The history of banking in a country as ancient as the UK would take a long time, but experts believe that the origins of British banking started in the Middle Ages, in the time of Saxon England, with the local Jewish population. The Jewish immigrants were looked upon favourably by the royalty and nobility and were amongst the first people to set up lending firms. They were later treated harshly and expelled by the English population; however the country would have a lot of reason to thank those people.
Since the 2008 global recession, banks in the U.K. have adapted to the newly formed economic environment, and to increasing political pressure, to change how –and why – they lend to new businesses.
A faster approval and funds transfer process was commanded by the British government in order to help the struggling economy after the worldwide economic crisis as the stock market dipped dangerously low and the stability of British banks was called into question.
Major U.K. banks, like Lloyd’s Banking Group (whose former chairman was Sir Maurice Victor Bank, who is vice president of the Jewish Leadership Council), were slated to receive a portion of the £500bn the government pledged to prevent against a financial collapse, though only Lloyd’s and RBS were the major recipients. Since then, and even after being given the bail-out funds, Lloyd’s Banking Group have struggled to maintain a stable profit and have only recently been able to shed any light on the future of the institution. During this, the demand for funds and loans increased as the impact of the recession caused many jobs to be cut, meaning banking customers were looking to borrow more and have easier and faster access to these funds. Individuals were also setting up businesses at a much faster rate as they were unable to find a job or other means of steady income.
The Workplace depot, a company that supplies new and existing Small and Medium Enterprises, has recently reported that individuals are also setting up businesses at a much faster rate due to difficulties in finding a job. The Workplace Depot reports that “as many as 500,000 people opt to set up their own business in the UK every year, and that number is steadily climbing. In the last 13 years, the number of small and medium sized enterprises (SMEs) in Britain has rocketed by 29%.”
Adapting to Customer Needs
As the fervour of individuals creating and registering new businesses increases, banks have recognised the need of new ways for their customers to access funds and banking services quickly and efficiently. This is especially important for new business owners to receive banking support and be able to quickly use banking services like transferring, withdrawing, and depositing funds without holds or fees.
Though many customers undoubtedly prefer to visit their local branch and use the traditional transaction ledger to keep track of banking activities, but many simply do not have time to do so, especially new business owners. In response to this increased demand for quicker access to banking information, and more efficient ways to track transactions, banks are consistently improving their online banking platforms to be more navigable and user-friendly. Telephone banking has also become largely automated so customers are able to easily access the service they need; many automated telephone services are available 24/7, and some banks offer telephone operators 24 hours a day as well. Lloyd’s has yet to offer telephone advisors 24 hours a day, though their automated phone banking is available 24/7.Many banks also offer free, secure, mobile banking apps for customers on the go, or regular text alerts in regards to account balances.
Business owners, in addition to needing fast access to funds, also need access to banking support. Usually, this support is in the form of a designated banking officer that offers financial advice and handles the monetary needs of the business owner while the owner focuses on running the business. Owners also need to have access to tellers to deposit large amounts of cash, and perform other account transactions, as well. To accommodate the need for access to these support services, banks have had to adapt to the demand for longer branch hours, including extending hours through the normal workday and having branches open their doors on weekends.
Lloyd’s Banking Group Responds
A major bank like Lloyd’s has recognised the need to adapt to the demands on new business owners due to the economic environment. The institution offers many helpful resources and provides a plethora of (free) information online on how to start up a new business, how to manage a business, financial planning services, and many more. The Workplace Depot comments on the importance of these aspects: “Of course, wanting to set up your own company and actually putting the wheels in motion are two entirely different matters. If you’re serious about making your venture a success, there’s a long list of factors, which require consideration, attention and planning. Lots of planning.”
But, because of the 2008 economic downturn and the rush of individuals creating new businesses to sustain themselves financially, many new business owners are just that – new. This may be their first business venture, and they may not have the background to fully understand just what it takes to start, and manage, a business. Lloyd’s is aware of this; they see the shift in the economic environment towards new entrepreneurs creating ventures quickly, but they also see the lack of experience many of these entrepreneurs have.
So, they have created a large database of information online to draw in new business owners, and have adapted their processes to meet the needs of these entrepreneurs by offering easily accessible online banking services, financial advisors available for extended hours (from 8am – 8pm weekdays) via the telephone, and offering a free mobile banking application available on most major smartphones. This provides unfettered access to the banking services, support, and information that Lloyd’s Banking Group supplies, and makes managing finances efficient for both the new business owner and the bank.
This year, Lloyd’s announced the release of the first annual Lloyd’s Bank UK Business Digital Index. The index will monitor the digital maturity of SMEs and charities in the UK (Lloyd’s Banking Group, 2014).This can be helpful in helping SMEs realise the potential for growth in the world of digital technology and the digital marketplace.
Not only does Lloyds help struggling SMEs, they also fund organisations such as the Jewish Council for Racial Equality or JCORE for short. This organisation is vital in supporting Jewish immigrants in the UK. Their JUMP project aims at welcoming new Jewish immigrants into the country so that they too may one day become an integral part in society with their own SME.
Although, on the one hand Lloyds have provided vital funding to JCORE, with the other hand they took away funding for the British charity Interpal which is dedicated to helping Palestinians in need of support be it financial or other.
The Start-Up Loans Initiative
In order to help with the most difficult part of setting up a new business, The Workplace Depot reports that “[a] recent initiative is the Start-up Loans government scheme, which aims to provide £151 million in funding by 2015 to help new businesses get on their feet. So far more than 13,000 businesses have received funding with in excess of £66 million paid out.”
This will mean that more political pressure will be put on banks to provide more funds to lend to new business owners. In response to this pressure, Lloyd’s has set up a new ‘growth’ charter where they have pledged a significant amount of money to aid in the growth of SMEs. As part of the statement released, Lloyd’s Banking Group says of the growth charter:
“Lloyds Banking Group has announced it is to grow its lending to small and medium sized businesses by a further £1 billion this year and double the amount its local managers can lend without central approval, as part of a brand new SME Charter, to help small firms harness vital growth opportunities as the economic recovery continues to gather pace.”
This growth charter is the first of its kind to be rolled out by any U.K. bank for 2014, and Lloyd’s promises that “This will help to underpin the Group's continuing outperformance on lending, with its net growth of six percent, compared to the decline of three percent across the wider industry.”
How Business Owners Benefit
More money and funding from banks and the government mean more money and funding is available for business owners to benefit from. Entrepreneurs can now get funding to start-up theirs businesses much more easily and efficiently through such initiatives like the government’s Start-Up Loans Initiative and Lloyd’s new ‘growth’ charter; the creation of new businesses means that new money is being injected and circulated into the British economy, along with the near-guaranteed return investment from loan repayments.
Lloyd’s ‘growth’ charter was made to benefits SMEs by providing borrowing options with negotiable terms that aim to be “fair and understandable”, and the group promises to be “fair and transparent in all… dealings with customers”. With a more customer-focused approach, getting funding to create a dream business is simple and more straightforward for entrepreneurs. Lloyd’s is committed to helping new business owners realise their dream ventures by providing borrowing options to help get entrepreneurs off their feet; The Workplace Depot comments on the importance of a loan in that “[a] bank loan can give you the cash injection you need to get going and allows you to budget effectively.”
Banks, and the government, responding to the need for increased amounts of financial support and information mean that these crucial services are more readily available and easily accessible for entrepreneurs that need it now. The extended branch hours, along with the longer telephone banking hours, provide sorely-needed support and advice in regards to everything to do with starting, managing, and financing a new business venture.
The economic environment is constantly changing and evolving, and banks must do everything in their power to keep up and provide for the demand that arises from this change. For Lloyd’s Banking Group as a major institution, adapting to this change and meeting the demand can take time, but it will be rewarding and beneficial to the customer, especially new business owners. The Group has responded admirably with a customer-centred approach in the creation of their ‘growth’ charter to meet the needs of SMEs and to ensure the continued stability and growth of these businesses in Britain. Lloyd’s is still adapting to the ever-changing economic environment, but has responded strongly to the growing political pressure from the British government and varying customer demands, and has shown a keen understanding that they need to focus on the customer as the customer drives the change.