Research from the Canadian Federation of Independent Business (CFIB) has found that small businesses are more satisfied with the overall level of service provided by credit unions than the country’s big five banks.
The report, part of (CFIB)’s Financing Main Street research series, also revealed that small businesses’ overall satisfaction with their banking services in 2022 is lower than in 2019.
The findings are based on results from CFIB’s Banking and Financing online survey in 2022, which is based on a sample of 7,193 small business owners across Canada.
“While big banks hold most of the small business market share, they’re not serving their small business clients as well as credit unions do,” said Corinne Pohlmann, executive vice-president of advocacy at CFIB. “Banking fees remain a major cost constraint, many small businesses find it hard to contact someone at the bank directly, and they feel like their unique banking needs are not being taken seriously.”
The research looked at a range of issues, ranking banks and credit unions from 0 to 10 within the areas of financing, fees, account manager and service, including access to online banking or how easy to read bank statements are.
Credit unions had the highest overall score of 5.97 (a dip from 2019 when they received a score of 6.19), while topping the banking fees and account manager rankings. In a previous study in 2019, credit unions also received the highest overall score and come at the top in all four areas of evaluation.
In terms of financing among the smallest businesses with up to four employees, the National Bank received the highest score (5.53). Desjardins, a financial co-operative, took the first position for financing small businesses with 5-49 employees with a score of 5.42. Despite being a federation of credit unions, Desjardins was not included in the credit union category. The report’s authors attributed this decision to Desjardins being much larger than any other credit union, the dominant banking player in Quebec and a key competitor by the big five banks.
When ranked based on its overall score, Desjardins came second (5.56), up from the seventh place it had secured in 2019.
“While there were some positive changes in the rankings, it’s still concerning that the top overall score decreased and comes in below 6.0. when the highest possible score is 10.0,” said Michelle Auger, CFIB senior policy analyst. “It shows there’s still a lot of room for improvement for all financial institutions, even the top-rated ones.”
The study also looked at how financial institutions had responded to the Covid-19 pandemic, examining access to financing, assistance with fees and/or payments, remote service offerings, and general satisfaction among small businesses. Desjardins, National Bank and credit unions received the highest scores in this ranking as well, while the rest of the big banks were placed toward the lower end of the scoring range.
CFIB made several recommendations to the Canadian government based on the report’s findings, including ensuring that financial institutions adhere to the Small Business Banking Code of Conduct; expanding the consumer provisions of the Bank Act to include small businesses; carefully reviewing banking mergers and acquisitions; and ensuring new banking/payment entrants and technologies are affordable and accessible to small businesses.
The apex added that financial institutions should “increase access to low-cost financing for small businesses, ensure small business bankers get to know their clients, and not promote credit cards as a main alternative source of long-term financing.”
“Small businesses deserve efficient, responsive, and helpful banking services,” said Pohlmann.