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5 tips to win in SME Banking and secure the digital future

By Aaron Hughes, managing director of Equiniti Riskfactor


UK Government research published in December 2017 showed that there are around 5.7 million Small and Medium Sized enterprises, employing less than 250 people. 5.5 million of these businesses employ less than 10.

UK SME’s turned over £19 trillion in 2017, 51% of all private sector turnover. The sector is dynamic, innovative and growing, and vital to the health of the economy.

This huge market segment is under-served by the Banks due to perceived risk and cost to serve, yet presents real growth opportunities. To achieve that in the face of technical innovations and new entrants to the market, Banks will have to offer SMEs what they want, and drive down the cost to serve through innovative new products and delivery channels.

What SMEs look for from their bank will vary depending on the size of the business, but it will include a seamless onboarding process, an easy digital experience, trusted advice and value-added services.

Here, we suggest 5 ways Banks can win and retain profitable SME business.

  1. Understand and segment the market.

There are multiple ways of segmenting the SME market. Turnover, staff numbers or sector may be the traditional ones but increasingly lenders are becoming more sophisticated and looking at factors like the complexity of the business, rather than its size, or the stage in its business lifecycle.

An early-stage business has different needs from a mature business. Businesses enjoying fast growth have more in common with each other, than they may have with more stable businesses in the same sector.

Building products and delivery channels to match the segments can bring simplicity and efficiency.

  1. Simplify and automate the onboarding process

Online account opening, and digital decisioning for new credit facilities and renewals, are all essential. Routine processes that require staff time can cost up to 20 times more than if they were automated. In addition, Customers increasingly prefer digital interactions. Without a secure online automated Compliance and KYC process, account opening costs rise to the point where it is uneconomic for the lender to accept some SMEs, and micro-businesses in particular.

  1. Speed of Response

Customers’ online interactions with Banks often compare unfavourably with their online retail experience. 24-hour access is vital, as well as ensuring only products of interest to that Customer are on offer when they access their accounts.

They will have different needs during the course of their relationship with the Bank. But the Bank must pro-actively identify these needs and offer solutions and advice that is relevant to that business. And when a Customer takes up an offer, they want to self-serve, and click through to product approval. Automated credit approval driven by better data will speed up the process and improve credit risk.

  1. Provide Value Adds

SMEs want to know what their Banks can give them to help them run their business better. This can range from the advisory, helping them with working capital optimisation, to networking opportunities. Tools to help them get paid quicker and allow them more flexibility with suppliers. Metrics that will help them benchmark themselves against similar businesses in their sector.By using data they already have, the Banks can help the SMEs track their cash flow, and plan for growth.

  1. Accounting Data Integration

Analysing transactional data from Customer accounts to help them with cash flow management is valuable to the Bank and the Customer. But integrating this with their financial accounts package gives the opportunity of providing value-add services that will drive Customer retention and advocacy.

Through their Banking apps, Customers can see income and expenses analysis, and cash flow forecasts, create budgets, and review their receivables and payables positions. Banks can automate the end to end payment cycle, providing finance when needed, with full visibility of the business. Data integration will also allow the Banks to automate credit approval for new facilities and renewals.

These integrated apps will increase interaction with the Bank, with lower cost and greater convenience for the Customer, and allow more tailored advice and relevant products to be offered.

 Alexa? Run the payroll.

By 2025, digital natives – those born after 1980 and grew up with digital technology – are expected to make up over 60% of the workforce. A further 30% will be converts, older but fully engaged with the online world. They are working in or running SMEs now. Already their expectations are for a digital banking experience on a par with Apple, Google or Amazon. So the entry of these tech giants into business banking would raise competition to a new level. Digital natives are already beginning to demand a full range of voice activated banking services for SMEs, and these companies have the technology resources to deliver this globally.

To maintain any meaningful share of the SME banking market in the face of that competition, Banks will need to offer the digital banking experience and wide range of specialist value-add services the changing market will demand.


House of Commons Library Briefing Paper No 06152, 28th December 2017 “Business Statistics”