There are some things you just can't do with an app

Today’s small and medium-sized enterprises (SMEs) are remarkable for their agility and diversity. They have embraced shifts in technology, such as using the internet to transform their marketing or operations. At the same time, they are reflecting changes in society. For example, the growth of flexible working has led to a surge in the number of sole-trader businesses.

Amid this moving and vibrant landscape, banks play an important role, not just providing the financial plumbing that allows businesses to function, and the finance to help them grow, but also – and critically in my view – the guidance to help them navigate the sometimes confusing world of business and finance.

But just as SMEs continue to change, so must banks. It is vital they keep delivering the benefits of technology that make operating easier and faster. They must also support the full range of business owners, including some whom a couple of decades ago might never have considered an entrepreneurial path.

Unsurprisingly, there is near-universal agreement about the need for banking services to keep evolving. But ask how this will, and should, happen and there is lively debate.

Different approaches both bring benefits

Broadly there are two types of business banking today. On the one hand, there is relationship banking, as practised and promoted by conventional banks. This is the traditional form of banking, with a local manager acting as a partner for clients and using his or her experience to support them.

On the other hand, there is digital banking, providing speed and convenience. There are even digital-only fintechs offering lending and banking services – some apparently promising all an SME could need through an app.

As you might expect, given I work for Barclays, my view is that SMEs today need both fast, effective digital services and also relationship banking. However, I am also adamant about the reasons for this, which are sometimes under-appreciated.

Let’s be absolutely clear: increasing competition in digital services has driven innovation. Furthermore, fintechs’ focus on user experience and the slick delivery of services has increased competition and raised the bar across banking.

But while the benefits of digital services – their speed and convenience – largely speak for themselves, and attract attention for their innovation, the benefits of relationship banking deserve more attention.

Relationship banking has a vital role

For many small businesses, and despite advances in technology, conversation with their dedicated relationship manager remains invaluable. It can help the business owner not only evaluate options, but also lead them to think about opportunities they would never otherwise have considered.

Let’s take the example of an electrician who needs financing for a new van. By just going online they could today quickly access a range of financing solutions, but a conversation with a relationship manager could be far more valuable. If the new van is required because the business is expanding, then that might spark a conversation about what else they need to think about as their business grows. But equally, if the issue is that their current van has broken down, then maybe a short-term overdraft to fund repairs could be a better and cheaper solution. What’s more, a conversation with a relationship manager could be the spark that allows a business to see opportunities and gain confidence to invest in their business.

I am also struck, when I travel to different regions, by the range of conversations our relationship managers have with clients. Not just about finance options, but also about topics as diverse as local accountants and the availability of storage units on the local industrial estate. Their experience and local knowledge mean relationship managers often have valuable networks that can bring wider benefits.

Importantly, the outcome of this type of banking is a strong, enduring relationship that benefits both parties in good weather but also, crucially, in bad. Challenging times are among those when a relationship manager, and specialist staff they can call on for support, can play a particularly vital role in helping a business – and when a lack of these people could cause real problems.

In the days after the recent collapse of Carillion, our relationship managers made over 1,000 calls to SMEs in its supply chain, to tell them that Barclays was ready to support them. That’s not something I believe you can do as well via an app.

Such considerations are important, and not just for business owners but also the economy overall. The importance of SMEs to the UK is easy to grasp when you consider that the latest government figures suggest they account for 16.1 million jobs, or 60% of all private sector employment.

At Barclays, our mantra is relationship-based, digitally driven. This means not just delivering the best of both, but using them together to support our clients – now and into the future. Relationship banking still has a vital role to play, alongside the speed and convenience of digital services, in supporting SMEs and the determined people who lead them.