The services offered to large scale enterprises differ markedly from those required by small to medium-sized businesses. Very often, companies that are classed as micro or small entities, need processes to be faster, and services tailored to the timeline of their business. Furthermore, small business owners expect a personalised service rather like the one they receive as consumers. This has led to a number of key changes in the space and has developed a new wave of small business banking trends.
Integration of Digital Services
SME founders prefer to have a banking service that provides a transparent presentation of their finances. This has led to a trend in integrated digital services, or rather, one dashboard that integrates with their accounting packages and provide an overview of things like transactions, cashflow, outstanding invoices, tax return filings, whether they are eligible for funding etc. One company, one dashboard that shows them all the required features and functionality that they need to run their business efficiently.
Speed of services
Instant services and quick responses to requests have become the hallmark of small business banking practices. Traditional banks often fall down at this point because they can take weeks to open a small business bank account and then even longer to give them access to an overdraft or other funding facility. However, Neobanks are all providing a bank account setup within minutes, which is boosting their customer service base among startups and entrepreneurs.
Thankfully, traditional banks are now taking note and jumping on this bandwagon too. For example, JPMorgan, Investec, and Marcus now enable customers to open an account in just five minutes using a passport and biometrics and video ID verification. For businesses that need funding, Liberis can integrate with their bank account and dashboards to provide access to instant funding that can be retrieved within minutes.
Rise of the Super Apps
Nobody wants their smartphone clogged up with five financial apps hen one super app will do the job. PayPal and Revolut are already on the case, developing omni-services within their existing ecosystems. As an example, Revolut enables customers to take out pet insurance, travel insurance, buy commodities and link to their other bank accounts and credit card statements through Open Banking.
Last year, the German Challenger Bank N26 also launched integrated insurance products through their mobile app. The super app is defined as a one-stop-shop dashboard that allows users to customise and integrate a whole host of services into one platform.
Providing customers with more choice in terms of transactions than they have ever had before, Open Finance has the ability to aggregate user data from a range of financial apps in one place. Having all bank transactions, sales ledger and credit bureau data in a single application means customers can get a real-time view of their cash position, and capture any emerging risks to their business or identify working capital gaps before they become critical.
Digital Working Capital
The lending space is opening up, and its not before time. For far too long, small businesses have relied upon bank overdrafts or personal credit cards to support their fluctuating working capital cycle. With the emergence of new lending technology, banks, specialist lenders and fintechs are creating new frictionless finance products which use real-time data feeds to assess their eligibility for a wider range of lending products like term lending, invoice finance and asset finance.
This trend is set to continue as an influx of new entrants to the lending market create innovative solutions to target the specific needs of small businesses. Wayflyer is a great example of a fintech that provides finance against future revenue from your business subscription services.
A revolutionary change for the small business market, embedded finance enables financial service providers or specialist applications to embed their propositions into other third parties channels. This may mean that a small business can get access to a range of marketplace solutions in their banking app. Conversely, they can get access to financial services from their bank within other channels they interact with (e.g. get access to an instalment loan when purchasing stock, which frees up working capital instead of committing all of your cash to fulfilling orders). We will see increasing numbers of bank and Big Tech partnerships in this space.