The environment of small and medium-sized businesses (SMEs) has changed substantially during the last two years. During the epidemic, many companies faltered, others adapted and innovated, and several SMBs were created. Regardless of whether they flourished or came close to failing, all of them now rely on banks to help them develop for the future as the economy recovers.

SME Bank surveyed over 15 Pakistani small and medium-sized enterprises (SME) across 20 sectors to see how the pandemic has impacted their financial and banking requirements.

Over sixty percent of small and medium-sized enterprises saw pandemic recovery as their primary short-term priority. Banks that want to be seen as part of the solution to the problems encountered by SMEs would benefit from gaining an understanding of their primary concerns.

Allow access to cash

Nearly half of all SMBs saw a rise in expenditures (due to the cost of products, technology, and shipping and logistics) and cited controlling current expenses as one of their greatest obstacles. Unless banks are ready to assist with access to finance, these costs may grow more difficult to handle as government assistance programmes wind down.

29% of small and medium-sized enterprises said that they were ineligible for banking products during the epidemic. Larger SME’s have the most difficulty gaining access to long-term funding and financial assistance. This pattern was seen outside of Canada: For our research, Bank of the Profitable SME Base, SME Bank polled over 1,300 SMBs worldwide. According to this poll, small and medium-sized enterprises (SMEs) are seeking lenders that are cognizant of the COVID-19 environment and forward-thinking about what is necessary to enable SMEs succeed. We discovered that 42% of small and medium-sized enterprises feel alternative suppliers may give superior service than established banks.

Non-banking institutions are rushing to fill the voids left by incumbent banks. For instance, the e-commerce giant Shopify developed Shopify Capital, which offers SME clients in Canada loans ranging from $200 to $500,000. By authorising these loans within days and using future sales for repayment, the company offers a timely option to safeguard and expand its client base.

Faced with rising prices, more than half of SMBs prioritised cost optimization in 2021. A comparable amount of respondents placed cash flow health at the top of their list of long-term objectives.

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Important steps for banks:

Design services and products that assist small and medium-sized enterprises (SMEs) retain their competitiveness, such as short-term finance or supply chain management.

Rather than relying on personal guarantees and security-backed facilities, transition to a model that utilises third-party data sources, cash-flow data, and microsegmentation methodologies for each transaction.

Utilize augmented digital channels and adjudication procedures to address previously underserved portions of the SME community.

Maintain confidence while enhancing convenience

Even while SMEs increasingly utilised digital apps, call centres, and email to connect with banks during the pandemic, they said that relationship managers (75%) and in-branch advisers (71%) were their “most significant” or “very important” sources of guidance. This demonstrates that customised counsel and individualised customer service are still crucial to SME clients. Globally, 62% of surveyed SMEs get or would consider receiving remote advisory services, highlighting the significance of tailored guidance for SMEs.

91% of small and medium-sized enterprises retained or improved their faith in their present banking suppliers.

Traditional banks have a competitive edge over new, digitally-led businesses that lack the branch infrastructure and established connections that small and medium-sized enterprises appreciate. However, this does not imply that these new rivals pose no danger. While 79% of SMEs trust their incumbent bank “a great deal,” just 59% of online payment and ecommerce enterprises feel the same way (e.g., Square and Shopify). Nearly half of SMBs (49%) would consider obtaining value-added services from a non-bank source. In the next years, the trust gap is projected to continue closing.

The inability to obtain goods or services because their financial providers lacked digital channel capabilities or did not provide suitable locations was cited by 25% of small and medium-sized enterprises as a significant annoyance when dealing with them. Worrisomely, 44% of respondents claimed they were “likely” or “very likely” to move their main banking connection to a non-bank supplier.

Important steps for banks:

Utilizing modern cloud-based technology, integrate the same capabilities across supported and self-serve channels to provide consumers with a more uniform and seamless experience.

Empower advisers with the appropriate data, insights, and tools to anticipate and detect client requirements and build relationships built on trust, emulating the practises of the world’s greatest banks.

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Expand collaborations within the ecosystem of financial services to expand digital offerings with value-added services, such as business analytics, for SME clients.

Focus on recuperation and toughness

The objective of small and medium-sized enterprises is to emerge from the epidemic into a more stable future. They are interested in partnering with banks that provide them with high-quality services and experiences, including prompt resolution of their issues, access to the products they require, reasonable and transparent rates and fees, and the option of speaking with a live advisor or handling their needs remotely through simple digital channels. As banks incurred lower-than-anticipated credit losses during the pandemic, they are in a strong position to satisfy these growing customer demands.

During the pandemic, a greater number of Canadian SMBs have moved into digital sales, installed technology to allow staff to work remotely, and accelerated other digitization ambitions. This has provided a big opportunity for banks to facilitate the expansion goals of SMEs throughout the recovery phase by introducing new services and products that increase the return on investment in these new systems.

Important steps for banks:

Increase the individualization of financing choices and product suggestions, particularly when SME business models have evolved and new ones have emerged.

In addition to ecommerce and point-of-sale solutions, provide insights and analytics for digital transactions and end-user preferences.

As more SMBs begin to sell globally, provide finance and guarantees for foreign commerce and receivables.

The majority of small and medium-sized enterprises have understood that the recovery will not simply be a return to “business as usual.” Instead, it will be the beginning of a new trip, and they will rely on banks to go the same path. Banks that support the new SME journey will be able to retain strong, trust-based client relationships and expand profitably with their customers.

Contact me here to learn more about the shifting expectations of Canada’s SMBs and how your bank can satisfy them.
Read the whole article of the profitable SME base study on the SME Bank website for a worldwide perspective.