SME Banking: Cracking the small business ecosystem

Digest

April 2019

Operating across the entire spectrum of industries, small and medium-sized enterprises (SMEs) have a variety of unique and complex business needs. But one thing they share is a need for easy access to digital banking and non-banking services that simplify management and support business development. Whatever their area of focus, SMEs place great value on having a business partner they can trust to provide seamless access to the services, partners and experiences they need.

Banks are well placed to be that partner, and some are already creating innovative services and engaging in partnerships and ecosystems designed to meet their SME customers’ needs. But others are lagging. Almost 70% of SMEs regard their bank as a utility provider rather than a business partner, and new entrants and market disruptors are stepping in to fill the gaps left between what SMEs want and what banks are delivering.

In this Efma Digest, we draw insight from recent research to highlight key areas of focus that will help banks position themselves at the center of SMEs’ needs. We look at the current state of play and why it has become essential for banks to create an ecosystem, or engage with an existing one, focused on meeting SMEs’ needs. We discuss the intense competition banks face from new entrants and the inconsistencies between what SMEs need and what they are getting, alongside examples of the innovations that are disrupting the SME banking market. Focusing on the importance of choosing the right partners to build credibility in delivering the experiences SMEs want, we highlight some of the successful bank + fintech partnerships that are achieving this goal.

In part three we identify key considerations for banks in developing an SME-focused ecosystem strategy. We explore three emerging ecosystem approaches that are already proving successful for banks, highlighting the shared qualities that are contributing to the success of each model. Our findings are supported by an inspiring collection of examples to show how banks around the world are putting SMEs at the center of innovation.

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Keywords : Bank Products & Services , API/Open banking , Business strategy/Model , SME/Corporate