Like everyone else in the SMB universe, I’ve been amazed by the resilience and dexterity with which independent entrepreneurs have undergone digital transformation over the past year-plus. McKinsey estimates that COVID-19 pushed it on by seven years in just three months. Having paid close attention to this transformation from the trenches, I can say that the McKinsey figure doesn’t feel like hyperbole at all.
As part of the dramatic change, the relationship between banks and small businesses has evolved in parallel. No longer relegated to the role of financiers, as de facto co-investors, banks are starting to find new ways to empower entrepreneurs, be it through education or through “digital inclusion.” Indeed, new digital tools have appeared that are helping banks to assist small businesses with streamlining their business processes and unlock profit margins. Together they’re producing a new, better SMB financial ecosystem. Today banks need to provide more services to businesses, especially to SMBs, if they want to remain competitive with the new generation of agile, self-service, less-regulated fintech tools. At the same time, SMBs are still struggling with the pandemic-induced economic crisis. They desperately need support in the form of loans, financial health education resources, and tools that help them survive and recover.
The bank-SMB relationship is changing
Banks are no longer viewed as simply places to store money, but as providers of a broad range of financial services that covers everything related to making payments, getting paid, and tracking money movements.
Business peoples’ expectations for banks are changing. Today’s small business entrepreneurs want self-service tools that are accessible on demand and around the clock. They want to be able to manage their finances from their phone, just as smoothly as they organize their personal calendar or order food.
In the same way that the status quo of on-demand digital transactions has changed personal banking, so too has business banking evolved. Small business owners likewise want self-service, always-open tools that assist them with more than depositing and withdrawing money. If their local bank can’t satisfy their needs, they’ll move to digital-only platforms. Fortunately, fintech platforms make it easy for banks to offer these digital services. Banks that adopt white-label, integrated or proprietary digital solutions can tap into deeper insights into SMB needs, trends, and pain points, enabling them to act swiftly to make suggestions or develop new financial products. With better data, banks can look for red flags that indicate potential downturns and move quickly to address issues, while building a stronger relationship with their business customers.
By offering integrated and embedded fintech tools, banks also enhance and diversify the value they offer to small business customers, empowering them to improve the way they manage cash flow, accounts receivable and payment processing. These are the types of functionalities that more and more traditional finance institutions are already offering, and the trend is only going to expand and deepen in the years ahead. Integrated banking platforms likewise make it easy for SMBs to share financial data with banks, so they can improve their credit scores, speed up application processes for loans and financial aid, easing the path to the capital they need to survive and achieve growth. As well as helping SMBs access vital working capital, this also encourages them to view banks as partners, rather than guards barring the door to funding.
SMBs get by, with a little help
COVID-19 pushed businesses to offer more remote and contact-free services, like contactless and mobile payments, digital invoices and receipts, online scheduling, and digital collaboration and communication. Buyers have high expectations of the small businesses that serve them, and not everyone is keeping up.
However, banks and other financial institutions that assist small business owners can empower them to seize the digital opportunity. They can do this by educating entrepreneurs about best practices and providing integrated payment tools that the SMBs can then share with their customers to deliver a “new normal” level of customer experience. When banks offer digital solutions that SMBs can use to improve the flow of their own customer-facing interactions, it strengthens the entire value chain. SMBs appreciate it, because it lifts the burden of completing time-consuming manual tasks, syncing with bookkeeping and banking apps for better, more accurate, and faster tracking.
A stronger small business ecosystem
All in all, new fintech capabilities are building a stronger SMB ecosystem that encompasses both banks and businesses. They empower banks to offer better services to SMBs, and SMBs to offer better services to their clients. With the new digital apps and portals, banks and small businesses can now interact much more often, making it easier for SMBs to be in touch with questions and for banks to share information about new opportunities.
SMBs can streamline their loan applications and see higher success rates, because the banks, in turn, are more willing to lend to business banking customers who have a trusted relationship with them and whose finances are more transparent. As a result, banks are stronger thanks to their closer relationship with their SMB customers, who see their logo on their banking app at least every day. Small businesses, too, are stronger and more confident about planning to scale and expand, because they know they have the resources to draw on. By powering smoother communication, fintech builds better customer relationships on every level, between banks, SMBs, and end customers.
Fintech is the glue in the new business ecosystem
The fintech revolution is helping banks and financial institutions to offer better service to their SMB customers, while also empowering them to pass on a more integrated, streamlined, frictionless experience to their own clients. Together, fintechs, SMBs, and banks are growing a stronger SMB ecosystem that is positioned to play a key role in the global economic recovery.
Itzik Levy is the CEO and founder of vcita, a comprehensive business management and client engagement platform that helps small businesses to manage their time, money and clients.