Stepping up to help SMEs bounce back

The current downturn is having a devastating and potentially fatal impact on SMEs. Higher regulatory burden and a perception that SMEs are more resource intensive seem to be at the heart of this issue which presents a huge problem for legitimate firms, disrupting their business continuity and growth.

However, a multitude of FinTech firms are seizing the opportunity to support this sizeable chunk of the economy, and some of them are looking to coax traditional banks back in via partnerships and collaboration. New insight published by financial infrastructure provider, Banking Circle, identifies a clear route for financial institutions to add value to the experience they deliver to the smallest businesses in the economy.

It seems that there is a significant gap between what SMEs need and the quality of advice and service they receive. Since new regulations and tougher restrictions came into play after the last global recession, banks have found it more difficult to offer financial services to smaller businesses. And the wide range of business models, distribution and ambitions means no two firms are alike, making them more difficult for banks to serve.


In other words, there is no one-size-fits-all SME banking solution, and banks don’t have the flexibility or resources necessary to offer suitable solutions at affordable rates.

Neither existing corporate nor retail-focused offerings are suitable, so SMEs are left out in the cold. Our research found that nine in ten SMEs are happy with core account services – but almost one in four experience customer service issues with their bank.

European banks have often claimed SMEs are expensive to service, and their needs too diverse. But our latest report includes examples of providers that are already getting it right. Where incumbent banks have been built upon monolithic legacy systems, FinTechs are built in the cloud.

They are flexible, nimble, more able to adapt quickly and launch new solutions to meet the rapidly evolving needs of smaller businesses. And they are building systems designed from the basic understanding, that technology is ever-evolving and that tomorrow, what was the norm today, may need replacement or an upgrade.

A mindset shift

In the past, banks often had the mentality that they could do everything in-house. But those that tried to overhaul their legacy infrastructure to deliver new solutions found it too difficult. That mindset has now shifted. Banks are increasingly open to collaboration to deliver the best solutions.

In the white paper, we have identified five key areas where improvements could be made to improve relationships and service delivery between SMEs and financial services providers.


SMEs are happy with a digital delivery model, but it should offer more bespoke services, lower cost and improved responsiveness – available through digital platforms and partnering with service providers.


SME choice isn’t always about the price. Financial service providers should think flexibly. Innovative – and tailored – approaches to pricing could help them improve SME services and enhance profitability.


To win SME trust, banks should seek to combine digital delivery with tiered, personalised services and the human touch, a view endorsed by Kent Vorland, SimplyPayMe, UK who said: “There seem to be very few tailored features or services for the SME market. By focusing more on the customer and their pain points, and less on procedural box ticking, a lot more could be achieved.”


Quality advice is key to serving the SME market effectively. Starting from the digital platform and partnership model, financial service providers can take things further, adding a layer of personalised advice via email and/or voice to the mix.

Selma Kveim, Bright Products, Norway, told us: “Companies like ours are willing to pay for better advice. The only place we can go for advice is our auditors – but they’re not financial product specialists. There’s huge potential for banks to make SME advice a paid-for service.”

Ready for the bounce back?

SME needs are indeed extremely diverse; ultimately achieving total financial inclusion for SMEs requires a joined-up ecosystem, where various financial service providers connect their solutions. Making these connections will be vital for global economies as we look to recover from the worst health crisis in a century, and one of the biggest economic shocks in history.

Partnering with specialist providers within the financial ecosystem in a platform or white label arrangement reduces cost and enables tailored services through existing banks’ digital channels. Our research found that 80% of retail banks and 74% of commercial banks have already worked with infrastructure providers.

Financial infrastructure providers like Banking Circle are focused on developing the technology to process payments directly, and to integrate to a vast network of local clearing and payments schemes. Using decoupled architecture, we can easily update or replace individual pieces of architecture with limited impact on the rest – meaning we can quickly add more functionality and work within new geographies. This means we are uniquely placed to give financial services providers the ability to support their business customers with faster and cheaper cross border banking solutions.

As we all know, SMEs are vital – so much so that they are often referred to as ‘the backbone of the economy’, and rightly so. In the EU alone, there are more than 22.2 million SMEs in the nonfinancial business economy, making up over 99% of the region’s businesses. But poor access to payments, lending and bank accounts is putting these precious businesses at serious risk - today more than ever before. Providers of all types need to make changes so they can serve smaller businesses better.

To find out more about how financial services providers can improve their service for SMEs, download the white paper here.

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