The reasons for switching banks have switched
Switching a company's primary bank relationship often involves months, sometimes years, of searching, planning and maneuvering. However, plenty of businesses choose to make the change. Nearly one in five middle-market companies are contemplating a shift in business from their primary bank providers within the next two to three years, according to a recent report by Deloitte Center for Financial Services.
Active switching is not a new phenomenon. Among mid-size companies, the share transplanting their primary banking business jumped to 23 percent in 2015 from 18 percent the prior year, according to a Greenwich and Associates study. Among companies moving relationships, two-thirds migrated more than a quarter of their overall banking business to a different bank, and approximately one-third shifted more than half.
The fact that companies sometimes leave bank relationships is nothing new. However, the reasons behind switching continue to evolve.
Five years ago, businesses largely traded in primary banking partners based on the price of loans or banking products, lower interest rates and looser lending structures. Today, other variables have moved to the forefront as catalysts for change.
Some companies simply outgrow their bank. Others are drawn to new relationships by higher responsiveness. Many switch sides when a new financial suitor demonstrates an interest in the relationship that their existing bank partner no longer shows.
No matter the reason, switching primary banks remains complicated. Here are three key questions business leaders should ask when deciding whether it's time for a change or best to stay put:
1. Do your bank's capabilities still fit for your company's needs? Over time, your company may evolve in ways not previously anticipated. Perhaps the most common change for successful companies is growth. While banking relationships developed in the past may have been appropriate at the time, company growth may strain your current bank's capabilities, preventing the relationship from scaling with your needs. For instance, it may be time to consider switching to a primary bank with the credit and treasury management infrastructure that better serves your company now as it continues to expand in complexity, size, and geography.
Also, consider whether your primary bank possesses in-depth knowledge and expertise in your industry. If your bank's portfolio lacks clients like you, then you likely have your answer. Industry-based expertise is priceless. Your banking team should serve as a trusted adviser as well as lender. Also consider the bank's international capabilities.
2. Does your bank still provide the same level of customer service and responsiveness? Time might build loyalty, but it also can bring complacency. If customer service has tapered off, resulting in longer response times, or if you're often referred to an 800 number, than it may be time to re-evaluate the relationship. Your primary bank should have a dedicated support team that knows your company and responds to issues quickly. In some cases, not being able get a fast credit decision can jeopardize an opportunity.
3. Does your bank still bring valuable, new ideas to help grow your business? A valuable primary bank partner not only comes through credit, but also provides financial, operational advice and products conducive to your business growth. Your bank should ask insightful questions related specifically to your business and industry to better cater to your particular needs. In addition, ask yourself if your bank discloses less or more strategic information now compared with when the relationship began.
Loyalty in business may be a great virtue, but as you consider your company's future growth plans, it makes sense to evaluate whether or not your current banking relationship provides you with the best options and resources for success."
• Tom Bush is senior vice president and regional group manager for Wells Fargo Middle Market Banking in Chicago. Email him at thomas.bush@wellsfargo.com.