Commercial Banking II: Forget the Underbanked, SMEs are Undervalued and Underserved!

Supporting growth in the SME market could lead to new sources of revenue for banks but how can the financial sector leverage technology to foster relationships and help SME’s succeed?

In our first post in the commercial banking series we discussed that businesses in general also require the same Bank 2.0 customer experience that retail customers expect. Today we will discuss the online banking experiences that banks should provide SMEs.

Lately the news has been awash with stories about the great unbanked and the underbanked, but what about the untapped potential of customers you already have? The SME sector has long been an overlooked and undervalued segment of commercial banking but the potential is undeniable. The latest research shows that there are huge gains to be made if banks shift their focus to better relationship management and offer the types of tools already available to corporate clients. To date small and medium sized enterprises make up 99.8% of the enterprises in Europe and 20.7 million of those account for 57% of the total turnover in the European, non-financial business economy. Recent surveys from Aite and Accenture have revealed that SME’s are looking for greater flexibility in the way they bank and at least 30% want better mobile banking services, which they are willing to pay for.

Banks should take note that deepening involvement and encouraging growth in the SME sector does not necessarily revolve around extending credit. Many SMEs report that they feel let down by their bank through lack of relationship and business service rather than for financial reasons. Just as there is a shift towards a customer-centric approach in retail banking online, there needs to be a similar push to nurture relationships with SMEs. Banks need to address the issue of how they are serving SMEs on their digital channels. By creating better experiences and offering more tools online, banks will be better able to tailor products and services to specific segments of the SME sector. However, while the digital channel for SMEs remains fragmented, requiring multiple sign-ins, difficult to navigate through and practically devoid of the mobile capabilities so readily available to retail and corporate customers, SMEs are unlikely to move away from branches. Keeping SME interactions chained to branches does nobody any favors. It is far more costly for banks and it limits the amount of services SME customers could be taking advantage of to improve their business operations.

That’s not to say that banks have entirely ignored the SME segment online. Most major banks do offer an online banking service directed at small businesses but in actuality they offer little more than the basic banking capabilities of retail banking like account overviews and bill payments. A very few, such as TD Bank below, have incorporated business specific functionalities like multi-user permissions.


Consider the fact that the average retail customer only walks into a physical branch once or twice a year, yet many people will check their account or perform transactions online up to ten times a month. It’s no secret that this level of interactivity has led to massive opportunities for banks to leverage different products, gather valuable data and improve customer retention. Exactly the same opportunities are available to banks that start tailoring online and mobile experiences to the SME community. Business Financial Management (BFM), forecasting and cash flow tracking are all examples of tools are that can be easily integrated into apps with today’s technologies. In fact, they already have been. Just not for SME customers, who would find them highly beneficial to the success of their businesses.

According to Accenture, Catering to SMEs online is a Win:Win situation

Accenture Win Win

Creating and nurturing a digital environment for SMEs need not take a huge amount of investment. A portal built to provide personal and relevant customer experiences is more than capable of catering to SME’s alongside retail and corporate customers. It’s just a matter of recognizing the unique needs of the SME customer and using existing functionality to create the tools and services they need. Once this is done, banks will be able promote their online platform as a business tool to help small business succeed. As SME’s become aware of the services available to them online, banks will be able to create targeted marketing messages offering new products to businesses as their needs change. Because SME’s have never been effectively served digitally there is little analytical data relating to their online purchasing behavior. However, it is very likely that the potential for cross- and up-sell opportunities in this segment is sizable.

Banks must begin meeting the needs of SMEs online or risk losing out to alternative financial servicing options that are emerging as a result of technological advancements. It’s time for the SME operators to begin receiving the same kind of service, support and tools already available to retail and corporate customers. Optimizing their digital channels to meet the needs of the SME segment promises great benefits for everyone involved.

See our next post in the series of commercial banking where we compare some commercial banking platforms of different banks.