SuperApps give traditional banks an edge in the race for SME clients

A third of SMEs are considering switching their primary bank for a better digital experience, according to consulting firm McKinsey & Co. And digital-first fintechs and challenger banks continue to score higher customer satisfaction ratings among SMEs than traditional banks. To capitalize on their advantage over newer competitors, incumbent banks need to make major changes to their SME business. And they must move quickly.

“Incumbent banks don’t need to become the next WeChat or Grab. But they should adopt the core principles behind those models: modularity, integration and hyper personalization,” says Rui Brito, head of sales and partnerships at banking platform provider ebankIT.

Those principles underpin the giant SuperApps that are transforming financial services in Asia and Latin America. While few traditional banks have the resources or brand strength to build and operate their own successful SuperApp, they can still integrate their services into established platforms. This route gives banks a faster path to offering SMEs the convenience, speed and integration of a SuperApp, without the burden of building one from scratch.

Three big headaches for SMEs

SuperApps enable banks to offer SMEs what they need, when and where they need it, says Brito. They overcome the three big challenges that frequently frustrate SME customers:

1. Clumsy user experience – Opening accounts or paying suppliers tend to be difficult and time-consuming.
2. Funding struggles – Access to credit or loans is often slow and expensive.
3. Multiple digital tools – SMEs often rely on as many as 12 separate business applications.

Brito was speaking at an online event, hosted by ebankIT and the Qorus SME Banking Community, that examined how banks can employ SuperApps to bolster their SME business.  Representatives from Standard Chartered Bank and fintech ANNA Money shared how their organizations are already using SuperApps to meet the needs of SMEs while also increasing revenues.

Banks cautious on SuperApps

Bank executives at the online event acknowledge the potential of SuperApps and recognize their ability to improve support for SMEs. Around 75% of the executives polled pointed to embedded lending or financing as the offerings that would add most value to their SME digital platforms. Such offerings rank ahead of marketplaces for business services, data insights, and partner ecosystems.

However, none of the executives could report that their bank has launched a fully-fledged SuperApp. When polled on the current status of their bank’s SuperApp strategy for SMEs they responded:

·      Early exploration – 40%.

·      Bundled some services – 30%.

·      Platform with external integrations – 13%.

·      Not yet on strategy roadmap – 18%.

Incumbent banks need to change how they think about serving SMEs before they start working on SuperApps, says José Luis Sousa, pre-sales engineer at ebankIT.

“I see a lot of old ways of thinking among traditional banks. There needs to be a shift in mindset, in mentality, before they think about changing their product offering.”

Listening to clients is the first step.

“SMEs across Europe have very different needs. Regulations and priorities vary. Each bank needs to understand its own reality and the unique needs of its clients.”

The bank also improved its turnaround time for SME lending. Loans of up to the equivalent of US$500,000 can now be approved in 10 seconds. Previously, SMEs could wait up to three days.

Access to prominent SuperApp platforms has expanded the bank’s reach. By embedding its SME offerings into prominent ecosystems, Standard Chartered now has access to more than 50 million potential customers.

The scale of the SuperApp ecosystems provides the bank with more than just greater exposure to potential clients. It also gives it access to vast amounts of customer data that improves the bank’s risk models, says Sharma.

“The more data points you have the more accurate your predictive models become and the better your ability to underwrite risk.”

When assessing SME loan applications, the bank draws on real-time SuperApp data that includes customer and supplier details, transaction size, speed, and geographic reach, as well as credit history.

“This information is available to us at the click of a button not only when we decide to finance the client but every day thereafter. It removes much of the uncertainty around financing.”

Sharma says the bank had to rethink its SME business model as a result of its SuperApp experience. And it continues to learn and adapt.

“We were trying to align the market to the way we do things in the bank. We realized that it has to be the other way around. We have to align ourselves to what the market wants.”

Many of the fintechs and challenger banks that have successfully entered the SME market have built strong customer relationships by listening closely to their clients and responding quickly to their needs.

UK fintech ANNA Money, for example, uses its mobile app to help early-stage SMEs with admin support and tax reminders.

Lots of ANNA Money’s users are immigrants with limited access to formal business services, says Boris Diakonov, the company’s co-founder and co-CEO.

“SMEs in the UK have been underserved because banks don’t have a feel for what SMEs are going through. We’re not just serving SMEs, we’re helping people. Many of them started a business because it was the only way they could make a living.”