About 90% of all businesses can be described as small businesses. However, traditional banks are losing market share in this vital segment to digital platforms that have financial offerings. At the root of this is the dissatisfaction that small businesses feel about the services that traditional banks offer them.
A recent survey, saidSachin Mukesh, senior product manager, business banking, found that as many as 82% of small businesses thought they were not receiving the right sort of services to help them effectively run their finances.
In the absence of adequate services from traditional financial institutions, digital platforms are stepping in to fill the void. “Payment platforms like PayPal and Block have long dominated the payment ecosystem but now we see them offering regular banking products, pulling customers completely into their orbit,” he said.
“Similarly, accounting platforms such as QuickBooks and Sage are now offering checking accounts and accepting deposits. Of the e-commerce sites, Shopify is also offering checking accounts, while Amazon has initiated more than $7bn in loans.”
It is estimated that small businesses around the world have unmet financial needs in the region of $5.2trn. By reimagining and modernising their systems, traditional banks can take the larger share of this potential.
Despite the potential, SMEs remain underserved due, in part, to the cost of serving them. Traditional banks, in particular, spend 70% more to serve SMEs than their digital competitors, who can take advantage of this to gain market share.
“But at the same time, it is an incredible opportunity for the banks themselves to make use of this.”
The Backbase Engagement Banking Platform, Mukesh said, offers banks a way to end the age of legacy silos and monolithic architecture and make a paradigm shift to an era where they can truly focus on the customer and their daily activities over a single, poly-functional platform.
Fabian Fanton, Solutions Engineer at Backbase, took the audience through a demonstration of how small businesses can benefit from the Backbase EBP.
The platform, he showed, can enable the seamless conversion of retail customers to business customers, using information that is already available about the customer, as well as onboard new customers.
Dominic Provençal, Head of Business Banking, MCB, said the Mauritius-based company had a vision of becoming a trusted partner for SMEs with a digital-focused approach. Its partnership with Backbase had enabled it to overcome some of the challenges it was facing, such as fragmented experiences for customers.
The company was able to launch an app that customers could self-register on and enjoy a seamless experience. Provençal said the customer base is growing at 500 new clients a month, in addition to which they are now able to sell customised products to customers. The app enables the bank to conduct surveys, one of the revelations from which is that customer satisfaction is now at 80%.