October has been quite a month for SME banking! Events such as the Global SME Finance Forum in Amsterdam (Oct 7-9) and the SME Banking Club in Warsaw (Oct 21-22) took place this month, and provided us with the chance to discuss the most pressing issues in SME banking with experts from around the globe.
FinTech is undoubtedly playing a big role in helping SMEs grow, and more and more banks see financial management white-label solutions as the best way to adapt and thrive in the current digital banking landscape.
We had plenty of insightful conversations about this matter in the Netherlands and Poland, so we thought it would be a good idea to recap and share some of the most frequent questions we get asked by SME banking professionals.
1. What are the biggest challenges that SMEs face today?
SMEs nowadays face two main issues: cash flow management and a broad lack of financial literacy. They need help in projecting their short-term cash flow and gain skills to make informed financial decisions.
“By nature, a small enterprise will have seasonal ups and downs and a cash cycle dictated by factors beyond their control, so ensuring they have enough cash to hand is critical,” says Estefania Gual, Product Manager of Digital Channels at Strands. “Profitable companies might see their cash reserves affected if they are moving too fast, and stagnating companies might find an unexpected liquidity issue unsurmountable,” she adds.
According to Estefania, SME’s issues, however, don’t stop there as they continue to be “very much on the back foot when it comes to understanding their finances and sourcing the help they need from their bank or any other financial institution.” As a matter of fact, studies have identified a lack of financial literacy as a common problem in SMEs and cite it as the main reason for the failure of these businesses.
Carlos Gómez, Business Development Manager EMEA, at Strands' stand in SME Banking Club.
2. Which features of your business finance management solution are the most appreciated by SME owners, and how do they work?
While Strands' AI-powered SME banking solution offers a comprehensive set of tools and insights to help small business owners achieve better and more efficient management of their working capital needs, “the most praised features are the cash flow management and our e-invoicing,” says Pablo Lacruz, Strands’ Business Development Manager for the EMEA region.
Strands’ tools help manage accounts payables, receivables, budgets and provisions and are all powered by a layer of AI and machine-learning models that help users to navigate the financial needs of their businesses. “Small business owners globally cite cash flow projection as the most challenging aspect of cash flow management, so we equip them with a reporting mechanism that provides a complete view of their financial accounts,” Pablo states, noting that “by bringing the power of AI to the SME user, we allow them to predict income, expenses, forecast balances, receive personalized alerts and notifications and recommend products and services that meet the immediate needs of their business.”
Strands is also working together with Mastercard to enable faster collections of invoices. By using machine learning insights, it is possible to get the history and extract more insights out of an invoice and thus allow the SME to better manage their cash flow and operate their businesses more efficiently.
3. How would you create a compelling value proposition for SME banking?
“A major pain point we often hear about is the limited and often downright messy nature of SME customer interactions with their bank,” Cesar J. Richardson, Strands’ General Manager, Americas reports. “Typical small business owners are not satisfied with their bank’s business banking platform, if it exists at all, as they are essentially using the Consumer banking experience that has very different needs. They might periodically check their balance, make payments and interact personally with their bank relationship manager once a quarter or less,” he says.
Banks also need to improve the quality of every interaction with their SME customers. This means undergoing a crucial transformation from a data interaction to an insight interaction. “More than executing payments, banks must encourage SMEs to engage for longer time periods, by getting them to actively manage their existing products and to consider new offers based on their current financial situation and specific business needs,” Cesar advises. These offers must be relevant in the context of each customer’s business and help them anticipate future needs.
Simply put, modern business banking must deliver a comprehensive banking experience, tailored specifically to SMEs and leverage their transactional data in order to deliver actionable insights through digital channels at the right time and through the right device.
4. How does Strands’ AI-powered BFM benefit banks?
“Our solution, driven by artificial intelligence, allows banks to grow, increase customer loyalty and boost their bottom line,” Strands’ Head of Global Sales Leandro Gimeno states.
Through seamless integration with their existing systems, BFM helps financial institutions to gain an edge over the competition, speed up internal processes and reap the benefits of a more engaged relationship with their customers. Particularly in the SME space, it pushes banks to take a more agile approach to cash flow management and invoice aggregation, which notably increases engagement on digital channels.
“Ultimately, banks achieve greater customer loyalty and a better understanding of SME’s needs,” Leandro points out, adding that “this allows them to develop more specific and profitable products and services, with an accelerated rate of innovation and faster time to market.”
Do you want to know more about SME banking? Please feel free to drop us a line if you have any further questions. We promise to get back in touch as soon as possible.