For a long time, small businesses have been viewed as a tricky customer segment, one that is hard to serve. Sole traders and small businesses span such a broad spectrum of activities, that it often seems hard to pin down exactly what this customer segment needs. After all, a landscaper, a coffee shop and an IT consultancy business have very different business models and requirements. Sounds impossible to come up with an offering that caters for such a diverse customer segment, right?

Well, it’s more straightforward to create a meaningful offering to the small business community than many banks think. However, to do this, we must first take a step back, assessing basic day-to-day needs and pain points, while thinking as a small-to-medium sized enterprise (SME), rather than as a bank.

As a small business owner, having to navigate different applications to access different types of information in order to get a full picture of your business’ financial health is not just inconvenient, it can be time consuming and complicated. And if taking any actions, such as collecting payments, chasing late payments or paying your suppliers requires yet another app, it becomes much harder to maintain oversight on all the business’ finances. It increases time spent on admin and finance (and away from core activities) and results in less accurate results as there is far more room for human error.

Traditionally, banks have focused on how they can push their portfolio of products on to small businesses, rather than listening to what their customer really needs in the first instance.

Business owners don’t think in terms of product, they don’t care about the fact that payment transactions are typically recorded in their bank accounts and business transactions (like invoices or bills raised) are recorded in their accounting package. From a small business point of view, the demand is simple. As a business, my focus is on delivering the services or goods to my customer and doing what I’m passionate about, getting paid for my work and making sure I maintain a good relationship with my suppliers by paying them on time.

Facilitated by open banking, fintechs, accounting package providers and marketplaces are able to offer SMEs this end-to-end journey that ties in nicely with their day-to-day tasks and they are doing this already.

Does this then mean that banks have already lost the battle for the small business customer? No, not at all. In fact, banks are very well positioned when it comes to helping small businesses as they already have the relationships in place. A recent survey [1] revealed that 91% of small business leaders trust in their banks to run business accounts effectively. Despite this, there’s no denying banks will need to adjust their approach to address the pain points of SMEs, keeping the businesses’ end-to-end financial workflows in mind.

A SME needs a 360° solution, not just a credit facility to bridge any cash shortages, but also a solution that helps get their invoices paid more easily to reduce late payments, settles supplier bills, manages cashflow and is seamlessly integrated alongside bookkeeping. When banks evolve their offering from a simple product push, to a financial workflow-oriented offering, which helps small business communities to more effectively manage end-to-end financial activity, this will put the banks at the heart of businesses.

To read more about BankiFi’s embedded banking whitepaper please download a copy here.

[1] Research from the Business Banking Resolution Service (BBRS), an independent and free dispute resolution service, based on the views of 750 small business leaders, found 91% trust their banks to run business accounts effectively. November 2021.