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Why banks are key to unlocking business growth

Unlocking value
By Kyle Ferguson, Chief Executive Officer

SMEs are the lifeblood of the American and European economies. In the US, it is estimated there are more than 30 million small businesses, while SMEs in the UK account for 60% of all private sector employment and 52% of all private sector turnover. In times of austerity, governments have relied heavily  on the growth of SMEs to help fuel the economy and, in uncertain economic times, further emphasis will be placed on this key sector.

With SMEs playing such an important role, it is vital banks offer the tools and services to allow them to unlock business growth. However, SMEs seem currently unsatisfied with the relationships they have with their banks, increasingly frustrated by a lack of understanding and slow processes. As SMEs form the foundation of the economy in both the US and UK, banks must begin to provide the tools and services to unlock business growth, paying particular attention to the following areas:

Funding options

Our research found that 52% of UK and 51% of US SMEs find it difficult to access funding. In the UK the Treasury Select Committee set alarm bells ringing, criticising big banks’ treatment of small businesses as “scandalous” following government investigations into small business lending.

The difficulty faced by SMEs in trying to attract financing can, at least in part, be attributed to the majority of banks having implemented stricter lending requirements. Yet, without adequate financing, SMEs may find it hard to keep their heads above water and achieving dynamic growth will certainly be far more difficult. It seems clear that Banks must seek to simplify the process of applying for finance in order to make it easier for small businesses to gain access to funds.

Commercial card technology

As a result of digital integration and customer awareness, spend on commercial cards is growing. By 2020 we expect commercial card spending to rise to $582bn, an increase of 71% over 2013 spending levels. As companies migrate away from paper invoicing and inventory towards electronic procurement systems, they are starting to realise the added layer of value commercial cards can bring.

By offering SME customers commercial cards, banks are able to provide a level of control to finance management that businesses and the executives that work for them have not previously enjoyed, helping to cut down on laborious administrative processes. This allows businesses to view transactions on electronic statements and adjust card spending limits on a case-by-case basis; all while enabling cards can be used for items that would potentially otherwise get trapped in an arduous invoice processing cycle.

At the moment, many small businesses complain about a lack of visibility which results in over half of them having to spend more than two hours per week on expense or financial management tasks. Innovative commercial card technology can help SMEs achieve greater insight into their spending, exert tighter control over it and therefore reduce the need to spend time interrogating audit trails and instead free up time to spend on value-adding tasks.

Value-adding services

At least one in three SMEs are already using or have expressed an interest in services from banks that will help them run their business better, improve customer service and/or increase sales. Similarly, Accenture found that 31% of SMEs are looking for closer engagement with their bank as a source of proactive ideas, including the financial and non-financial assistance that will help them to optimise their businesses.

Banks that are yet to do so must take this into consideration and help SMEs unlock business growth by providing value adding services. For instance, through fintech partnerships, banks can offer new tools which allow SMEs to use data to track cash flow and plan for growth.

Additionally, while banks might not have the knowledge and insights themselves, they can work with fintechs to gain the analytical capabilities that will enable them to segment their SME customer base and gain a better understanding of their needs. If banks have an improved understanding of who they are dealing with, they will be able to better serve SMEs and provide the products and services they need in order to achieve growth.

In competitive SME environments, the ability to grow quickly can be a key differentiator and even essential for any small business that wants to survive and thrive over the long-term. Although banks can be instrumental in helping SMEs achieve business growth, at the moment, very few have the capabilities to do this. By partnering with fintechs, banks will be able to gain the insights and technology needed to add value to their SME customers’ businesses and help them unlock this growth.