SMEs Existing Relationship with Banking:
Did you know that 90% of global business falls into small and mid-sized enterprises (SMEs)? Then why do banks and Fintechs focus more on enhancing retail and corporate customer experience with new technologies?
According to the World Bank, by the year 2030, the world’s workforce would require 600 million jobs of which 7 out of 10 jobs would be created by SMEs. Hence, as the backbone of the economy, there is no doubt that banks are missing out on the most revenue-generating industry that creates more than 50% of employment.
Yet, these challenges never stopped the influence of SMEs in shaping digital banking experiences.
Why Are SMEs Overlooked?
Simple! Because of their diverse and complex business landscape.
SMEs are a diverse group that includes everyone from retail and corporate customers or various other business types. So, while several of these businesses might require basic banking offerings like business checking accounts, limited credit requests, and simple payment services, some might require business credit cards, higher credit requests, payroll, and cash management services.
Long story short – The expected services are often novel, complex, or difficult, making delivering them a more costly affair than other customer segments.
There is also the strong case of limited digital awareness and/or reluctance at the SME’s side and a hesitance from the bank’s side to provide high-value credits since a lot of them have fragile financial ecosystems that make them vulnerable to economic shocks and hence financial risk.
How To Bring Back Focus to SMEs?
One can suggest that figuring out the best technology to be adopted and deploying it swiftly will make the biggest impact in SME banking to deliver success. However, it is easier said than done.
Let’s begin with what is most important to an SME.
A common challenge faced by SMEs is the time-consuming loan approval process which often takes weeks. However, the integration of new tech that incorporates AI automates the process considerably and significantly reduces operational costs. This is because AI and ML models are equipped to predict risks and creditworthiness that surpass traditional underwriting methodologies, offer bespoke solutions, and reduce staff workload considerably.
According to a report by Deloitte, by 2030, traditional financial institutions can save up to $31 billion through AI by utilizing robotic process automation and diverse data sources for faster loan processing and risk assessment. Implementing AI in SME lending can lead to an efficiency increase, reducing the lending process from seven days to just two days, approximately a 71.43% reduction.
Some of the diverse data points analyzed included social media activity, supplier payment records, and customer satisfaction data. All this equates to expanding the scope of lending to include a broad range of SMEs.
Financial Education and Partnerships:
Additionally, banks must proactively offer financial education to inform SME customers about the benefits of digital solutions and impart training to utilize them effectively.
In Conclusion
Today, the changing trends point to banks beginning to realize the potential of serving SMEs. Several McKinsey reports reveal that leading Western European banks have achieved over 30 percent higher revenues from catering to SME customers.
Exploring better ways to serve SMEs?
Learn more here – Appzillon digital banking platform or reach out to us at marketing@i-exceed.com for swift and sustainable digital success.
