How 2021 is Shaping the Crucial Drifts of SME Banking Industry?

In the coming years, banks will need to continuously improve their technology to match the needs of the markets. In the future, SME banking will be the biggest trend in the financial markets. Some of the biggest matters relating to SME business operations include the opportunity to run sustainable units. These sustainable banking trends are being designed to serve smaller businesses globally.

It is time to understand the opportunities which will help in running competitive, innovative, and sustainable SME banking systems. The SME Customers are expecting banks to provide intelligent and intuitive user experiences from top digital companies.

The SME bankers are broken by the regional trends and also by the size of operations of SME banking. The major challenges that these banks face in serving smaller businesses is investment areas. But they should yield results and look for innovations to shape the future of SME banking.

SMEs constitutes a large portion of the world economy and this is a strong driver for economic development. This also helps to generate employment with the right support. The access to strong financial services and a right regulatory environment will help SME banking leaders to promote smaller businesses’ banking operations.

How will SME Lending Change Post the Pandemic?

Post COVID-19, the pandemic has shaped digital transformation for the lending platforms of the banks. Although the SMEs have been resilient many of these businesses have shifted business online and have profited from the spike in online consumption amidst this pandemic. The online shift has made some of these businesses profitable. The pandemic has shown that online is cost-effective and helps in efficient business management and that businesses can effectively operate with smaller physical space and lesser overheads.

A business that expects profitability is in a position to borrow. The businesses that are digitally oriented and have strong fundamentals become an attractive target for the lenders. Usually, banks are not motivated to lend to small businesses as such businesses pose higher costs for the loan. But if a business is digital, then the automated solution significantly reduces the cost of acquisition and thus SME lending becomes profitable. In addition, the process of automation enhances the speed and benefits with improved customer experience.

As the SMEs are proving their mettle in the tough economic times, they are likely to borrow higher with the recovery of the economy. Lenders must service this demand by implementing automated onboarding to overcome enormous volumes.

The Methods for Banks to Build Strong Relationships with SMEs

Banks have initially embarked on their relationship with SMEs for administering government lending schemes. But banks also need to grow on the new relationship that has been created by the pandemic via digital lending programs. Financial institutions have to maintain and sustain such partnerships through their product offerings. This is a huge opportunity that will help banks to cater to all the needs of the SME’s and this will also help them boost their profitability.

Banks that are participating in government-sponsored programs have been able to evaluate SMEs remotely and accurately as they provide open banking data. Thus, banks have expanded relationships through other products and services with these SMEs. This relationship is based on the bank’s experience as a borrower.

How will Digital Transformation Progress in the Lending Scenario

With the pandemic, banks have seen more progress and they have been implementing the right features to unlock their efficiency. However, now the banks are looking for all-inclusive solutions which are paperless and automated. It will cover risk, compliance, and decision-making. The service of automated and digital lending will improve the operation of the banks and will deliver value to the customers. As time progresses, we might see more lenders adopting advanced technology for decision making, onboarding, servicing, and activation.

  1. Promoting Remote Working  

Banks are now alliancing with FinTech partners to give their customers a holistic digital journey. This relationship is being built not just with the customers but with the employees of the banks too. Due to the pandemic, it has been seen that employees can efficiently work from home thus the banks are looking for digital tools. These tools support remote working and increase savings on costs.

As more and more customers are getting comfortable with open banking, general regulation by the government and the system has helped people in feeling confident about the handling of third parties. They are not worried about the mishandling of their data.

  1. Reliable Banking

As the adoption of open banking depends on the banks using open data in an all-inclusive way, it is embedding this into their processes and services. This is beyond services like account aggregation and other payment-related services. This intensifies trust as the value in such products becomes visible and the pandemic has also helped with this process.

  1. Real time Functioning

The open banking system allows banks to comprehend people and their circumstances. In this world that is reshaped by pandemics, no data from a credit bureau is enough to predict the credit risk. The phenomenon of open banking has increased the assessment of risk and affordability. The lending solutions are capable of getting transaction data in real-time. As people’s incomes are fluctuating, non-traditional companies like Amazon can take better-informed credit decisions.

In the last few years, the awareness about open banking and looking for use cases has increased. In 2021 the steps towards mass adoption might be taken and the number of users might double or triple.

The Prominent Trends to look forward to in User Experience Trends

Businesses and consumers now want banking apps that are frictionless and smart. Be it, retailers or other service providers that use data analytics for minimizing the requirement for the customer, banks are catering to these services. Many banks have started innovating to ensure these services become a fundamental requirement.

  1. Role of Machine Learning

The decisions that are based on the customer or business input are also common. Businesses and consumers value this decision. Thanks to better digital onboarding with the advance in machine learning and availability of data in the open banking environment, the process has become more intelligent.

  1. Faster Auto-decisions

The benefits of smarter and quicker auto-decisions in the lending industry will help the multiple channels that banks engage with. For services like paying utility bills or generation of data at the point of sale, lenders draw on the customer profiles by third-party data. These data services are available due to open banking and this enables the lenders to refine the services.

  1. Reduced Manual Work

A majority of lending decisions will be made on the spot, which will result in less manual work, lesser personal engagement, and higher satisfaction among the customers. And these services will be extended beyond the vista of SME lending, into mortgages, asset finance, and various other sectors. SMEs are an attractive segment for banks due to the changing business environment. As more and more SMEs are turning towards alternative financing, they are getting better conditions.


These processes are ensuring lesser complications in processes and customized solutions. The traditional banks are now less relevant and banks need to act to adapt the business model to modify the needs of these SMEs. If SMEs do not adopt these processes are at the risk of losing their business.


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