Over the last decade, challenger banks, neobanks, payment processors, accounting package vendors and fintechs have been responsible for fraying the edges of banking in what many commentators describe as the “unbundling” of banks and banking services. What’s more, evolving regulations and advances in technology have significantly lowered the barriers to entry for these challengers, and this will continue to happen. The bad news for banks: Rather than slowing down, the unbundling is likely to increase.

One of the major trends brought about by the mobile and digital revolution is the move away from a banking product or transactional relationship to a fully embedded and immersive experience. Banks should note that customers do not just “pay” for something, rather they “buy” it. This is an important distinction. The payment is just one step in an overall experience or workflow that typically starts several steps earlier with investigations, comparisons and research (with a wealth of relevant information readily available at our fingertips), and then, conditions permitting, ends up with a purchase.

Think like a SME, not a bank

One of the main reasons banks are in danger of losing out to competitors in the provision of services to small- and medium-size enterprise (SME) customers is because they continue to think like a bank and not like the SME. Times have changed, and banks need to change too.

For far too long banks have operated through a lens of “What product can I sell?” rather than “How can I help my customer?” Ultimately, if banks can shift their emphasis in thinking to help solving their customer’s pain points, the consequences will be that they ultimately sell more products, and in fact, sell new products – to a growing base of more satisfied customers.

What’s more, moving towards embedding banking services within the day-to-day tasks that business owners face will go a long way toward improving the relationship that banks have with their SME customers.

The challenge for banks is this: How can they move from being a mere mono line provider of payments to offering an embedded workflow experience?                   

Let’s look at an example from the retail world: There’s an innovative contact lens provider in the U.K. which does much more than just sell contact lenses. Their workflow-based business model mirrors what customers want and need. Their sleek website provides help, advice, comparisons, health tips, a variety of products, and the ability for each customer to make an informed and frictionless purchase. They provide each consumer with all that they need to make the best choice for their needs, and simultaneously are building a relationship of trust that leads to strong repeat business from a loyal and very satisfied customer base.

Banks can think in these same terms as they develop modern business models for their target market – strategically designed with the customer at top of mind.

The days of when banks segmented their customers and forced them down a meaningless siloed channel strategy are gone. In particular, serving SMEs requires personalized service and demands a far more flexible and agile approach. 

The essence of embedded banking is to move to a model where banking and payments become part of the overall workflow and experience, rather than just a step within it. In reality, this means that the banks’ mobile and internet channels need to be transformed from being purely transactional (a place where SMEs simply hold their money) to become the place where SMEs can easily run their businesses. For banks, this involves “getting eyeballs on their portal” and developing deeper relationships with their customers via a compelling and personalized proposition, rather than continuing to let their competitors steal that gaze.  

By focusing on their customers’ workflows and becoming embedding within the SMEs’ day-to-day processes, banks can forge a powerful and trusted relationship that any challenger would struggle to break. Get it right, and banks can also increase revenues, reduce costs and protect their lending business – all while enabling formerly underserved SME customers to thrive. Think like your customers and you’ll reap the benefits.