SME
customers, with the quality of service delivery and trade advice also regarded
as very important,” he said.
This is virtually identical to the service expectations in the middle market.
“However, the nature of relationships between SMEs and their trade providers
differs markedly compared to the relationships between larger companies and
their financiers.”
In the SME segment, virtually all of the trade finance business is serviced by
the main financier, with the average primary provider wallet share coming in at
88.6 percent.
This is in stark contrast to the Institutional and Corporate markets where
wallet shares are 63.7 and 51.8 percent respectively, and where two out of three
customers have a secondary trade provider.
“Even though SMEs are more entrenched with their primary financiers compared to
larger businesses, they show more willingness to switch to another provider,” Mr
Knezevic said.
About a quarter of SMEs say they are very likely to change their main provider
during the coming year, compared to just 9.1 percent of top 500 and 18.8 percent
of middle market companies.
“In the top 500 and the middle markets, customer churn means that the financier
often loses only a part of their business with the customer. But in the SME
market, customer churn generally results in the entire relationship being moved
to another provider.”
With this backdrop, competition in the SME trade finance market remains vibrant.
NAB and ANZ have the largest market share as trade financiers to SMEs, but they
face competition from the international banks, led by Citigroup and HSBC, as
well as the smaller domestic providers such as BankWest, Arab Bank and St
George.
“The SME segment is the most populous in terms of customer numbers so the stakes
for trade financers are quite high,” said Mr Knezevic.
“Understanding the expectations of these customers and the nature of their
relationships with providers is an important first step in meeting the financing
needs of smaller businesses trading internationally,” he concluded.
About East & Partners’ Australian Trade Finance Markets Program
Australian Trade Finance Markets is East’s ongoing six-monthly research service
focusing on the Top 500 institutions and a structured sample of the corporate
businesses with annual turnover between A$20 and 340 million. From August 2008,
the program also includes full coverage of the SME ($A5 to 20 million annual
turnover) market segment.
Each analysis report covers a range of metrics including market share, share of
wallet, product penetration, export/import regions, supplier share of mind and
customer satisfaction with service performance.
For more information please contact:
Tanya Glazer
Marketing Communications
East & Partners
t: 02-9004 7848
m: 0404 474 446
e: tanya.g@eastandpartners.com