The banking landscape is constantly changing. The banking revolution has started with the consumer and is quickly transforming the business banking world. What’s fueling this change? Britain’s economy is very dynamic. It has over 4 million active incorporated companies with around 15% of those being new companies and 10-15% of existing companies dissolving each year.
UK Regulators play a significant role in supporting transformation through BCR funding and up to £400m has been injected into the economy to instil innovation. On the other hand, they are also raising standards and expectations, pushing SME banking providers to leverage technology. Moreover, new entrants to the business banking world, such as Monzo and Starling bank, are gearing up at a rapid pace to get into this market. So the big question is: “What does it take to deliver great business banking?”
Mike Kennelly, Director, Open Banking and Digital Transformation at PwC, discussed this topic with Denis Dorval, DueDil’s COO at our recent Banking Unplugged event. Read on for some of the key learnings and trends within SME banking.
What does B2B consumerisation mean for SME banking?
Business owners are individuals who are used to banks offering highly digital products in their private life and, hence, will look for the same level of service, characterised by ease of use and speed, when it comes to their business banking. Consumerisation is one of the biggest trends across a number of industries and banking is no exception. What business owners expect from their banks is seamless, easy to use service available 24/7. Business owners want to solely focus on their core activities - delivering their services and products.
For banks to become truly digital they need to focus on improving the onboarding experience of their customers. To meet SMEs’ increasing expectations, banks need to better understand customers’ journey beyond onboarding banks’ products or services and take a holistic view over what customers face each day. Ensuring your proposition fits into the new way of doing business is crucial for success in the new digital era fueled by partnerships. Businesses become part of ecosystems and will look for banking services available within those platforms. Banks need to be there together with the customer to stay relevant and appealing. The first steps in building ecosystems start to appear with integrations of banking into supply chain platforms and business accounting platforms.
Do partnerships help banks to innovate?
UK SMEs are an underserved yet rapidly growing segment of the UK economy. More and more often, business owners turn to the new players in the financial services market as they seek speed and personalisation. While incumbent banks start to see FinTechs as partners rather than competitors. To keep their SME customers loyal and bring more customers onboard, incumbents need to leverage innovative tech companies.
If the banks want to stay afloat going forward, providing tailored digital financial services to business customers is no longer an optional feature, it is a must. To stay competitive in this dynamic market, banks have to become more agile. Partnerships are fundamental to proving top notch customer experience and continue to innovate. Bringing partnerships into banks’ value chain is a big but necessary change. Relationship banking where banks have control over everything from end to end is not going to survive in the future.
The response to this trend will depend on the size of the bank. “The tier 1 banks still have a monopoly in terms of being able to control what customers are doing: people don’t move accounts, business accounts don’t move either, actually.” says Mike. While “... there is a significant appreciation that disruptors are not the enemy” amongst the tier 2 and tier 3 banks, he added. The best way for incumbents to deliver a refreshed attractive business banking proposition is to embrace partnerships with the new disruptors in the industry.
Technology underpins the discussed above change across business banking. It spans throughout the entire product and customer lifecycles, from the team productivity tools to fueling compliance processes to onboard business customers and partners and risk monitoring on an ongoing basis. There is a trust gap between banks and FinTech providers which causes frictions during partner onboarding. Hence, there is a need to build a trust framework between banks and FinTech providers which will enable quicker and easier validation of partners.
All in all, banks start to realise the importance of engaging in and building communities of customers and partners. These communities serve banks as the gateway into the world of customers and provide banks the insights into what those problems that customers face are and the expectations that customers have. “It is really about bringing the customer into the whole delivery and change management capabilities that’s inside the bank” - Mike suggested. "It is important to truly focus on solving those real life problems that customers have and “build into the fabric of the organisation the KPIs that the customers have” - Mike added.
Providing tailored digital experience to SME customers is no longer an option, it is a basic expectation business owners have. Ecosystems and marketplaces, fueled by technology, allow financial services players to make decisions in real time. DueDil creates a real-time and validated view of any business which enables banks to deliver an enhanced customer experience to SMEs.
Moreover, leveraging partnerships allows established players and newcomers to build out their core functionality quickly and efficiently. What banks need to focus on is building differentiators on top of the robust core capabilities that could be achieved by means of partnering with providers. DueDil supports a number of financial services institutions, from High Street Banks to FinTech innovators to provide a seamless onboarding of business customers and to further enhance their experience throughout their lifetime.