Why personalisation is key to banks capturing the SME market

In recent years, technological advances within retail banking have continued at pace, changing both our experiences of banking and our expectations. This evolution of banking in our personal lives has fuelled a change in expectation among SMEs who are demanding the same experiences and offerings within the world of business banking.

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 figure is only expected to increase as younger, more digital-savvy employees take up senior roles.

As a result of this change in expectations, SMEs are demanding a better digital approach – something which the majority of banks have, as yet, banks have failed to adopt. Currently, banks are struggling to meet the demands of SMEs and deliver the more personalised service and consumer-focused offering the majority desire.

Yet, with a combined annual turnover of £2tn and accounting for 52% of all private sector turnover in the UK in 2018, SMEs are a highly lucrative market that banks can’t afford to ignore. But where do banks start and what exactly should they do to attract SMEs?

A digital offering

Thanks to the apps and platforms on offer from consumer banks, SMEs now want the same digital capabilities they get as personal customers. According to a Fraedom survey, 95% of commercial clients who bank digitally in their personal lives, expect to do so at work as well.

Fraedom’s research found that the digital services which SMEs value most include 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. 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. Banks must 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.

In our personal lives, we now have seamless mobile transactions, highly responsive customer service and fast transaction times. Yet, although 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. It is therefore unsurprising that SMEs are left frustrated by the lack of innovation offered by banks and are demanding banks provide the same level of service and personalised experience we have become so used to in our personal lives.

Speaking the same language

Banks’ engagement levels with SME customers has also been revealed by Fraedom to leave a lot to be desired with just 12% of UK SMEs saying they thought that banks their organisation had dealt with over the past year fully understood their needs as a business. It is therefore vital that banks work to understand the needs of SMEs and also learn to speak the same language.

This understanding of SMEs also extends to ways in which they want to interact with banks. For instance, the 2018 FIS Performance Against Customer Expectations (PACE) found that almost half of UK SMEs prefer to contact their bank through digital methods via a tablet or mobile, for example. Banks need to keep this in mind and offer preferred methods of communication if they are to really tap in to this lucrative market.

Moving towards a solution

If banks are to start answering this demand for a more personal service, they must begin to innovate and work with fintechs to not only implement the right technology, but also to get a better understanding of their SME client-base. Through fintechs, banks will be better able to understand the ‘consumerisation’ of business processes and technologies; 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.

By offering a more personal, tech-enabled service tailored to SMEs, banks will be able to build lasting, more trust-based relationships with SME customers, while SMEs will benefit from greater business agility, streamlined efficiencies and increased visibility of expenditure.

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