The balancing act of doing what is best for your small business clients as well as uncovering ways to deliver revenue growth is put through the unique lens of European banking. In this workshop you will learn and interact with various ways Barclays Bank (and other Financial Institutions in Europe) generated new lines of fee-based revenue, helped position themselves as innovators in the SMB banking space, and also delivered world-class solutions vital to their clients. Discover how a deep understanding of SMB needs drove these banks to step beyond banking products and transactions and align their proposition with the basic, day-to-day requirements of small businesses: helping them survive and thrive. From this starting point, learn how deepening customer relationships can lead to double digit sales penetration on cross-sell opportunities, help to harvest the accompanying goodwill PR, and drive better retention of your most valuable customers. The workshop will cover: •Basic research findings about what SMBs consider to be their big headaches •What banks traditionally do and don’t do •What is the alternative – positioning the bank as trusted adviser and going beyond banking •What are the areas you can stretch to – how and why •Barclays – a UK case study – followed by ABN AMRO, RBS, Santander •Benefits provided to these banks, not only the SMB client

1. What Small Businesses Want: A European View John Davis, Managing Director, BCSG November 9 th , 2011 16 th Annual Small Business Banking Conference

2. Agenda Case Study 1: Barclays Positive Outcomes of a Broader Offering The Proposition | Small Business Suite | Needs Based Selling The European & UK SMB Markets BCSG and the US Small Business Home Truths Case Study 2: ABN AMRO Credit Management

3. The European & UK SMB Markets The Facts European SMB Market c. 40m UK SMB Market c. 4.5m US SMB Market c. 27m 01 02 03 The banks & SMEs Big players dominate In most markets, there are 4 or 5 significant players with c.20% market share Banks look the same Customers perceive very little difference between banks SMEs are valuable Each UK customer is worth an average of £1K per annum in banking fees alone 99% of European businesses are SMBs 90% of SMBs have fewer than 10 employees The start-up market is vibrant – in the UK, more than 0.5m new businesses will start in 2011 04

4. Small Businesses: A European View ‘ To Encourage Small Business, Learn from Europe’ ‘Despite our rhetoric about the importance of small business in America, many European nations have a better approach to encouraging small business than we do.’ Bloomberg Business Week, December 2010

5. What Small Businesses Want – A European View 20% 01 10% 02 8% 03 3% 04 1% 05 What % of SMEs annual spend is on banking?

6. Small Businesses: A European View ‘ For banks, we have identified an opportunity to provide added value to customers’ ‘If customers are not getting valuable assistance from their bank in areas like cash flow management and other business efficiencies, they should explore other options’ Greenwich Associates, August 2011

7. What Small Businesses Want – A European View 46% 01 37% 02 29% 03 22% 04 17% 05 What % of SMEs are ‘extremely satisfied’ with their bank? (customers of top 4 – Citi, Chase, Wells, BofA)

8. How much time per week do you spend on administration, specifically financial, legal, HR and other non-core tasks? Base: 500 owners, founders and senior employees from UK companies with 20 employees or fewer, operating for 5 years or less

9. What Small Businesses Want – A European View Get the basics right 01 Provide support and advice 02 Take an active interest in my business 03 Leave me alone to run my business 04 Give me access to tools to help me run my business 05 When thinking about your relationship with your bank, rank the following in importance to your business.

10. What Small Businesses Want – A European View Get the basics right 01 Give me access to tools to help me run my business 02 Provide support and advice 03 Take an active interest in my business 04 Leave me alone to run my business 05 Ranked

11. What are the three biggest challenges your business has faced so far? Base: 500 owners, founders and senior employees from UK companies with 20 employees or fewer, operating for 5 years or less

12. What Small Businesses Want – A European View 80% 01 67% 02 56% 03 41% 04 32% 05 What % of US SMEs say that their bank has NOT provided advice on managing cashflow?

13. What were the most challenging financial elements of starting up your business? Base: 500 owners, founders and senior employees from UK companies with 20 employees or fewer, operating for 5 years or less

14. Small Business Facts SMEs spend c.3% of their annual cost base on banking 01 They set up in business because they are passionate about that business 02 But they tend to hate spending time on the administration and financial matters that are part of the deal 03 They want advice and support and they want someone to take an active interest in them and their business 04 They want more from their bank than checking accounts, deposit accounts and lending 05

15. Barclays – The Proposition SMBs present a genuine revenue opportunity that stretches beyond banking… 3% of the annual cost base spent grows to 10% when you stretch to wider business services. ...so Barclays embraced added value services to capitalise on that And introduced a broad proposition, delivered by face to face RMs that offers easy to use solutions to the big headaches SMBs face They made the most of face to face time and trained RMs to talk broadly to SMBs... About cashflow, late payment, red tape and securing business critical data, emphasising the SMBs success is Barclays’ success ...and used a needs based sales approach to introduce non-traditional bundled offers which covered bookkeeping, planning, HR, legal, e-learning, data backup, payroll and credit management

16. The Small Business Suite Barclays first introduced customised accounting software in 2002… It was £300 upfront and covered bookkeeping only In 2004, Barclays Business Manager was launched as a £20 monthly subscription… It included accounting software, planning software and HR & H&S support In 2011, Barclays launched MyBusinessWorks – a SaaS platform containing accounting, planning, legal support, data backup and e-learning… It is £14.50 pcm for a Barclays Business customer

17. Small Business Suite Income generation and better relationships The product initially achieved 10% conversion which has risen to nearly 50% in the latest iteration. In addition, customers consistently rate the initial start-up interview (where this service is discussed) as the best in the market

19. Needs-based selling Award winning and Commercial The process was selected as a case study by the Business Banking Board and has been nominated for multiple awards It has also significantly driven up penetration rates on core banking products and wider business services

21. Credit Management Responsive to market trends The Credit Management services launched in the Netherlands and the UK have been perfectly timed to make the most of the focus on helping SMBs to manage cashflow better. Sales rates are correspondingly high and market reactions have been immensely positive

23. Taking action Implementing this approach need not be difficult or costly Partnership approach to sourcing products and services / Highly feasible to trial What challenges are you likely to face? Initial salesforce resistance / Focus on the core vs. meeting broader demands Returns may start small but endowment effect is powerful NII small compared to banking revenues / Ancillary benefits are significant – stickiness, satisfaction etc.

25. The Need The Facts about SMBs US SMB Market = c. 27m with turnover of <$2M 01 60% extend credit 02 94% have late payment problems 03 Bad debt costs = $4000/yr 04 55% higher DBT (days beyond terms) than large companies 05 How are SMBs currently addressing the problem? 58% of businesses extending trade credit don’t monitor their existing customers and suppliers 33% of businesses extending trade credit have never credit checked a new customer Use of third party debt collection services in small businesses is rare