The signs in front of OCBC's Ubi industrial estate branch have a simple boast: "Business banking made easy". Dedicated to the district's small and medium-size enterprises (SMEs), the branch is part of the bank's strategy to bring solutions directly to its customers.
Located off Singapore's Pan-Island Expressway, northwest of downtown, Ubi lacks the bling of the city-state's newer, multinational-oriented industrial estates. The district's main thoroughfare, Ubi Avenue, is bounded to the south by a public housing estate and to the north by a multi-storey auto sales and repair centre.
Banking SMEs is big business in Singapore. Small companies generate half of the country's economic activity, with local and regional banks vying for their accounts. Competitors DBS and OCBC offer comparable product offerings, including extensive branch networks, trade document drop-off boxes and robust online banking portals.
Despite the heated head-on competition, both banks are doing well. DBS, with its government connections, is larger by revenue, earning S$3.5 billion ($2.5 billion) in the first half of 2009 compared to OCBC's S$2.6 billion, but the smaller bank is growing faster with a 24% year-on-year rise in revenue during the period compared to DBS's 9% increase.
In 2006, OCBC stepped up its efforts to capture small business customers with the launch of its offsite quick check deposit service that led to the opening of the full service business banking branch in Ubi in July, 2008. Today, along with this branch, the bank has seven business banking centres in branches scattered around the city-state, four with trade services counters. These are crucial sites as a substantial portion of the bank's cash management revenue comes from SMEs.
"We chose OCBC for their personalised service and for their wide branch network," said Andy Goh, managing director of Ubi-based Bez Balloons. "They have the flexibility to accommodate my growing requirements and they are also very helpful in providing advisory services for my banking needs. In addition, they are also prompt in response to my needs."
Bez Balloons provides helium-filled decorations to functions throughout Singapore. Goh said the firm is one of the largest suppliers on the island, providing customers with balloon decor for openings and launches, and inflatable bouncy castles for children, and creating custom-made large advertising balloons. The company shapes and prints client logos and designs on its products in Ubi.
When asked what aspects of OCBC's Ubi branch are most important to him, Goh said: "The branch's banking hours of 10am to 5pm suit our needs and allow us to settle urgent banking transactions like last-minute telegraphic transfer submissions even as late as 5.30pm. With a dedicated trade finance and advisory counter at the Ubi branch, we also enjoy same-day issuance of credit, shipping guarantees and trust receipts."
But while OCBC's Ubi location is convenient for Goh, the bank is constantly battling with other local institutions for SME business.
Treasurers market
Small companies can be big business for financial institutions. Celent research finds that banks focused on SMEs outperform other institutions, with profit margins as much as 10% higher than their competitors. Successful commercial banks bend over backwards to win these lucrative customers.
Alenka Grealish wrote in a Celent report that for financial institutions to succeed with SMEs, they need to focus on service, including convenient locations, simple products and attentive staff. There are numerous examples of banks responding to small business treasurers' demand for more branches; OCBC's Ubi location is just one. Other banks are doing so by acquiring or building out local networks. (Consider ANZ's recent acquisition of Royal Bank of Scotland assets throughout Asia.)
Competition and standardisation typically keep pricing low on basic cash and trade tools, including payables and receivables, transfers and letter of credit issuance. In Singapore, OCBC makes all these services available in both its branches and on its internet portal Velocity@OCBC.
Above all, small business treasurers should expect financial institutions to work hard for their business. "The best banks sell not just a product but also a service," wrote Grealish. She explained that service for a bank involves caring "more about your small businesses than your competitors" and making "it easier to start and keep doing business with you".
Each small business treasurer has different needs, however. For Goh it is convenience, simple products and personalised service, but for another treasurer it could just as easily be proximity to another bank's branch or the availability of multi-country banking capabilities.
In the buyers' market that is SME banking, treasurers should keep in mind what their business needs are and then find the institution that fills that role best.
This article first appeared in the October 2009 issue of FinanceAsia magazine.
