How banks can develop a personal approach to attract SME customers

Financial Services | Reports

Written by Kyle Ferguson, CEO, Fraedom

Small businesses play an extremely important and valuable role in the UK economy, accounting for 5.6 million businesses in the UK and making up 99.3% of all private sector businesses. Of this number, 99.9% were classed as SMEs. It’s, therefore, no wonder that the majority of banks have set SMEs in their sights as a target sector.

That said, research from Fraedom found that 47% of banks cite the lack of technology as a major concern in addressing the needs of SME customers, while over half of banks are concerned that large enterprises invariably take priority over resources. This sentiment is echoed by SMEs with only 12% of UK SMEs saying they felt the banks their organisation dealt with fully understood their needs as a business.

As technology has evolved, the way we bank in our personal lives has changed considerably; this has given rise to SMEs now expecting the same experiences and offerings they get in their personal lives. As such, SMEs are now demanding a better digital approach from banks. In fact, 95% of commercial clients who bank digitally in their personal lives, expect to do so at work as well.

So, how can SMEs overcome these issues and offer SMEs the same kind of banking experience they get in their personal lives?

A digital approach

With so many of us able to check our personal bank accounts via an app on a smartphone or tablet, it should come as little surprise to banks that SMEs now want the same digital capabilities they get as personal customers. Unfortunately, banks are yet to provide this with less than half of SMEs saying they have near real-time control over business spend. Fraedom’s findings also highlight that SMEs lack the day-to-day visibility of spend they get in their personal lives with over half of respondents spending more than two hours a week on expense or financial management tasks. This need to regularly go back and interrogate audit trails can be a further drag on a business’ resources, efficiency and productivity.

Additionally, the most valuable digital services for SMEs were found to include real-time accessibility, access to online and mobile banking and fast turnaround – specifically relating to problem rectification, credit applications, account balance and fee enquiries. It is vital that banks address the pain points and desires of SMEs and begin to provide the tools and digital platforms SMEs need to gain a real-time view of spend, just as we get personally from retail banks.

Personal customer experiences

Currently, banks are far more geared towards big businesses than they are SMEs. While lowering costs and up-weighting rebates may appeal to large enterprises, they don’t have the same impact for SMEs. Instead, SMEs want their banks to deliver the same services they get from banking in their personal lives.

While in the world of consumer banking, customer experience has come on leaps and bounds, at this stage, the same can’t be said of commercial banking experiences. Thanks to technological innovation, in our personal lives, we now have seamless mobile transactions, highly responsive customer service and fast transaction times. Yet, although personal bank statements typically update in real time and can be viewed on a mobile device, reconciliation of work-based expenditures can take days, if not weeks to process. Similarly, while procurement generates reams of paper invoices and purchase orders, personal mobile wallets pay, log receipts and reconcile on bank statements in the blink of an eye. This lack of innovation from commercial banks is leaving SMEs frustrated, and as such, they are demanding banks provide the same levels of service and experiences we have become so used to in our personal lives.

Banks must also address the way in which they communicate and bring this in line with what SMEs are used to in their personal lives. According to the 2018 FIS Performance Against Customer Expectations (PACE) report, almost half of UK SMEs prefer to contact their bank using digital methods, such as via a tablet or mobile phone. Given that so many of us are so used to logging on banking apps or websites and talking to a chatbot to resolve issues within minutes, this is unsurprising. For SMEs, online communication is likely to much more time efficient than making phone calls, which often requires periods of being left on hold. By developing this offering for SME customers, banks will be able to increase engagement and bring its processes in line with the changing ways in which the world at large communicates.

Developing an effective solution

In order to attract the lucrative SME market and answer the growing demand from SMEs for a more personal service, banks must begin to innovate and work with fintechs to both implement the right technology and gain a better understanding of SME customers. By partnering with fintechs, banks will be able to focus on the aspects they do well and allow fintechs to provide the insights and technology they lack. More often than not, fintechs are best placed to help banks better understand the consumerisation of business processes and technologies today; the eagerness of SMEs to adopt these to achieve enhanced agility; and the frustration they feel if they sense that banks are effectively not speaking their language.

In turn, a more personal, tech-enabled service tailored to SMEs, will allow banks to build lasting, more trust-based relationships with SME customers, with SMEs set to benefit from greater business agility, streamlined efficiencies and increased visibility of expenditure.

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