SME Banking: Become your SME customers' primary bank

by Cesar J. Richardson on Sep 25, 2018

According to FIS Global's 2018 PACE (Performance Against Customer Expectations) Report, 43% of SME banking transactions in the UK are completed digitally, and 60% of SMEs increased their use of digital transactions in the past year.

In the US, the same report shows that 42% of SMEs use their mobile banking app (online and/or mobile) more than a year prior, but interestingly, far fewer small businesses are planning to jump ship, with 8 out of 10 SMEs satisfied with their banking provider. 

There is still a considerable demand for business financial management (BFM) tools in the SME space (especially for bookkeeping, expense management & business planning).
According to a 2017 survey carried out by UK200Group, 65% of its members’ SME business clients do not currently use software to manage their accounts. More surprisingly still, 16% of small business (SME) owners do nothing to record business transactions

Image source: FIS Global

FIS Global

All signs point to a significant opportunity for banks to step up and become their SME banking customers’ main financial services provider - in other words, their  primary bank. 

So the question now is: how exactly can banks leverage BFM software to drive the kind of engagement SMEs are looking for?

In order to become the primary bank and true business partner of their SME customers, banks can leverage FinTech in the following 3 ways:  

1. Opt for a holistic, symbiotic solution that is tailored specifically to SME operators.

In practice, this means offering a centralized hub that immediately displays the financial wellness of the SME owner - a kind of  “mission control” or dashboard for their business - right from their online banking.

Presenting a customized overview in such a tangible way shows that you, the SME bank, understand that SME customer's individual business and are up to the challenge of providing the personalized advice and financial planning help they are looking for.

Let’s be clear: this is not meant to be an accountants-only tool.

Although CFOs can and should find it useful - we aren't talking about another Quicken or Freshbooks! A good BFM is and should be built specifically for owners or operators that want an easily digestible snapshot of how their small-to-medium-sized business is doing.

2. Use the power of FinTech to gain actionable insights from transactional data.

The objective of any good business financial management tool is to simplify and interpret transactional data by making it more relevant to SME customers and small business owners, right from their online banking interface.

For instance, insights generated could include past and predicted cash flows. Or, if your SME customer is dealing with multiple operations, being able to “tag” or segment income or expenses by customer or by business unit.

In emerging markets, a lack of technology infrastructure can present barriers to obtaining data robust enough to deliver actionable insights. This is also where mobile can play a more powerful role by enabling banks to “leapfrog” the need for expensive hardware. 

As for software, single-feature BFM solutions such as e-invoicing already exist for even the most basic mobile devices. Users simply need a smartphone device to log into their online banking.

From there, future cash flow information could be displayed via API connection with their existing invoicing service, or they could use the bank’s existing invoicing solution that would drive that same information through the BFM.

3. Use insights to educate SME customers, especially in emerging markets.

BFM can also be an effective tool to target unbanked business customers (or those with lower business acumen) in emerging economies by combining technology with branch-based education.

Imagine a marriage between technology and branches, where an SME manager at a local bank branch can do more by using data insights generated by BFM technology to train customers with real life examples specific to their business.

Suddenly, the SME portfolio manager is not the only one who can sell products - BFM can do it for him or her too. The physical branch can and should be used to maintain human and educational relationships with SME customers, with FinTech as an important tool to explain business management basics like cash flow, saving goals, invoicing, etc. 

It's clear that SME owners anywhere and everywhere in the world should be able to understand their business finances quickly and easily, without needing an accountant to interpret their financial situation for them .

A good BFM dashboard should give them the full financial picture - in the time it takes to glance their smart watch, phone or tablet.

The final ingredient, but perhaps the most important one of all, is for banks to understand their SME customer, know them and engage them to keep them on board. 

4. Engage & Monetize. 

There's no getting around it; SMEs are a lucrative business, but one that should be invested in wisely.  Understanding them, and personalizing financial offerings and solutions will impact directly on their satisfaction, loyalty and ultimately, your churn rate.  When it comes to SME banking, a little extra goes a long way. 

Learn more about financial management solutions for SMEs

Cesar J. Richardson
Cesar J. Richardson

Head of Alliances at Strands. Cesar has over 15 years of experience identifying business opportunities, implementing plans and generating revenue growth in investment banking technology, online travel and educational technology companies.

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