Today’s banking market for small- and medium-sized enterprises (SMEs) is being reshaped by two, often contradictory, forces. Together, these are creating a steady build-up of tensions that mean banks must serve SME customers in a new way—or risk losing out in this vital marketplace.
What forces are at play? In simple terms, commercial banks are having to find the balance between rapid change and traditional business models—as customers’ move to digital behaviours comes up against banks’ established model for serving SMEs.
Banks must harness new technologies in new ways
Banks are actively trying to respond to meet these shifting customer preferences. But this isn’t easy.
Our 2019 UK SME Banking Survey reveals four top-line findings that—in combination—illustrate how the underlying forces are playing out and creating tensions in the SME banking market:
- The market won’t change through switching alone – Only about 15 percent of SME customers intend to switch bank within the next 12 months.
- SME customers’ fundamental needs haven’t changed radically – 55 percent of SMEs consider their own banking needs to be "simple."
- SMEs’ expectations about how their needs will be met are changing – over 60 percent of SMEs now see some clear advantages in AI compared to traditional human service.
- SME banking can’t afford to lose the human touch completely – Only around 25 percent of SMEs would give up their RM for a "digital-only" alternative, even if it were cheaper.
Drivers for change are facing resistance
SME customers' expectations are changing. While their banking needs are remaining relatively consistent, their readiness to seek out and use digital banking services is rising. Yet they still want to know the human touch of a relationship manager is available when they need it.
Four imperatives to strike the right balance
The overarching challenge for banks is to get to know their SME customers in a more astute way that enables them to find the optimal blend between the new and the old—while also lowering cost to serve and providing customers with value for money. To all this, we think banks must harness new technologies in new ways via four steps:
- Blend RMs and digital to change the defaults—creating the "human + machine" colleague.
- Get to know your existing and target customers’ unique DNA.
- Re-architect IT to develop compelling new propositions, delivered at pace.
- Embed data-driven intelligence throughout the BAU lifecycle.