There is a reason that the banks in Britain have been subject to dozens of competition inquiries and repeated regulatory interventions over the past twenty decades, because in a market that has only a few key players it is hard for new entry level banking businesses to take off, allowing the established banks to get away with behaviour that would otherwise cause a business to fail.
In other words, because the banking industry is not as competitive and self-regulating as other industries, it has to be watched carefully for the people’s own benefit. SMEs that do not get the same type of protection from the banking industry that individual consumers do are often the victims of this situation because their interests are not so closely monitored.
The good news however is that unless you happen to be one of the banks, some of the barriers that have been preventing entry into the banking industry are slowly starting to scale back. This is clearly shown by the fact that there are now new players offering services to SMEs such as Shawbrook and Aldermore both of whom are making some excellent inroads with the high street’s traditional business.
The online world has really helped to increase competition as well as technology is making it easier for new entry level banks to steal niche markets away from the major banks.
A great example of this in is the peer-to-peer lending market where companies such as Squirrel and Funding Circle are able to utilise web platforms in order to give financing options to SMEs that comes straight from its own consumers.