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By · October 18, 2023
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The Future of SME Banking: Insights from FTT SME Banking 2023

The Future of SME Banking | Woman paying digitally at small business

The thing that SMEs have in common, is that they have very little in common.

A phrase that was repeated recently at our exclusive SME Banking event in London.

The small and medium-sized enterprise (SME) sector is a crucial part of any country’s economy, contributing significantly to job creation and economic growth. Despite their importance, SMEs have historically struggled to access the necessary financial services and capital required to run their businesses.

To explore this topic further, we organized a unique FTT SME Banking event with our friends at Fintech Talents, dedicated to exploring the challenges faced by SMEs and how technology can help drive growth. We brought together a community of fintech providers, banking experts, and SME leaders to learn about the most innovative tools and swap knowledge on how to provide the best possible experience for SMEs. 

Participant institutions included NatWest, HSBC, Lloyds Banking Group, Funding Circle, Bibby Financial Services, Shawbrook Bank, OakNorth Bank, Metro Bank, EY, and Goldman Sachs. 

In this article, we explore the advancements within the banking industry and three tips for winning over SMEs, shared by industry experts during the panel discussions. 

Driving the SME Banking Revolution 

Teo Blidarus, CEO and Co-Founder of FintechOS, kicked things off by sharing a few recent examples in the banking industry that have made it easier to cater to SMEs than ever before.  

This rapid growth trend has led to an increased number of bank-fintech partnerships, which are playing a significant role in driving the SME banking revolution. 

Overcoming the SME Technology Gap

Incumbent banks have traditionally struggled to provide sufficient lending options to SMEs due to the sector’s complexities and varying attributes. Now, with embedded fintech, incumbent banks can seamlessly integrate fintech solutions, leveraging AI, data-driven decision making, and purpose-built customer solutions to streamline operations and better provide for SMEs. 

Teo Blidarus at FTT SME Banking

To succeed in this in fast growing market, there is a need to be able to deploy differentiated products and services to open new distribution channels quickly.  

– Teo Blidarus, CEO and Co-Founder, FintechOS

By embracing today’s tech transformation and nurturing strategic partnership, traditional banks can navigate complexities and offer tailored solutions as seamlessly as emerging competitors. 

Succeeding in the SME Segment

While the SME segment is a complex group, there aren’t many financial players who have figured out how to cater to their needs efficiently – leaving lots of opportunity and market share available to the innovators. 

Here are three ways banks can win the business and loyalty of SME customers:  

1. Get Personalization Right for SMEs

The journey of personalization in SME banking is a complex yet crucial one. In a diverse market with millions of SMEs, understanding their unique needs and adapting banking services accordingly is pivotal.  

For Bibby Financial Services, its transformation started with a deep dive into customer segmentation and direct qualitative and quantitative interactions, says Lucile Flamand, Chief Strategic Development Officer. The focus was on identifying the right balance between human touch and technology. Building a customer-centric culture involved fostering a mindset shift, acknowledging that what worked before might not align with evolving customer expectations. 

At Metro Bank, personalization has been at the core since its inception. Benjamin Dellal, Director of SME Lending, mentions the approach was not to treat everyone the same but to acknowledge individual differences and uniqueness. By combining common-sense human experiences with digital innovation, Metro Bank aimed to reintroduce old-school banking into the modern world. Striking a balance between automated services and personalized human engagement became crucial. 

Paula Costea, VP Product Management at FintechOS, followed up by emphasizing the fintech enablement product’s focus on creating personalized offers for diverse SMEs, partnering with equity suppliers, and simplifying complex advisory processes. It leverages data from various sources, redefines risk models, and employs AI-enabled models.

2. Structure SME Lending for Need and Speed

SMEs often require swift access to funds, a need that traditional banking systems have struggled to fulfill promptly. The diverse needs of SMEs can’t be met without moving towards a faster, more efficient lending processes by leveraging data-driven insights and innovative technologies. 

Understanding the specific requirements of SMEs and tailoring lending products quickly and accordingly allows banks to ensure that entrepreneurs receive the financial support they need precisely when they need it. 

Lucy Hasson, COO at SilverRock Financial Services, discussed her experience with digital transformation journeys and breaking free from traditional banking structures to cater to SMEs more efficiently. Leveraging data has streamlined the lending process, automated decisions and ensured consistent, high-quality outcomes. She highlighted the challenge of building trust around data provision among SMEs, emphasizing the need for a balanced approach to automation. 

FintechOS’s SVP of Commercial, Andrei Gaman, discussed the importance of innovation cycles and how they can be used to enable faster product launches and quick adjustments based on customer feedback. He highlighted the need for financial institutions to adapt swiftly, create personalized lending products, and enhance customer experiences to address the dissatisfaction prevalent among banking customers if they want to succeed.

3. Utilize Embedded Finance for Success

Embedded finance not only enhances accessibility, but also ensures that SMEs receive timely, relevant, and convenient financial solutions, fostering an environment where businesses can thrive. The integration of advanced digital technology simplifies the financial aspect of entrepreneurship, allowing business owners to focus on what they do best: growing their enterprises.  

Sheehan Silva, Head of Digital Solutions, Global Trade and Receivables Finance at HSBC mentioned the challenges that come with supporting SME growth, emphasizing the need for partnerships with fintech providers to embed financing at key points in transactions. He also discusses the need for customizing and personalizing financing solutions for different SME segments. 

Sergiu Negut of FintechOS elaborates on this by highlighting the role of technology in facilitating embedded finance. He discusses the importance of data and data integration to offer customized financing solutions for various SME segments, in addition to how embedded finance can be a more cost-effective and scalable option for many banks.

Conclusion: A Bright Future for SME Banking

As we step into the future of SME banking, the possibilities are vast and exciting. By focusing on personalization, speed, and innovative solutions, banks can create a thriving ecosystem for SMEs.  

While challenges such as core infrastructure and risk management are inevitable in the ever-changing landscape of SME banking, they shouldn’t be looked at as a barrier to innovation.  

The insights shared at FTT SME Banking illuminate a path forward, emphasizing the importance of adaptability, collaboration, and a customer-centric approach. As Fintech partnerships continue to flourish and technology paves the way for groundbreaking solutions, the future of SME banking appears promising, with untapped opportunities for growth and success. 

Hear more from Sergiu Negut on how FintechOS is enabling SMEs to thrive in this full interview from the event below.

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