SMEs (Small and medium-sized enterprises) are the strongest hit by the changing environment especially when the crisis arrives. During COVID-19 the case became more worst and then the need for SME Banking Transformation evolved to support SMEs’ success.

Towards the beneficial aspects of SME transformation, banks need to have a thorough knowledge of their challenges.

Where to start for SME banking transformation?

There should be a deeply focused approach on the areas of concern to find the solution for the problems faced by SMEs and the banking support required. Let’s have a look at the actions required:

  • SMEs are running through a sustained period of impactful change and seek support from their banks.
  • Here to support SMEs for the best result, banks need to be attentive to the real needs of SMEs, help them to get the basic rights, transform their credit operations and become more flexible as per their need.
  • Even there is scope for banks to strengthen their relationship with SMEs by leveraging and developing the SME ecosystem via new platform models.

As per the survey on the impact of the pandemic on SMEs, the major percentage such as 74% of small businesses got affected negatively through the period of COVID-19 through profit margin, revenue, and sales volumes on a huge ground.

The short-term impact can be expected but the pandemic forced SMEs to adapt to the more profound change in their world. Due to this condition, the directors of the small business are forced to peep inwards and think to find their company’s place and goal in the economy.

After a deep study of the condition, more than half 56% decided to renovate their business models in response to changing market conditions and move with more digital channels.

Future of SME Banking Industry

The quick transition of SMEs s places high pressure on the financial service providers to get adapted to satisfy their emerging customer’s needs. The hypotheses that can define the future of the corporate, commercial, and SME banking industry by focusing on the issues:

  • Bank’s transformation concerning increments has a partial role in shifting the client’s expectations to have a higher digital reveal.
  • The global breakdown in the economy and ongoing low-interest rates with low asset quality have lessened the scope of growth opportunity to come across.

In the last five years, banks have done incremental transformation for the corporate, commercial, and SMEs. But the problem is not solved as it is just a partial satisfaction to the client’s expectations. On the other hand, the other efforts focused on specific operational challenges and supported streamlined compliance tasks. Even banks took hold of the latest technologies on the ground for growth but in a small number of fit-for-purpose use conditions. Maximum banks are focused on cost escalation.

The conditions are improving with a stronger fundamental transformation than before to overcome the market threat caused due to pandemic. Conventional products are not in demand by the clients as per their relevance and they want more value-added services to have dense experiences. There are many disturbances already lined up under the topic that what will come and confirm that tomorrow’s leaders will need to explore with a bold vision. This includes defining a purpose and modifying offerings that will move with the mission. With that, the client-centric facility to fetch the digital services and products easily should be on priority.

Here are a few hypotheses out of a set to describe how SME banking can dominate the challenges of 2020 to have winning growth in 2030. It includes the compelling opportunities for tomorrow’s market leaders with the higher challenges for tomorrow’s stragglers.

  • Tech giants and huge platforms spread their banking services as the maximum number of companies adopt self-finance operations and provide credits to the suppliers

The modern transformation of the banking services may threaten the traditional processes and their relationship with the clients. When a client asks for credits from the bank they expect more from them than just the credits.  Even the smart banks know the requirements and expectations of their customers based on the current status of performance and growth opportunities.

Now the leaders will present a different offering to all types of businesses despite their sizes. These businesses then will get included in their clients’ supply chain. Here the stragglers will lose a huge amount of market shares to large self-banking corporates. They will be forced to access the cheaper deposits to stay back in the race.

  • Restructuring of the client-centricity in a segment less world by Banks

The leaders in banking sectors will modify their banking structure and operating models to provide the products and services that can be the choice of clients. Banks will focus on the digital offerings for their clients despite where they fit into the conventional segments.  

These banks will be ready to solve the old problems associated with the SMEs to provide them the relaxation from the stressful environment.

Where these smart banks are working towards client growth other lagging banks will stick to their rigid rules based on revenue and employee counts. This limits their capacity to reach the continuously changing needs of the client.

  • Banks act as trusted advisors, leveraging data to mark their presence in shaping clients’ future business strategies

The client’s expectations are rising from the banking providers about the strategic requirements for the advancement of their business that can connect them to the growth opportunity. Here leaders will help by serving to keep like-minded and complementary clients together with third-party service providers like accountants, real estate professionals, etc.

Bottom Line

Smart banks are moving forward to provide the expectations filled with services and keep track of the client’s business growth throughout their life cycle. Backward banks are in diverse conditions due to their rigidity not to change the approach for the transformation. A healthy relationship between a bank and its client cannot be built, if the clients can’t find the growth opportunity under the shed of its leader.


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