With the digital transformation sweeping the business world, the banking needs of small and medium-sized enterprises (SMEs) are changing rapidly. Instead of continuing to use physical processes and analog solutions, SMEs are increasingly relying on online channels and digital solutions. A recent survey found that more than two-thirds of SMBs are looking to digitally manage as many aspects of their business as possible.
The growing need for digital solutions is changing the relationships SMEs have with their financial institutions (FIs). Branch banking is no longer important to most SMEs. Businesses want online products and services instead. SMEs’ preference for digital is so strong that it determines which FIs they choose to work with. FIs need to meet these digital needs, but many lack the infrastructure to do so. Fortunately, financial institutions that lack the capacity to build digital solutions themselves can leverage integrated FinTech and banking solutions to meet the digital needs of their SME customers.
The “Next-Gen Commercial Banking Tracker®,” a PYMNTS and FISPAN collaboration, explores the changing expectations of SMEs for branch banking versus online banking and how FIs can meet these expectations with integrated and open banking solutions.
Around the Next Generation Commercial Banking Space
When it comes to business-to-business (B2B) payments, billing remains a major issue. A PYMNTS survey of SMEs found that 45% of businesses cite manual invoice review as a problem during payments, with 19% indicating it is their top problem. Of the 18 issues included in the survey, manual invoice review ranked highest. Procurement is also experiencing invoicing difficulties. The survey found, for example, that nearly half of suppliers struggled to anticipate when payments would arrive.
An admonishment of banks by regulators in the UK is further evidence that FIs are not adequately addressing the banking needs of SMEs. The UK’s Financial Conduct Authority (FCA) recently warned banks that unless they improve their service to SMEs struggling with debt, these banks could face tough regulatory action. The warning came after the FCA reviewed customer records and found repeated instances of poor customer outcomes and routine failures to treat customers fairly.
To learn more about these and other stories, visit Tracker’s News & Trends section.
Cross River Bank on meeting consumer needs with integrated banking services
Digital banking trends are now dominating the industry and FIs need to provide customers with all the capabilities and products they need, from mobile wallets to lending technology and everything in between. Integrated banking services can help FIs ensure customers have the banking features they want and need.
In this month’s feature, Anthony Peculic, Head of Cards and Banking as a Service (BaaS) at Cross River Bank, explains the importance of integrated banking in meeting customers’ digital banking needs.
SMBs prefer digital tools over branch banking
While businesses have been gradually embracing digital banking solutions for years, demand for these digital offerings has reached a tipping point. Companies, especially SMEs, do not just expect digital banking tools; they need it. A recent Bank of America study found that 85% of its small business customers use digital channels. Compared to pre-2020 levels, small business digital sales are now up 300%, accounting for nearly half of total sales.
The growing need for digital solutions is changing the types of products and services that SMEs want and need from their FIs. With businesses focusing primarily on online solutions, branch banking is now taking a back seat. Many banks lack the in-house expertise and infrastructure to deliver a comprehensive digital offering. For these banks, on-board banking and open banking solutions are essential. FIs can easily purchase white-label solutions from FinTechs and other third-party vendors and integrate these solutions into their digital offerings.
To learn how integrated and open banking services can help banks solve their problem to meet the needs of SMEs, read the Tracker’s intelligence PYMNTS.
The “Next Generation Business Banking Tracker®” examines the latest trends in branch and online banking needs of SMEs and how FIs can use integrated and open banking to help SME customers.