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Although big companies dominate news headlines, small and medium enterprises account for the majority of businesses in the world. For every ten businesses, nine are small and medium businesses. SMEs provide half of all jobs in the world.

Yet every bank will admit that SMEs are underserved compared to bigger businesses. The World Bank and the G20 have prioritised SME financing during the Saudi presidency of 2020, pointing to the innovative potential of digitalisation and the impact of fintech.

Fintechs find the SME market much easier than consumer banking, and have led the way in terms of financial innovations ranging from digital credit to digital identity and banking-as-a-service operations that bring smaller financial institutions into play. SME banking is much more of an ecosystem play, and fintechs appear more comfortable operating in an ecosystem environment than traditional banks. They can offer excellent user interfaces and better facilities in terms of APIs and the plug-and-play economy.

SME Business Banking – The Deliverables

Our SME Business Banking and Fintech reports include case studies of the leading emerging business banking fintech players along with case studies of new and nimble business banks worldwide. We examine the notable business banking fintech initiatives currently underway worldwide. Finally, we include recommendations for designing strategies, improving execution, creating new addressable market segments, improving processes and practices and increasing profitability

SME Business Banking v Consumer Banking

  • Business banking is relationship-driven, consumer banking is transactional
  • In consumer banking, it is easy to recruit borrowers, and hard to collect loans
  • In business banking, it is hard to recruit clients, but much easier to collect loans
  • Banks worried about risk management for SMEs but new and evolving scoring systems are available.

Banks frequently have more and better data than they realise, especially on the crossover between personal and business accounts.

Each report covers at least three case studies into the movers and shakers in the SME business banking and fintech world:

Marketplace Credit
Marketplace credit providers such as Klarna, Mybank, and Square have acquired banking licenses and have moved into traditional bank spaces on the back of providing specialised services to SMEs. They use alternative metrics to assign credit scoring and specialise in speed to market with quick decisions and disbursements.

Nonbank Lenders to SMEs
New non-bank lenders such as Kabbage and Lending Loop also specialise in alternative data and real-time analysis of financial information flows; Kabbage was acquired mid-year by Amex for its real-time secret sauce.

The evolution of P2P lending in the SME world
P2P lenders from Zopa to Farmcrowdy originating in the fintech world are now ending up as front-ends for banks or launching their own lending operations as licenced banks. Think for instance of Zopa, the first P2P lender which was started by former bankers, and has now become a bank.

Digital and Cross-Border Payments

With Open Banking legislation being adopted piecemeal but globally, fintechs such as and Lemonway have proven adept at being early movers in open banking, building new business models on top of compliance, KYC and AML processes that can be largely automated, driving low-cost digital customer acquisition.

POS Manufacturers in the SME world
It's not all about the software, as new players entered the POS market including Mexico's Clip and South Africa's Yoco, joining iZettle (acquired by PayPal).

The Transformation of Traditional Banking
Traditional banks pursuing digitalisation must accept that it is a long and difficult process, but BBVA, DBS and Lloyds can offer some pointers.

Data, Analytics & Loyalty
The convergence of data analytics and loyalty programmes with digital banking and personal financial management apps is now moving into SME banking, with attendant rewards for those who can derive customer insights through analytics. Strands and Meniga are leading names here.

Accounting services for SMEs
One major evolution in SME banking is the arrival of Open Banking, bringing non-bank data expertise into origination of payments and account information and growing the market of Quickbooks and Xero.

Digital Credit for SMEs
Re-thinking digital credit: having its origins in the world of prepaid phones, digital credit is now a major ecosystem opportunity involving combinations of telcos, fintechs such as Lulalend and banks and non-bank financial institutions.

Digital Identities for SMEs
Digital identity: we can't really have digital money without digital identities, an issue finally being worked through at high level by the United Nations and regional bodies. Alastria leads the way on decentralised identity.

Banking-as-a-Service & Open Banking
The emergence of banking-as-a-service will underpin new offerings for the SME sector. Players include ClearBank, Fidor Bank and solarisBank. And it's not all about the technology: culture is key.

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