Awards for Excellence 2017
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| © 2017 Euromoney |
| Also shortlisted |
| Lloyds Banking Group |
| OCBC |
| Press release |
| Full results |
Santander launched its global initiative for small and medium-sized enterprises in 2015, so this year’s awards process provided a good opportunity to examine how much progress has been made. In terms of sheer numbers, there is no doubt that it has proved popular with the firms that it is designed to help: in 2015, there were 46,100 participants in the programme; in 2016, this number had jumped to 70,700. The goal for 2017 is for 90,000 firms to be involved.
A key strength of the Spanish bank in this sector is its global approach to what is a very domestically focused activity. Santander has a global-team equivalent of 15 to 20 full-time staff led by the retail and commercial banking division, which works with other core units such as risk, universities, marketing and technology. Below this there are local mirror teams led by country heads that implement the SME strategy, adapting to local requirements. The SME initiative has been rolled out in nine of the 10 countries in which Santander is present. The one laggard is quite a large exception: the US.
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Jaime de la Mora, |
“We have changed how we approach and serve SMEs over the last three years and SMEs are now more actively engaged with the bank,” says Jaime de la Mora, head of SME banking at the commercial banking division of Banco Santander. “Three years ago there were some reports saying Santander was not a specialised SME bank. At that moment we identified an opportunity to improve our SME banking core capabilities and build a unique value proposition. SMEs are very important in every country where we have a presence. We now have more than three million SME customers in 10 geographies which account for 22% of the bank’s revenues.”
The four pillars of the programme are training, internationalization, jobs and connectivity, and the bank has boosted participation in all of these. There has been a 54% increase in firms benefitting from training, from 26,000 to 40,000, and 37% more SMEs are tapping into the trade portal and trade missions. The jobs programme, which offers university graduates a three-month internship with an SME, has grown from 9,100 participants in 2015 to 10,200 last year, while there has been 175% growth in firms looking to Santander for their e-commerce solutions.
Digital is a big focus for Santander, one in which it is keen to catch up with rivals. Earlier this year, it announced the establishment of a new digitally focused advisory board chaired by Lawrence Summers, who is also on the board of US fintechs Square and Lending Club. “Our SME digital solution consisting of helping SMEs build a web or online store was launched in Chile in 2015 and since that time more than 10,000 SMEs now use this solution. It has been launched in a number of other countries including Spain and this year will be launching in Mexico and Brazil,” explains de la Mora.
Santander was one of the first European banks to partner with a peer-to-peer lender when it brokered a referral agreement with Funding Circle in 2014. The bank is using the Atlanta-based fintech Kabbage to offer its UK SME customers same-day decisions on working capital loans up to £100,000. The arrangement is similar to JPMorgan’s deal with On Deck.
Kabbage raised a $135-million Series E round in October that was led by Santander InnoVentures. “Our relationship with Fintechs is good,” says de la Mora. “We are collaborating with them in some areas, we have even invested in some of them. They are beginning to understand we may be more agile and efficient in some banking services and probably will be collaborating more with them in the future.”
Another way in which Santander provides funding to SMEs is through its €650 million alternative financing facility Advance Fund, which saw take-up rise to €313 million in 2016, from €220 million the year before.
The interesting aspect of Santander’s SME offering is the extent to which the bank focuses on education and training as a means to develop a relationship with its SME clients. It is an investment in the relationship that few other banks are prepared to shoulder. SME clients have needs beyond financing that include learning how to transact, how to acquire and retain the best talent, how to move business to international markets and how to transition to digital – all of which are addressed by the four pillars of the bank’s SME scheme.
“We view the value-added services that we provide as an investment, not a cost,” says de la Mora. The conversion rate of non-customers that participate in the scheme rose last year from 15% to 21%, which shows momentum in the right direction.
Implementation of the SME programme is not seamless. It competes for budget in each country with other aspects of the bank’s offering, so it can sometimes be a challenge to get the ball rolling. “The Breakthrough programme in the UK was the seed of our SME strategy,” explains de la Mora. The last year has seen a strengthening and consolidation of that strategy as it builds towards a healthy momentum.
Santander’s takeover of Spanish rival Banco Popular in early June is a big boost to its SME footprint in Spain, giving it an overall 25% market share.
