Serving SMEs in Turkey: DenizBank
Serhat Yilmaz, SME Banking Marketing SVP at DenizBank, discusses the many ways in which the bank is delivering for their SME customers.
Small and medium-sized businesses make up an integral part of the Turkish economy. As the needs of these businesses evolve, financial institutions are working to provide their customers with the digital tools that any modern businessowner needs to succeed. With all of the excellent work going on in Turkey, we wanted to speak with SME bankers about the current landscape in the country and their strategy, key projects, and views on the future of the segment. We will publish a series of interviews over the coming weeks, culminating in a Voice of the Members report that will be published in April. We are sure you will enjoy this deep dive into the SME banking scene in the dynamic country of Turkey.
How integral are SME clients to your institution’s overall strategy? And how would you define key aspects/features of your SME banking strategy?
The role of SMEs is quite substantial in many countries. Especially, in developing countries like Turkey, SMEs are accounted for large share of employment, job creation, GDP and total loans, etc. Parallel to the developed world, 99% of enterprises in Turkey are SMEs and their share in GDP is around 53%. They also contribute 82% of employment and 56% of exports.
However, Turkey differs negatively from Europe and USA in total SME loans. Even though, share of SME loans have been growing, there is still room to expand in SME loans in Turkey. 24% of cash loans is SME loans in Turkey while the same ratio is 30% in USA or EU. There remains a sizeable market to be served.
Similarly, in DenizBank, we contribute 15% of loans that also show an opportunity for a growth in SME funding. As DenizBank SME Banking Group, we have been performing for in this area with the enthusiasm of serving both SMEs and economy of our country. We have reached 3 Billion USD of SME cash loans this year.
Our strategy has been shaped by SMEs characteristics. The SME sector can be diverse, with needs that depend on both their development stage and their industry focus. SMEs are officially segmented according to their revenue and number of employees. In DenizBank, we have two main customer segments separating medium and small size enterprises with regard to their funding needs, products, banking services, etc. Therefore, we have separate strategies and service models providing best solutions based on customers’ business needs.
Can you briefly describe your sales and service model of the whole SME banking business?
DenizBank operates in 81 provinces of Turkey, with 730 branches. As SME Banking Group, we have categorized our relationship managers (RMs) into two, considering the nature of customer segments and the ways to serve them. As a result, we have placed specialized medium segment RMs to serve only for medium segment customers in strategically located hubs. Additionally, medium RMs are represented in some of our branches with small RMs. We have Small RMs at each branch that SME Business Line serves except Medium Hubs. Moreover, our digitally based remote channel is active for small SMEs.
On the other side, we also have internet-mobile banking services and applications that are designed for SMEs only. Our mobile sales, telemarketing or customer service teams offerings digital banking solutions have become more valuable this year after pandemic, and we will continue to use these channels more especially for small segment.
Our service model is based on channel and product customization for different segments while our strategy is to use every channel accordingly to satisfy our current customers’ needs and increase our active customer base. Usually, medium segment SMEs prefer dedicated RMs, able to offer tailored loans and services. As SMEs grow in size, they are more likely to engage financial specialists to professionalize and manage the complexity of financial products they use. Yet, small segment is customer dense in nature and differ greatly in their banking services. While we finance their short or medium term needs faster with our SME Card, we also aim to reach new SMEs in need of funding via state backed loan projects and solve their problems with innovative digital banking services.
Could you highlight three key projects your institution has delivered to SME costumers within the last 2-3 years? Have all of these projects been digitally-based?
• “KOBİ’deniz” - “SME’deniz”
KOBİ’deniz was a first and only digitally enabled remote channel project in Turkey created for specific segment SMEs. As now, all of our branches are integrated into KOBİ’deniz.
In our analysis of the branch service model, we identified an opportunity to increase customer satisfaction of almost 500.000 micro and small SMEs by customizing the way we service them. Customers do not need to visit branches anymore, have quicker solutions remotely and have a better time management, as the newly designed remote channel can complete 99% of transactions. There are over 100 banking services that can be performed by our agents (or remote RMs) from limit allocation to time deposit options. We offer specialized propositions based on our knowledge of the SME market. When a customer calls a branch, Call Center or directly KOBİ’deniz channel, they immediately reach their assigned KOBİ’deniz RM every time.
This transformation of service model also resulted in higher efficiency of small customer RMs in branches and they are dedicated to small segment customers only.
• “Deniz’e Çek Gönder” - “Send Cheque to Deniz”
“Deniz’e Çek Gönder” mobile application has been designed for SMEs, whether working with DenizBank or not. We offer the opportunity to send the photo of their cheque up to 200.000 TL and learn the corresponding cash amount even before maturity date from closest DenizBank branch. The application is unique, as cheque cashing before maturity is decisive for cash flows in Turkey.
• “KutupYıldızı” – “NorthStar”
We have designed an actively working mobile application with our CRM team that it is easy to use and understand. On this screen, our RMs, especially when they are at customer visit, can see detailed customer information including product tendencies, cash management needs, specific offers for their customers.
• Robotized Processes of Loan Applications
Our products and services support SMEs in many ways but this year we have started to operate digital robot evaluation process for loan applications. Basically, loan limit application has always been long and complicated process in which there are many paper work needed. Yet, we have reorganized customer information gathering tools from online systems, including customer historical data, revenue etc. In the end, the loan allocation process has been robotized, giving immediate results to branches. Our organization have an abundance of data about SMEs and we try to predict future creditworthiness enabling well-informed decisions instead of manual services. With this process, we were able to allocate limits to more than 40k customers in few months.
What were the immediate first steps your SME Department took internally to cope with the pandemic crisis and respond quicker to clients? How have you been helping your SME customers face the impact of the Covid-19 crisis?
We have been focusing on the benefits of recovery packages of the government for the SMEs in need and we do all we could to work with all of the parties involved. As it was expected, most SMEs have been struggling to pay salaries or other fixed costs and trying to adapt their way to do business. We have been watching the market closely and working hard to solve their urgent financial problems.
“Economic Stimulus and Shield Plan-2020” designed by Turkish government includes many specific low interest rate loan packages for SMEs in need for funding. In overall, it can be seen that the extra resources provided for SMEs, which are affected by crisis, has been used for mostly operational costs or salary payments, etc.
Many SMEs have been benefited from these packages in the country mostly from state banks. However, As DenizBank SME Banking, we have welcomed 30.000 new SMEs while we reached 60.000 in total.
The most important project we have participated actively, as the only bank, with the contributions of CGF and TOBB, have been “Nefes” Project that provide lifeline supports for small SMEs struggling with high interest rates. The project reached 3 Billion TL in size.
As a result, in 2020, we have grew in loans almost twice as much compared to other private banks in Turkey. On the side of repayments, we also restructured the loans of SMEs that were not operational for months due to quarantine. With our mission to support every single SME in Turkey, it can be said that we have been leading the private sector with flexible lending solutions.
Additionally, our digital based services were proven worthwhile in pandemic crisis, as we canalized our customers more into these areas where they can easily reach us without leaving their workplaces. Robotized loan applications, KOBİ’deniz remote channel, internet and mobile banking, telemarketing teams and specific banking applications actively and successfully have been handling daily transactions.
From your point of view, what will the future bring for the SME segment? What will SME banking look like five years from now?
We believe that banking services within the SME Banking market, with technology and customers’ acquaintance with it, will require more customer centric approach and robust digital service alternatives.
Especially for medium SMEs, SME Banking may much more be perceived as business partnership in terms of service level. The banking experience will have much more superior customer experience that will increase loyalty with long term flexible lending solutions as well as strengthening the market positions of the banks, as banks will access more information to tailor banking services and gain further insights into the SME sector.
On the other side, banking sector spends more than 10 Billion TL every year on digital transformation, big data-oriented mass management or alternative distribution channels for all banking services; and will invest more. As a result, continuous limit offers, quick loan limit decisions, sector specific products and automated risk monitoring will be the key elements of SME Banking especially for small customers. Yet, the scale and depth of the customer data is immense and banks may need to be better equipped and transform themselves considering SMEs future needs, as new API enabled platforms or mega tech platforms can compete banks.
Particularly in Turkey, we expect that long-term financial solutions especially in production and export focused niche sectors will need be provided more. Strong credit guarantee mechanisms will also need to be designed especially for high tech start-ups in near future. In addition, external funding will be easier to get, as financial instruments will be varied for other SMEs.
This interview will appear in our upcoming report "SME Banking in Turkey: customer first". Pre-order your copy now!