Kyle Ferguson, CEO, Fraedom


SMEs have become an increasingly lucrative market with a combined annual turnover of £2.0 trillion in the UK in 2018 and accounting for 52% of all private sector turnover. It is, therefore, clear to see why banks have begun to look to SMEs as a key target market. However, as banks have traditionally been more geared towards large corporates than SMEs, they are yet to get a handle on the SME market with a lack of innovation and understanding of these customers largely standing in their way.


Kyle Ferguson

As technology and expectations have evolved, so too have the needs and expectations of SMEs. Driven by experiences and offerings in our personal lives, these often more agile organisations are now demanding a better digital approach. This is reflected by 57% of SMEs that now want to move to an online/mobile banking business environment and the fact that in 2017 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 order to meet the demands of SMEs and deliver the more personalised service and consumer-focused offering the majority desires, something has 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 the same punch for SMEs. Instead, SMEs want their banks to offer the same service they get from banking in their personal lives with Fraedom finding that 95% of commercial clients who bank digitally in their personal lives, expect to do so at work as well.


This is unsurprising when you compare customer experiences. Largely influenced 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 device, reconciliation of work-based expenditures can 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 offer as part of digital services, finding that real-time accessibility, access to online and mobile banking and online, fast turnaround specifically relating to problem rectification, credit applications, account balance and fee enquiries are most desirable. However, just 43% of SMEs claim to have near real-time control over business spend. Almost a third of respondents feel they have very little visibility on a day-to-day basis and nearly a quarter confessing to having to regularly spend significant time and money investigating who spent what. Furthermore, over half of UK respondents said that on average they were personally spending more than two hours a week on expense or financial management tasks.


The need to regularly go back and interrogate audit trails can be a further drag on a business’ efficiency and productivity. That’s especially the case because senior people 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 view of spending they require.


Improved communication

Just 12% of UK SMEs polled in the Fraedom survey said they thought that banks their organisation had dealt with over the past year fully understood their needs as a business. This suggests banks are yet to grasp 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 must also learn to speak the same language as their SME customers. If banks fail to communicate effectively and offer the service and products needed by these customers, they stand 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 able to understand the consumerisation of business processes and technologies today; the eagerness of SMEs to adopt these to achieve enhanced agility; and the frustration they feel if they sense that banks are effectively not speaking their language.


For banks, these partnerships, and generally offering SMEs the levels of service they are 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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