Five key digital initiatives in SME Banking

Today, SME banking embeds technology in almost every business model. Read about five key digital initiatives that we spotted while interviewing some SME bankers and experts in our community. 

With the advent of the digital economy, banks are rethinking their strategic role in the SME banking space to address the financing gap and capitalize on this segment opportunity. Official statistics show that about 40% of formal micro, small and medium enterprises in developing countries have an unmet financing need of $5.2 trillion every year¹. 

On the other hand, the pandemic disrupted contact center operations and sped up digital adoption². According to J.D. Power, quoted by The Financial Brand, only 46% of consumers will go back to “banking as usual”, with a concurrent 20% increase in mobile use and a 17% rise in online banking.  

Therefore, pushed by the emerging digital economy and by new entrants (like neobanks, challenger banks, BigTechs, retailers and telcos), some incumbents are committing to long-term transformation by modernizing core banking systems and migrating to a digital culture. Here are some examples: 

No matter the size of the digital transformation process they embark on, one thing is common about SME banking these days: technology is embedded in almost every business model. 

In this article, you will discover five key digital initiatives in SME banking that we spotted while interviewing some SME bankers and experts in our community for a comprehensive survey in the field. The research was conducted in partnership with Efma. 

# 1 Migration from product- to customer-centricity  

Raul Rîșniță, Head of Companies Digitization Department at Banca Transilvania noted that in recent years banks “have struggled” to change their mentality from product-oriented to customer-centric, from risk-adverse to failing fast, from waterfall to agile. “But I believe fintechs have accelerated the process for banks and have set up a new standard of approach,” he said. 

Ionuț Encescu, Head of Products at First Bank, mentioned three key digital initiatives that place the customer at the center:  

• Creating best in class lending processes,   
• Developing high quality UX and UI mobile and internet banking interfaces for customers and   
• Building a reliable and resilient service ecosystem, a task he described as “mandatory”.   

A recent example of a customer-centric service comes from HSBC, which launched HSBC Kinetic, a new mobile business banking service designed to help SMEs manage their finances 24/7 from a smartphone. HSBC Kinetic was developed using insights from over 3,000 small business owners, as Martin Hyde, Head of HSBC Kinetic revealed in an interview by Efma⁵.  

#2 Switching to self-service 

Universal banks have services that cater to a range of needs, from basic banking all the way to the complex requirements of large companies.  

“This is something we need to tackle in our digital development – simplifying this  

complexity is a challenge fintechs normally don’t have,” said Nina Arkilahti Head of Business Banking at Nordea. 

The rollout of Nordea Business and Nordea Business Mobile in the four Nordic countries is a key initiative that will further introduce digital self-service for SMEs’ basic needs, including account management, cards, cash management and user rights. Nordea’s mobile banking app now has more than one billion logins annually, the bank disclosed⁶.  

#3 Creating ecosystems to offer complex value propositions 

OTP Bank started its digital transformation in 2015. Tibor Csonka, Managing Director, Corporate Directorate, believes that banks can be successful if they are able to create ecosystems and offer complex value propositions to their clients, especially in times of crisis. OTP Bank kicked off several digital initiatives during the pandemic, introducing a new corporate internet bank, renewal of loan processes, and CRM development (all on the Group level).  

The bank is continuously developing related processes, such as remote account opening, managing digital signatures, and remote contracting.  

“Overall, we expect that we will be able to serve our clients in a better way, with better processes and with digital solutions”, said Csonka⁷.  

#4 Going digital 

Raiffeisen Bank focused not just on completing the range of products that the banks’ clients could access digitally, but also on granting remote access to its advisory services via dedicated relationship managers and the RaiConnect platform. Thus, Raiffeisen Bank has opened the digital channel for e2e online pre-approved loans for eligible SMEs. Recently, customers that have foreign exchange operations in their current activities were offered a dedicated platform called RFlex.  

Banca Transilvania (BT) is also riding the digital wave. Last year, through the SME Invest program, BT granted over 10,000 loans, supporting companies in providing 100,000 jobs, with the largest share of these new positions created in the fields of retail, transportation, and construction. BT had 348,000+ Micro Business and SME active clients at the end of 2020, according to its Annual Report⁸.   

Nowadays, “our focus is to develop a well-established online infrastructure of digital products that have the capability to cover all basic banking needs of the customers” – Raul Rîșniță, Head of Companies Digitization Department at Banca Transilvania.  

#5 Thinking beyond digital 

Raluca Nicolescu, CFA SME Director at Raiffeisen Bank told us that “Factory by Raiffeisen” is its “flagship program” dedicated to start-up entities and young entrepreneurs, “which brings in not only finance, but also mentoring, and educational components.”  

“Our initiatives go beyond digital transformation and reach the service model and sustainability topics, the blended result being a consistent, smooth, and intuitive experience for our SMEs”, she said.  

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 Main photo credit: Unsplash 

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Register now to get a copy of our report, “Seven Banking Leaders on Fintechs, Challenges and the Future of SME Banking”. 

For more findings on this industry, ➡️ follow the Insights section on our website.   

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 References:  

1. Forbes.com – “The Digital Side of Deutsche Bank That You Have Never Heard About” 
2. FintechOS.com – “SME Banking – Weathering the Storm” 
3. https://www.efma.com/article/15952-hsbc-kinetic-it-all-starts-with-the-customer 
4. Another strong quarter | Nordea 
5. Efma – “OTP Bank: Creating easy and seamless solutions for SMEs and corporate clients” 
6. “BT 2020 Annual Report”  

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Read more whitepapers on the same topic:  

• Digital-First SME Banking — Efma 
• 10 Key Findings from the Efma Survey on SME Banking 
• SME Lending – How data and tech can bring a surge for banks 

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Related articles: 

• SME Banking – Interview with Mike Fullalove, FintechOS: “Lending has emerged as a priority area for digital innovation” 
• Seven Banking Leaders on the Future of SME Banking: Five Takeaways 
• The SME Financing Challenge: Why Digitization Matters  
• What’s Gone Wrong with Traditional SME Lending – And How to Fix It  
• SME Banking: Weathering the Storm  
• SME Banks Need to Act Fast: Responding to The Wave of Newcomers  
• Cov-19 Response: Banks will have to rise to new digital expectations  
• What’s Gone Wrong with Traditional SME Banking  
• How to Unlock the Potential of SMEs  
• Underserved SMEs: 4 Steps for Banks to Tap the Market