Building a successful go-to-market approach in SME Banking
Big banks must sharpen their SME strategies and strengthen client relationships or risk becoming lending utilities.
SMEs are a huge business opportunity for banks that are looking to expand their services and drive up revenues. They dominate most economies and are hungry for finance and business services. But banks’ traditional approaches to SMEs rarely meet the needs of most small businesses and frequently fail to provide sufficient profit margins for banks.
Banks eager to succeed in the SME business need to do more than roll out new digital offerings. They must develop fresh customer acquisition strategies that sharpen their client targeting, improve delivery models, and strengthen customer relationships. If they stick to their traditional approaches they risk losing their existing clients, missing cross-selling opportunities, and becoming just lending utilities. Fintech firms and digital platforms are already capturing a significant share of the SME banking business with flexible, on-demand services tailored to small businesses.
Incumbent high street banks in the UK, for example, have seen their share of SME lending fall from more than 80% to less than 40% in the past 10 years, says Conrad Ford, chief product and strategy officer at fast-rising fintech firm Allica Bank. Ford adds that medium-sized SMEs, what Allica Bank terms established SMEs, have been particularly hard for big banks to serve.
“They are too complex for a consumer banking operating model, but they're too low value for corporate banking.”
Ford was speaking at a Qorus online event that examined the go-to-market strategies that banks need to protect and grow their SME business. Other speakers included representatives from consulting firm McKinsey & Co and major multinational bank DBS.
Most of the bank executives who attended the online event acknowledge that their organizations are still trying to get to grips with the SME market. Only 14% of the executives polled by Qorus believe their banks have a clear and effective approach to serving SMEs. The majority, 59%, believe their banks are making progress but still need to improve, while 17% are figuring out their SME strategies and 10% recognize they need a new approach.
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