Despite their increasingly conservative attitude to small business lending, the biggest Canadian banks still have a major stake in their support for small business customers. New long term data from the Canadian Federation of Independent Businesses (CFIB) shows how major bank market share in the small and medium enterprise sector has fluctuated since the late 1980s. The data clearly shows the commitment of certain banks to servicing the SME market, while others have drifted further away from their interest in working with entrepreneurs.
From 2000 to 2015, significant declines occurred across select banks, namely CIBC (-3.5 percentage points), Royal Bank (-2.7 percentage points), and Bank of Montreal (-1.9 percentage points). Since 2000, Scotiabank boosted its market share by 6.7 percentage points while TD CanadaTrust increased its market share by 4.4 percentage points. Credit unions gained 2.8 percentage points in market share.
So what makes a bank small business friendly? According to CFIB’s polling base, it boils down to a few key categories: financing (willingness to lend, lending terms, information requirements), fees, account manager issues (accessibility to, treatment and business understanding by account managers, and service (clarity of bank statements, access to branch, user friendliness of online banking.)
Many major banks are collaborating with financial technology firms to invest heavily in reduction of the barriers to small business lending. However, large bank risk models and service systems are not designed from the ground up to service SMBs and their needs as exclusive customers. As major bank market share decreases, alternative banking will be able to offer a wider range of solutions customized to meet the needs of smaller businesses.