No More Crumbs From The Table: Feeding SME Digital Appetites
SMEs are digitally hungry. Yet banks, for the most part, have been busy feeding the digital appetites of their larger retail customers. According to research by Efma, SMEs are viewed as the main source of growth for the European economy, representing 60% of GDP in Europe and creating every two out of three jobs. Little wonder then that pressure is now mounting to address the widening shortfall in digital SME banking services.
The irony is that while the SME sector is a huge growth segment for banks over the next few years, it’s also the most at risk part of a bank’s customer base. Fintech companies and challenger banks have been tempting customers away with digitised, lower cost services, exploiting weaknesses in banks’ value chains, while they took their eye off the SME ball.
If you’re wondering how far behind the curve you are, do this simple litmus test. An easy way to determine where you are in your SME development cycle is to take an inventory of all the services you offer to your high net worth retail clients, and see how many of these are also available to SMEs. I’m guessing there isn’t much of a like for like comparison, yet SME interest lies far beyond simple online access. According to a recent PwC survey, one of the biggest gaps between actual and preferred online banking services for SMEs is in credit and financing. And that’s just one area. SMEs are starting to expect their bank experience to match their consumer experience (think personalization, multi-channel, social two-way interaction, seamless integration, and maximum convenience).
The challenge, of course, is to overcome existing legacy technology limitations. Stand-alone SaaS applications aren’t designed to be personalized, many can’t integrate with core applications, and without the right digital framework in place, it can be difficult to make the leap from simply conducting transactions to actually engaging with customers, and giving SMEs the same level of enterprise grade functionality. To help address this shortfall, Efma and SAP recently launched an SME AppsBank portal, providing banks with the option of developing new SME banking apps on the SAP HANA Cloud Platform. Using the portal, banks have free access to a one day on-boarding, design and development session, the ability to share new and existing apps online and in the apps library, and eligibility for awards to formally recognise the best applications worldwide.
I think in the next three to five years, the most successful banks will be those that are both digitally empowered and execute against the bigger picture – looking at what other needs they can fulfil for different types of customers, such as facilitating business networks to help SMEs speed up their cash flow, gain access to wider supply chains, or provide consultancy in specialist areas, for example. Meeting these sorts of needs is a golden opportunity for banks to become trusted advisors to SMEs, using state-of-the-art technology, processes and transparency to help fuel the growth of their own business and that of their customers.
In my experience, banks want to give all customers a good service – not just retail clients. They’ve just been somewhat distracted by the bigger fish in the pond and encumbered by the limitations of their existing systems. It’s time for this to change before your customer base gets eroded any further by challenger banks and digital disruptors. The right digital framework, tools and apps can help level the playing field, giving you the agility and efficiency to reshape the way you engage, serve and support your SME customers.