Recently, we have been spending a lot of time with SME business owners in the UK - getting to know the problems and pain points they face when it comes to managing the financial side of their business.
In doing so, we discovered that all SME owners - irrespective of size, age, or industry - fundamentally try to achieve the same set of core outcomes. Today, the experience of achieving these outcomes is poor, and the products and services SMEs turn to for help suffer from a number of shortcomings. We’ve already explored what those shortcomings are in our previous post. Now the question remains - how do we fix the experience? Who will bring the innovation in banking that the SME owners need?
From our research, and drawing upon product and service development lessons across the industries in which Kin + Carta Create works, we’ve identified four key components that any future SME proposition needs.
One of the biggest pain points for SME owners is that their data is fragmented. Remembering passwords, logging in and moving data between tools is a huge time drain.
Open Banking renders this a thing of the past. Any product or service built today needs to be built with Open APIs and integration in mind: competitors will have to learn to play nice with one another.
SME owners don’t have real-time visibility into how their business is doing financially. Having lots of incomings and outgoings across various payment methods - cash, card, paypal, bank transfer etc. - and timelines, makes seeing how much money the business has at any one time a challenge.
Aggregating products, and making them easy to integrate with, will give SME owners the ability to pool together their different products and services into one place. This will provide a single overview of their businesses finances, in seconds.
No existing solution accurately, fully and reliably analyses the plethora of data that a business collates. Nor are they able to deliver timely and personalised insights about its performance to SME owners. Instead, SMEs rely on a network of peers, friends and family for advisory services. Others have been strategic about who they bank with, purposely choosing small banks, like Handelsbanken, to ensure a more personal relationship.
With this in mind, there is a clear opportunity for banks here. By leveraging their existing customer data, and building products that are open and unified, larger banks can give SME owners a single place to connect and store all of their data. This data, taken holistically, can be analysed to provide rich and personalised insights that SME owners can access anytime and anywhere. Whilst unlikely to replace the role of the peer network, or the accountant, these quick, accessible snippets of information add value and deepen the customer relationship - giving SME owners back control and confidence over their business’s performance for the times in between meeting with their accountants or tapping up their peers.
SME owners either rely on their memory, other employees' memories or by setting various reminders, whether alerts or scribbled notes, to keep on top of things. Missing deadlines can either have very little to no impact, or it can put your business into dangerous water. Any future product needs to flag information and actions when your attention is needed.
Smart, proactive notifications would save SME owners time and effort - keeping them on top of payment schedules and invoices; ensuring they are never left out of pocket when they forget to chase a supplier for a payment, or providing updates when new legislation could impact their business.
So, who’s going to win in the SME space?
Who’s best placed to seize this opportunity and build a leading digital SME banking product and service? Is it the banks? The internet-era players? Or the new FinTech players?
The reality is - I don’t know: no-one does. It’ll most likely be a combination of the three. What I do know is how they’ll win.
The winners will be the ones who follow these 3 simple rules:
- Focus on SME outcomes, not features
It’s imperative to understand the role a product or service will play in the lives of SME owners. Focusing on what outcomes a bank can help SME owners achieve will ensure that you build products and features that SME owners want and need.
- Learn to play nice in the ecosystem
The days of getting everything from one provider are over. The future of SME services will be that of a marketplace, where different solutions integrate and work together. Open APIs and products that integrate nicely with other products will become the digital default - those that don’t will die.
- Give SME owners back their time
SMEs owners are time poor. Whatever we build, it must give SME owners back their time. Fifteen minutes to authorise a payment, weeks to open a business bank account, days to receive your corporate card and quarterly business insights from your accountant...these are all things of the past.
We’re already starting to see amazing SME products, from new banks like Tide, Coconut and Penta, to intuitive and simple tools like Square and iZettle. At the moment, the reach and impact of these new products and services is limited, but it is growing - last year saw a 7% increase in the number of SMEs, representing 51% of private sector turnover (£1.9trillion).
The room for innovation in SME banking remains wide open, for now.