Kyle Ferguson, CEO, Fraedom


SMEs have become an increasingly lucrative market with a combined annual turnover of lb2.0 trillion in the united kingdom in 2021 and accounting for 52% of all private sector turnover. It's, therefore, clear to see why banks have started to look to SMEs as a key target audience. However, as banks have traditionally been more aimed at large corporates than SMEs, they are yet to get a handle on the SME market having a lack of innovation and understanding of these customers largely waiting in their way.


Kyle Ferguson

As technology and expectations have evolved, also have the needs and expectations of SMEs. Driven by experiences and offerings within our personal lives, these often more agile organisations are actually demanding a better digital approach. This is reflected by 57% of SMEs that now want to move to an online/mobile banking business environment cheap in 2021 40% of all SME financial transactions were completed online or via mobile. This number is only predicted to increase as younger, more digital-savvy employees move into more senior roles.


In to meet the demands of SMEs and provide the more personalised service and consumer-focused providing the majority desires, something needs to change. But how exactly can banks meet these demands?


Customer experiences

While lowering costs and up-weighting rebates might work for large corporates, they don't pack exactly the same punch for SMEs. Instead, SMEs want their banks to give the same service they receive from banking in their personal lives with Fraedom finding that 95% of commercial clients who bank digitally within their personal lives, expect to do so at work as well.


This is unsurprising when comparing customer experiences. Largely affected by technological innovation, we now have seamless mobile transactions, highly responsive customer service and fast transaction times. While personal bank statements typically update in real time and can be viewed on a mobile phone, reconciliation of work-based expenditures may take days, if not weeks to process. Procurement generates reams of paper invoices and purchasing orders. In contrast, personal mobile wallets pay, log receipts and reconcile on bank statements in the blink of an eye.


Fraedom's research also looked at what SMEs want banks to provide as part of digital services, finding that real-time accessibility, access to online and mobile banking and online, fast turnaround specifically associated with problem rectification, credit applications, balance and fee enquiries are most desirable. However, just 43% of SMEs claim to have near real-time control over business spend. Almost another of respondents feel they have very little visibility on a day-to-day basis and nearly one fourth confessing to having to regularly spend significant money and time investigating who spent what. Furthermore, over half of UK respondents said that typically they were personally spending more than two hours a week on expense or financial management tasks.


The have to regularly go back and interrogate audit trails could be a further drag on a business' productivity and efficiency. That's especially the case because senior individuals are often left to do much of this administrative work themselves. Banks must, therefore, address this clear disparity between what SMEs need and what is being provided in order to give SMEs the tools needed to give SMEs the real-time look at spending they require.


Improved communication

Just 12% of UK SMEs polled in the Fraedom survey said they believed that banks their organisation had handled over the past year fully understood their needs as a business. This suggests banks are yet to understand the needs of SMEs, which is leading to banks to being perceived as a potential stumbling block, rather than as an enabler of agility.


Banks must not only work to understand the needs of SMEs but should also learn to speak the same language his or her SME customers. If banks neglect to communicate effectively and offer the service and merchandise needed by these customers, they are in position to lose out on a highly lucrative market.


Developing the right approach

In order to answer the demand for a more personal, digital-first service we will start to see more and more banks partnering with fintechs. Through these partnerships, banks will be better in a position to understand the consumerisation of business processes and technologies today; the eagerness of SMEs to consider these to achieve enhanced agility; and also the frustration they feel if they sense that banks are effectively not speaking their language.


For banks, these partnerships, and usually offering SMEs the levels of service they're demanding, will enable them to build lasting, more trust-based relationships with SME customers while SMEs achieve streamlined efficiencies and greater business agility.

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