The Three Things SMEs Need from Digital Banks

What three things SMEs need from their banks.

New entrants, FinTech startups, government regulation and challenger banks have changed the SME banking market. SME customers have more choice than ever and are starting to look towards new players to get access to simple and uncomplicated digital banking tools and financial support.

With more competition and a less sticky customer base, banks need to adapt their SME offering to stay in the game and maintain customer loyalty.


What do SMEs need from Digital banks?

  1. Access to finance.
  2. Advice on banking.
  3. Analysis of their accounts for financial planning.


By implementing the correct digital tools banks can improve the SME banking experience and cost effectively build a loyal and engaged customer base.

  1. Access to finance.
  2. It is well known that SMEs often struggle to get access to finance. What’s more, the loan application process is often paper heavy, laborious and can take weeks or even months for approval. For most SMEs, their finances are managed on a month-to-month basis with very little room for error or overspend. Without access to finance, SMEs can have a difficult time implementing plans, expanding their business, or worst-case scenario keeping the business afloat.

    It’s not easy for banks either, when around 50% of small business go under within their first 5 years, it can be risky for banks to approve applications without the layers of documentation needed to prove an SMEs’ current security and future potential. SMEs’ difficulty in providing documentation of cashflow or proof of earnings is one of the main reasons their loan applications get rejected.

    Banks can make accessing finance an easier process for SMEs and for themselves by integrating solutions into their digital banking software that can simply track cash flow and provide a dashboard style overview of a customer’s financial situation. SMEs can then easily access the information they need for their loan applications.

  3. Advice on banking.
  4. Running a small or medium-sized business can be overwhelming. Leaders in these organisations tend to wear many hats and run many of the functions of the business. Their time is scarce and precious, and they need uncomplicated and transparent support and advice from their bank.

    Limited resources on the bank side means that offering specialised advisory services is becoming more difficult and less common. Banks can circumvent this problem by providing convenient and digitalised self-service options.

    For example, offering digital financial literacy advice and tools can provide SMEs with the personalised assistance they need and guide them through the do’s and don’ts of SME banking, explaining the jargon and making the process more understandable.

    Banks can make financial planning an easier venture too. By Providing expense and budgeting systems within banking apps, SMEs can receive notifications alerting them to potential budget overspends or advising them to optimise working capital when relevant. With this in place, SMEs get a clearer overview of their current situation and make better financial decisions for the future.

    Many banks are also employing AI-powered servicing tools to cost-effectively manage these relationships with SMEs. These capabilities including chatbots can act as a 24-hour a day support to SMEs, answering their queries with data-driven and tailored responses based on account insights.

  5. Analysis of their accounts for financial planning.
  6. SMEs need clear insights into their current finances and cashflow. These insights are crucial for the day-to-day running of their business. Providing personalised data-driven tools like predictive cash flow forecasts, proactive upcoming payment alerts, FX insights and trade & supply chain finance information can make the banking experience more user friendly and easier for SMEs.

    Banks can also use this data-driven analysis of transactions to provide timely product guidance to SMEs and proactively offer new products and services that they need, when they need them.

Small and medium sized businesses have the potential to offer attractive returns for banks, but in order to defend and grow this segment, banks need to provide a carefully designed, personalised, transparent and scalable SME digital banking experience.

Blog post updated July 2020
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