What the experts said David Selves, Founder of The Selves Group, summed up the two main problems. Firstly, delays caused by card payment clearing, and secondly: “You can’t go and natter with your bank manager, you can’t explain to someone who knows you and your business that the transaction is approved and the money is on its way but just hasn’t cleared. Automated systems will turn down applications or reject direct debits because the funds are not in the account.” Kent Vorland, CEO of SmartTrade App, explained why this is such a serious issue: “Smaller merchants tend to have normal people problems. They need their money so that they can complete the jobs or orders for their customers, or to purchase stock for the customer who has ordered it. If they don’t have access to the finance they have legitimately earned, they might not be able to feed their family.” Roger Vincent, General Manager (UK&I) & CIO of Trade Ledger, was among those who agreed that some categories of SMEs are better served than others. He commented: “Above a turnover of £1million, banks will flick businesses over to corporate banking from retail, and that’s the gap where companies are massively underserved. SMEs are the driving force behind the UK economy. If we don’t start to tackle the problem of financial exclusion, we will be a long way behind the curve against other industries or other countries which are tackling the problem and stimulating growth within their countries.” Patty Zuidhoek, Director of Business Banking at Triodos Bank, highlighted the difficulties faced by banks, with the European Central Bank enforcing more stringent gatekeeping requirements: “All these checks and balances can be discouraging. A lot of large banks withdrew from SMEs because they want to take a standardised approach, which doesn’t work in this sector.” Paul Townsend, Non-exec Director of Vitesse PSP, confirmed: “There are certain client groups where a bank is perfectly www.fintech.finance
acceptable and works well. Where it becomes more challenging is when the client becomes more complex, requiring foreign exchange and cross-border payments, having a small balance sheet and low number of employees. This brings concerns around cost-to-serve.”
Broadening the SME banking horizon
and solutions to be distributed through other ecosystems. Either way, we are seeing a distinct shift away from exclusive relationships in favour of a more shared approach. Undoubtedly, banks must be involved in the conversation about the way forward – they are perfectly placed to lead on areas of strength and build collaborative solutions to fit this diverse sector, working together to help build a larger marketplace from which everyone benefits.
Although most alternative banking solutions in the market today cater for consumers, there is increasing provision What’s next? targeted at SMEs. Valentina Kristensen, Kent Vorland of SmartTrade App believes Director of Growth and Communications the market is more than ready for a better at OakNorth bank, said: “SMEs are still SME funding solution. not top of the agenda for most financial “One hundred per cent of the merchants services providers, but many are waking I have worked with over the past three up to the benefits. They are realising that years would be overjoyed, thrilled, to have if they get an SME on board, they will be access to their cash instantly, and would loyal and bring multiple cross-selling willingly pay a small fee or interest on opportunities within the business, amongst the loan, or a certain percentage of all the business owners, and there is potential transactions, to pay back a settlement or for employees to become profitable retail loan they needed,” he says. Not only that, customers too.” but he believes the solution could be As our report shows, delivered now. bringing about real change “I can assure you, every and better financial inclusion financial institution on earth for SMEs requires not only could put together a risk top-down directives from structure that would allow state authorities, but more these companies to have of a grassroots movement. access to that finance. And, This requires participants to on top of that, all insurance work together and develop companies in the world joint solutions, building would be happy to insure bridges between individual those liabilities, so the risk innovations already in wouldn’t necessarily even the market. lie with those offering Roger Vincent of Trade that financial inclusion. Ledger added: “We are All in all, there is a long line creating a new ecosystem of of companies that would financial services providers, benefit from being given in partnership with other that level of flexibility.” entities, such as Banking However, as our latest Roger Vincent, Trade Ledger Circle, to establish a new era report shows, the progress of financial services that will better serve and achievements will remain limited until customers and SMEs. If we better serve the further collaboration, communication and banking space through the incumbents, joined-up thinking becomes commonplace then the SMEs will benefit greatly as they within the financial services industry. will be able to access the services they want. As David Selves, of The Selves Group, In this new ecosystem, we can provide a commented, the potential is huge: new environment to better serve SME “A bank which took the bull by the financial services.” horns and really went in to support Banks are also recognising the potential SMEs would clean up.” of the ecosystem model and are facing a ■ To register for the new Banking choice between two strategic moves. They Circle Insight Paper, which will be can build their own ecosystem platforms, launched at Sibos 2019, go to www. or they can design interoperable services bankingcircle.com/whitepapers
SMEs are the driving force behind the UK economy. If we don’t start to tackle the problem of financial exclusion, we will be a long way behind the curve against other countries
Issue 13 | TheFintechMagazine
Fintech Finance presents: The Fintech Magazine Issue 13