Tag: SME

Digital Disruption Offers SME’s A New Growth Path

A new digital marketplace and small business hub – Proquo – was announced early June, as a start-up joint venture between NAB and Telstra. They are now developing their market presence, and have told DFA that they had 500 users registered prior to launch. Proquo offers small business owners and accounting experts access to a range of services from other providers. Users can create briefs for the work they need, provide quotes, manage payments and publish reviews, all on the one platform. Interestingly, they are not planning to make access to the service available by a dedicated app at launch time (but it is on the road-map for later), but access is via their web presence. Here is their marketing video which explains the concept nicely.

Proquo says micro and small business owners, as well as experts in the accounting industry are invited to register for free to take advantage of this world-class tool to aid networking and help their business thrive. The services offered under the accounting umbrella include: Budgeting, Book keeping, Xero, tax and many more.

Small business bartering is no secret and Proquo’s unique swapping feature is an innovative tool for digital marketplaces. Members also have the option to buy, sell or pay the difference should a trade-off not match the cost of a service.

Proquo is free to join and has no subscription fees, and members who sign up by 25 July 2016 will enjoy no transaction fees for the remainder of the year. From 2017 fees of 7.5 per cent to 10 per cent will apply to paid transactions charged to the service provider, the lowest fees of any services marketplace in Australia, they claim. Transaction fees do not apply for straight swaps. When a payment is involved, Proquo holds a 50 per cent deposit in its secure Vault, assuring members their money will only be released when the job is delivered successfully.

When registering, members create their own profile, which includes ABN validation to ensure only Australian businesses can transact, as well as to outline their experience, qualifications and previous work. This and Proquo’s rigorous rating and review feature helps fellow members make informed decisions on who to collaborate with.

Proquo says that a dedicated team and robust briefing and quoting process is in place to make sure members have the right person for the job and both parties are on the same page about what’s being delivered.

We have confirmed that Proquo will focus on Australian businesses, and there are no limits to the number of transactions, or value of transactions which can be made on the platform.

Co-CEO Carl Spurling said, “Proquo combines transactions and networking, enabling small business owners and accounting experts to connect, share their expertise and grow their customer base via a trusted online hub”. We encourage the Australian small business community and especially experts in the accounting industry to register and explore the essential business services available, to help them get ahead with the expertise and customers they need.”

Now this is an excellent example of digital disruption in play as we know from our SME surveys, that many are technology capable, as measured by our technographic analysis, and expect more services to be available on mobile devices.

SME-Techngraphics

But we also know that 50% are likely to fail, and whilst access to funding is one reason, many fall over because they cannot find a channel to market to find customers easily. So, it looks as if Proquo has the potential to become an excellent catalyst for the SME sector. Though many SME’s will find the barter approach quite attractive, it will be interesting to see if the momentum continues to build, once they start charging a fee for cash transactions.

Finally, it is worth remembering that according to the ATO, barter transactions are assessable and deductible for income tax purposes to the same extent as other cash or credit transactions. When an entity that is a member of a trade exchange makes a taxable sale to another member, there is a liability for tax, including GST.

 

Is small business really the engine room of Australia’s economy?

From The Conversation.

It seems that in Australian politics – and this campaign in particular – everyone loves a small business.

Just before this year’s federal budget, Treasurer Scott Morrison said of small businesses: “they are the hope of the side.” Somewhat less pithily, but no less adoringly, Labor’s official policy on small business declares:

“Small businesses make a huge contribution to national prosperity and supporting Australian jobs. Small businesses play a central role in the economy. Over 2 million businesses – sole traders, partnerships, trusts and small employers – have helped underpin 25 years of economic growth.”

In fact, the only thing the major parties seem to disagree on is whether a small business has less than $2 million in annual revenues (the Labor definition) or less than $10 million (the Coalition definition).

But do small businesses, for desperate want of a better term, create “jobs and growth”?

The first relevant fact is that small businesses employ a lot of people. According to figures compiled by Saul Eslake, and discussed in a terrific piece by Adam Creighton in The Australian, business that employ fewer than 20 people account for roughly 45% of private sector employment.

Businesses with 20-199 employees account for about 25%, and businesses with 200+ employees, around 20%.

So small businesses are important employers. Check. Only problem is, they haven’t created a lot of jobs in the last five years. As Creighton pointed out, those small business created 5% of the growth in private sector employment since 2010, while businesses with more than 200 employees created 65% of that growth.

In one important sense, this should not be surprising. When looking at the landscape of firms of different sizes, existing firms exhibit what economists call “survivorship bias”. The very fact that a firm exists today means that it was created, and succeeded.

Big firms were created and really succeeded. So it’s likely that today’s big firms are, on average, more successful than today small firms at, well, getting big. And the way that happens is by, you guessed it, employing more people.

So much for the positive political economy of why politicians are desperate to ingratiate themselves with small businesses. There are a lot of them, hence a lot of potential votes.

But the real question, of course, is what tax policy should be. The Labor party wants to cut the company tax rate from 30% to 25% only for businesses with less than $2 million turnover. The Coalition wants to do that for all businesses, but over 10 years. In the medium term both parties want to cut taxes for mainly for small businesses, albeit to varying degrees.

To answer that question, we first need a quick primer on why everybody (at least until very recently in some cases) agreed that cutting company taxes help workers and the economy more broadly.

Roughly speaking, the amount of “stuff” produced in the economy depends on two inputs: capital and labour. Lowering the company tax rate attracts more capital – especially since Australia is a small, open economy. More capital means more stuff because capital is useful in production.

Moreover, more capital means that the marginal return to more labour goes up, too. That is because, generally speaking, capital and labour are complements in the production process. More of one makes more of the other more valuable at the margin.

Aside: forget all the jibberish you have recently read about dividend imputation and franking credits. That’s a second-order issue – the key is the complementarity between capital and labour.

This increased marginal return to labour means more jobs and higher wages–capital made labour more valuable, and labour captures some of that benefit. This is why Treasury has estimated that two-thirds of the benefit from a cut in company taxes flows to workers.

Now, do small businesses or big businesses use more capital? Answer: big businesses (See here, page 3). So it is big businesses that will increase the amount of capital they use the most from a cut in company taxes. And it is big businesses that will thus drive more employment growth and higher wages.

To sum up. Small businesses employ lots of people. But they haven’t driven much of the job growth in Australia over the past five years. And a company tax cut won’t cause them to stimulate employment as much as it will for bigger businesses.

We should cut company taxes, and we should cut them for all firms. But it makes no sense to favour small businesses over bigger ones.

That’s the economics of the matter. What we are witnessing in this election campaign – on both sides – is pure politics.

Author: Richard Holden, Professor of Economics, UNSW Australia

QuickBiz – Proof of the Pudding

National Australia Bank has entered the online SME lending market with the launch of the NAB QuickBiz Loan, which that allows customers to borrow up to $50,000 in unsecured funding via a new online application process.

Developed by NAB’s in-house innovation hub, NAB Labs, the online platform uses financial technology to assist with the loan application process and states that customers will have money in their account within three days of NAB receiving their signed loan document.

The QuickBiz Loan carries a fixed interest rate of 13.85% for terms of either one or two years. The loan is repaid by monthly principal and interest payments and there are no application or ongoing fees.

According to Angela Mentis, NAB group executive for business banking, “in the early days of business ownership, small businesses often only require small amounts of funding – and many owners don’t have a property or other significant assets to secure a loan against. We’re responding to these customer needs, placing more emphasis on the strength of the business rather than traditional physical bricks and mortar security.”

Jonathan Davey, executive general manager of NAB Labs added the NAB QuickBiz Loan is “another example of the bank’s agile approach to meet customer needs”.

Meanwhile, Canstar’s research manager Mitchell Watson says “from NAB’s point of view this is a move to help stem any loss of low-risk customers to smaller, more agile competitors.”

According to Watson, “the advertised 13.85 percent does seem to be a fair interest rate”, given it is lower than the 16% being charged by the Commonwealth Bank’s Simple Business Overdraft. However, it should be noted that an overdraft is a more flexible and expensive loan product than a principal and interest loan.

What this means for your business

QuickBiz Loans are unsecured, although borrowers should enquire about whether personal guarantees are required. They should also check to ensure the 13.85% rate is based on the outstanding balance rather than the original limit. Any discrepancy would have been evident had the NAB website quoted the interest rate on an APR (annualised percentage rate) basis. Borrowers should also be aware that they could be up for costs if for whatever reason they terminate the loan before the expiry date.

An interest rate of 13.85% is at the lower end of the rates charged by the new breed of online lenders. Banks will always be able to offer cheaper loans to customers because of their lower cost of funds but while it is important, price is not the only factor SMEs consider when it comes to borrowing.

The biggest attraction of the online lenders is the ease of doing business and although there is little doubt that banks can develop software and systems at least as good as the online SME lenders, none of them will survive in this increasingly crowded marketplace if they fail to deliver on the commitments made on their website.

NAB says the QuickBiz loan product is launching in early June, although the website has already been up for several days. In fact, four days ago I applied for a QuickBiz Loan and the experience has been insightful in that the process is not automated, as it is with true online lenders where your application is made totally online. Rather this was an online enquiry. In addition it has not been quick. Having submitted answers to several basic questions about my identity and existing relationship with NAB, I then received the following message in an automatically generated email:

“Thank you for your enquiry regarding the NAB QuickBiz Loan.

“We are currently reviewing the information you provided us and we’ll be in touch shortly to discuss your application further.”

Four days later there has been no response. Of course there are always teething problems in implementing new ways of doing business but this experience re-enforces the importance of good execution. Banks have lots of great products and ideas but too often their execution lets them down.

If the big banks really get their act together with online SME lending, it’s going to be tough for the new little guys to compete. But this remains a big “if” and in the meantime the new players are backing their ability to do better on product and service delivery.

However this unfolds, we are finally starting to see genuine competition in the SME lending market and that’s a great thing for those SMEs who for years have been missing out.

Author: Neil Slonim who is the founder of theBankDoctor.org, a not-for-profit online resource centre that helps business owners deal with the challenges of funding their business. Reproduced from SmartCompany with permission.

NAB & Telstra create digital business marketplace for small business

Small businesses around Australia will soon be able to develop and grow through a new digital marketplace called Proquo; a start-up joint venture between NAB and Telstra.

Proquo will offer more than two million Australian small businesses an online platform to network, trade or swap services with each other.

Small businesses will be able source a range of services from other providers, create briefs for the work they need, exchange quotes, manage payments and publish reviews all on the one simple platform.

Proquo is a modern interpretation of the phrase quid pro quo (meaning ‘this for that’) and offers users the unique ability to swap or exchange their skills or services in addition to traditional monetary payments.

Proquo was developed by NAB’s innovation hub, NAB Labs and Telstra’s Gurrowa Innovation Lab. While it is a 50/50 joint venture, it will operate as an independent entity.

NAB Executive General Manager Micro and Small Business Leigh O’Neill said NAB was continually looking at ways to support Australian businesses and to make it easier for them to build their business.

“Small business is the backbone of the Australian economy; around 97% of all Australian businesses are small businesses and they provide a huge economic contribution to Australia’s current and future prosperity,” Ms O’Neill said.

“Small business owners tell us they are continually looking for new ways to do business and we think Proquo will provide them with a unique way to network and grow their business.

“Strategic partnerships like this one with Telstra, to combine the capabilities of two of Australia’s biggest companies, creates a really innovative business option for the small business community,” Ms O’Neill said.

Telstra Group Managing Director Telstra Business, Andy Ellis said Telstra supports more than 1 million businesses across the country with technology solutions so they can focus on running their business; and believes Proquo will offer them a new and innovative way to network and help their business thrive.

“Small businesses often struggle to get off the ground and our research shows that the exchanging of services will be a great advantage to many start-ups.

“We’re excited and proud to partner with NAB to offer this unique digital platform. This joint venture further highlights our commitment to small business so they can run, develop and grow their business,” said Mr Ellis.
Proquo will begin a pilot phase in June, with a full launch expected in July 2016.

Fast finance with new online NAB QuickBiz Loan

National Australia Bank (NAB) today announced it will introduce a new $50,000 unsecured business loan for Australian small businesses.

The NAB QuickBiz Loan, which has been developed by in-house innovation hub NAB Labs and will launch in early June, allows eligible customers to apply for up to $50,000 in funding via a new online application process.
The new online platform uses NAB’s Application Programming Interface (API) technology to assist with the credit check on the customer’s application and provide an automated credit decision within minutes. Customers will have finance for their business account within three days of NAB receiving their signed loan document.

NAB Group Executive Business Banking Angela Mentis said: “The Australian economy relies on entrepreneurs who innovate, establish new industries and create jobs. As the biggest business bank in the country, we stand ready to back Australian businesses with great ideas, providing simple, quick funding solutions to support small businesses looking to grow”.

New NAB research shows around 1 in 3 Australians would like to run their own business with young Australians clearly the most aspirational (nearly 1 in 2) and this offer will help businesses in those early years with the important cash flow they may need.

The research also showed that banking support (49%) is still commonly cited as a critical element to building businesses.

“In the early days of business ownership, small businesses often only require small amounts of funding – and many owners don’t have a property or other significant assets to secure a loan against. We’re responding to these customer needs, placing more emphasis on the strength of the business rather than traditional physical bricks and mortar security,” Ms Mentis said.

The initiative means NAB is the only big four bank to offer such an online service without a third party referral involved.

Executive General Manager NAB Labs, Jonathan Davey, said the NAB QuickBiz Loan was another example of the bank’s agile approach to meet customer needs.

“We are listening to our customers and focusing on the development of capabilities to drive better customer experiences,” Mr Davey said.

“It’s another example of NAB Labs agile development and rapid prototyping approach, where we build to decide, rather than decide to build, delivering solutions that make a real difference for our customers.”

New Website Is Good for Traditional Banking Relationships but not so Good for Smaller Businesses

Getting the right funding is always a challenge for SMEs. The ABA and CPA Aust have developed a new website to help. Its really good for larger traditional banking relationships. But ignores fintechs which might be the best option for smaller businesses. Cross posted with permission from Neil Slonim, The Bank Doctor.

If you are an SME or you advise SMEs a free new online resource centre Small Business Finance could be of real benefit in establishing and maintaining better relationships with banks.

This website has been developed and funded by the Australian Bankers’ Association (ABA) in conjunction with CPA Australia. Support for the website has also been provided by the Council of Small Business Australia (COSBOA) and the NSW Business Chamber.

It guides users through the three main stages of obtaining bank finance starting with what to do before applying for a loan, how to complete a loan application and finally what to do once you have the loan. There are several useful templates that small business owners can download to prepare documents like a business plan, a business case assessment and a cash flow forecast.

The main limitation of the website is that it is premised on the traditional business banking relationship model which no longer works for smaller businesses that have borrowings of less than around the $250k level.

Many of these customers don’t have a relationship manager or if they do that individual has several hundred customers to look after, lacks experience or authority plus they seem to stay in their roles for very short periods of time.

For business loans of less than $250k banks simply cannot afford to have a manager sitting behind a desk reviewing business plans, business cases and cash forecasts. When assessing your creditworthiness, their primary focus is in how much equity you have in your home because this is the quickest, easiest and safest way for them to lend money. But if you don’t have a home, or have no equity in your home or you and/or your partner are just not prepared to put it at risk then, until recent times, your options have been very limited.

The future of business banking particularly at the lower end is all about Fintech. According to ABA statistics, the total market for small business bank loans is about $260b and almost half are for less than $100k. Within the next few years some experts are predicting fintech lending to SMEs will rise to around 10 per cent of the total SME lending market. In 2015 fintech lending to the SME sector was around $0.25b coming from a base of zero in two years. This means it could rise to around $26b, an increase of 100 times current levels. Its just too big to ignore.

Small Business Finance is a useful tool for larger businesses which still fit the relationship business banking model. It is much less relevant to those smaller businesses which don’t fit this model. Hopefully over time the website will be updated to reflect how technology can be leveraged to provide better outcomes for both SME borrowers and lenders.

To learn more on this subject you may like to read this SmartCompany article Banking resource centre aims to help SMEs but fintech is still the elephant in the room

 

 

 

SME’s Get New Loan Information Portal

A new website – financingyoursmallbusiness.com.au – has been developed the by ABA, in conjunction with CPA Australia and with the support of the Council of Small Business Australia (COSBOA) and NSW Business Chamber. It features a step-by-step guide to completing a loan application, including the do’s and don’ts, with particular emphasis on preparing a business plan

ABA Chief Executive Steven Münchenberg said.

Banks approved $88 billion in new small business loans last year, which is $11 billion more than two years ago. While banks’ lending to the small businesses sector is strong, we recognise that for some small businesses being able to access finance is still a concern. To help with this, we have developed a new website that explains what banks look for in assessing loan applications. It also shows how different types of finance may suit different small businesses. We realised that small businesses would benefit from guidance on how to present information in a loan application that goes beyond just providing the company accounts.

CPA Australia Chief Executive Alex Malley said the ability of small business to articulate the how and why of their venture is extremely important to the success of their loan application.

If we have small businesses growing, spending on new plant and equipment and expanding their markets, then they are sustaining and creating jobs and that’s precisely what our nation needs.

COSBOA CEO Peter Strong said:

This is a great initiative by the banking industry and will help people who want to start, buy or expand a business save time and stress.

NSW Business Chamber Chief Executive Stephen Cartwright said:

For small to medium businesses having access to finance is crucial to their success. Having this resource for SMEs to understand the right type of finance for their needs will help maximise their potential and in turn, help Australia’s economy to grow.

They also released a report on small business lending. Their key findings on small businesses in Australia and banks’ lending to the sector are below. The full economic report is available on the ABA website.

  • There are just over two million small businesses in Australia.
  • The rate of formation of small businesses is strong while the exit of businesses due to financial difficulty has fallen from its post global financial crisis (GFC) highs.
  • Small businesses employ 4.7 million people equating to 44.0 per cent of all jobs in Australia.
  • Small businesses contributed about one third of all industry value-added over 2013-14.
  • About 30 per cent of small businesses have no debt.
  • About half of small businesses have a business loan facility other than a credit card.
  • There are about 1 million loans provided to small businesses.
  • Bank loans to small businesses (where the loan amount is under $2 million) totalled $261 billion in December 2015.
  • Almost half of all small business loan outstandings are less than $100,000.
  • The interest rates on small business loans are at generational lows.
  • Almost nine in every ten small businesses say they do not see access to finance, or the capacity to finance further growth in their business, as an ‘issue’.

ANZ collaborates with start-up Honcho to help small businesses get started

ANZ has today announced its collaboration with Honcho by Business Switch an online platform offering customers the opportunity to set up their small business in one day, along with tools to help their business grow.

Using the tool, Business Ready powered by Honcho, customers can register their ABN, business and domain name, set up a simple website, email addresses and ANZ business bank accounts without having to visit multiple websites and suppliers.

ANZ Managing Director Corporate and Commercial Banking Mark Hand said: “Each year in Australia around 300,000 small businesses are set up and one of the biggest frustrations our customers have is it takes weeks to get started and they often don’t know what steps to take next. This tool is a simple, efficient and cost effective solution that guides customers through the process. “Combined with our $2 billion dollar pledge for new small businesses and discounted banking packages, our Business Ready initiative is another way ANZ is providing ongoing support from the start-up phase through to the growth phase and beyond,” Mr Hand said.

Honcho Chief Executive Officer Matthew Abrahams said: “We chose to work with ANZ because of its commitment to small businesses and our shared goal of making life easier for small business owners. “The single biggest issue that new small businesses face is time. Being able to fast track starting up a business from weeks to hours with only a small capital outlay enables people to start earning revenue faster and to concentrate on building their customer base,” Mr Abrahams said.

Why Taking a Small Biz Loan is Better Than Crowdfunding

From Kabbage.

In the past five years, we’ve seen a plethora of crowdfunding platforms hit the internet. And, the popularity of these “open source” funding sites seems to only be increasing, particularly with those within art communities and the tech industry.

While the goal of these platforms is to connect small business owners with investors looking for opportunities to back promising ventures or ideas, many small business owners wonder if this source of financing is a viable option for securing working capital.

Certainly, crowdfunding can be a great way to get friends, family, colleagues and peers excited about a promising new or developing business. Yet, it can be a mixed bag when it comes to actually obtaining capital to support day-to-day operations.

If you’re a business owner who is tempted to try crowdfunding to “find out” how much capital you can generate, it may be well worth your time to consider the drawbacks of launching a campaign, as well as the advantages of taking a small business loan instead.

Time and Effort to Create a Campaign
The most successful crowdfunding campaigns are those that include eye-catching content to support them. This makes sense when you consider that your campaign is actually competing against others on the platform. Campaigns that stand out in the crowd and have a particularly compelling message will get noticed and receive more funding than those that don’t quite have the same “wow” factor.

Once a campaign is launched, it then needs to be promoted. If you’re a savvy social media marketer, creating buzz on Facebook and Twitter can propel your brand to new audiences and potentially generate investor interest. If you’re not into online pitching, this can be a tedious, painstaking task that doesn’t always generate sufficient results.

In other words, you may be incredibly excited about your machine fabrication business and how you’ll be able to help manufacturers in your industry with your amazing products. However, crowdfunding investors might be more drawn to the solo business owner who is making unique purses crafted from beads sourced from a local village and sharing photos of them on Instagram.

If you’re going to try crowdfunding, you’ll definitely want to consider the time and money you’ll need to create and promote your campaign. This includes photos, a video, social media channels, the development of a website and maybe even a second microsite that is focused on your crowdfunding efforts.  This can cost hundreds, if not thousands of dollars, along with many hours of your time. When you tally the costs for launching a campaign, it may be faster, easier and more effective to obtain capital from a lender that doesn’t require these efforts.

No Guarantees You’ll Be Funded
When you peruse the many campaigns on a crowdfunding site, you’ll see some are incredibly well-funded, while others haven’t received even their first dollar. There are no guarantees that you’ll secure funding, even if you’ve invested in creating a compelling campaign.

If you have a set amount that you need for specific goals you’re trying to achieve such as hiring more staff to cover a seasonal uptick or buying a new piece of equipment, rolling the dice with a crowdfunding campaign is not the right choice for you. An option like Kabbage that lets you apply and receive funding in a matter of minutes may be a better choice that can enable you to plan and budget what you need to succeed. It’s also important to remember that if you don’t reach your funding goal on a crowdfunding site, funds raised typically have to be forfeited.

Are you seeking a large amount of capital? Startups and small businesses are only allowed to raise up to $1 million annually from “small-dollar” investors on web-based platforms, according to the JOBS Act which passed in 2012. Thus, if you’re looking for a substantial capital infusion, crowdfunding definitely isn’t the right choice. You’ll be better off working with a private venture capital company.

Fees

Like with other types of small business financing, there are fees for raising capital via crowdfunding. Most platforms charge a percentage of funds raised that typically ranges from five to twelve percent. There are also other fees to consider such as those to process contributions.

When you add these costs to what you’ll spend on creating and managing a campaign, it may work out to be more costly than what you’ll pay to a lender for a small business loan.

The Cost of Rewards

Rewards-based crowdfunding is particularly popular with startups and new businesses because it also offers a way to test market products. Individuals contribute money to a campaign, and in return, the business provides “rewards.” For example, a jewelry designer may reward each contributor a handmade necklace. Or, a new bakery may offer each contributor a voucher for a free loaf of bread.

Any business that goes the route of offering rewards as part of a crowdfunding campaign needs to also include the investment in supplying rewards when it comes to tabulating the total cost for securing capital.

Time Constraints

Every business owner who is seeking working capital needs to carefully consider their time limitations. Applying for a traditional bank loan is a notoriously slow process that can span weeks or even months before an approval decision is made. Likewise, crowdfunding can also be slow and tedious, requiring daily monitoring and promotion.

For business owners that need money quickly, securing a source of working capital that can be accessed when it is needed is often a strategically smart decision.

Although these reasons certainly highlight why a small business loan can be a better decision for many small businesses, there are benefits to crowdfunding that can’t be denied. For some, being able to leverage the benefits of both may even be the right option. The key is considering your specific business needs, industry, and target market and choosing the right funding option that helps you achieve your goals.

SME Deposits and Basel

APRA has today written to ADIs about best practices in assessing SME deposits accounts. Essentially, in a recent review of 14 institutions, they found significant inconsistencies, based on how individual ADI’s were choosing to flag balances as a “stable deposit”, whether the customer was in a “stable relationship” with the ADI, and which types of account – especially internet based account should be considered “less stable deposits”. In addition “heavily rate driven deposits” need to be correctly classified.

This complexity is a result of the Basel Committee who  introduced a globally harmonised liquidity framework by developing two minimum standards with the objective of promoting short-term and long-term resilience. The Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) were developed to fulfil these objectives and to also enable regulators and investors to make meaningful comparisons between banks. APRA’s expectation is that ADIs with similar business models, balance sheets and customer groups would generate similar cash outflows under the LCR.

The net effect may well be to change the relative attractiveness of rates offered by banks, especially for call deposits offered on line, as they will cost the banks more. On the other hand, deposits, held as part of a longer relationship, with notice periods attached could become more attractive.

Finally, APRA noted that few ADIs benchmarked their offered rates against rates offered by peer competitors for the purposes of this classification and suggests that such benchmarking would constitute good practice.

DFA looked at SME savings balances in our recent report. SME’s have deposits in total worth more than $107bn. The distribution of deposits varies with size. Nearly half is held by the largest firms, and holdings decrease as we look across the smaller-sized firms. The average savings balance varies also between firms which are credit avoiders, and those who are not.