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Can Banks break the Missing Middle with technology in addition to just Credit lines?

A breakup of Business Banking in the UK. 5.5 million businesses were small (0 to 49 employees) forming 99.2% of the total count of private sector businesses, followed at a distant by 35,600 businesses were medium sized (50 to 249 employees) and finally large business counting to 7,700 businesses. By and large the proportion is same across other parts of the world. The case of ‘missing middle’ whereby only microscopic few businesses makes it to Medium & then to large as brought out by the Reserve Bank of India Governor Shri Shaktikanta Das. The Governor specifically spoke of inertia to technology adoption as one of the causes for the ‘missing middle’. Others like working capital issues are well known. Technology shyness & illiteracy may sometime make simple process around Account Receivables and Account Payables look formidable while we live in an era where storing, analyzing, and managing crucial structured and unstructured data to drive better customer experience is the norm. Some 91% use excel to work on cash forecast globally. Beyond the Cost of Adopting New Technology such units are faced with challenges like Lack of IT Skills , GDPR, Data Backups and Disaster Recovery, Scaling IT for a Growing Business and Dealing with Security Risks. Technology is the key for efficient Management of Working Capital where accurate forecasts trigger investment decisions apart from interest savings.
Not even 1% of the small enterprise makes it to the medium and further as above. Sovereign support coming into the SME ecosystem in terms of driving digital effort & marketplaces for faster credit decisioning using alternate data is seeing penetration of technology into this segment. Tech need is surely not ‘One size fit All’. If we take a typical service of liquidity management that a CFO office does it can range from a vanilla type for a small unit which just reconciles an ERP with Bank statement and sends follow up mails for delayed payments and gets the deductions in payment clear to a  Large unit which shows the foreign currency hedge to build forecast for periods which are back tested from time to time in a broad network of currency and geography with a massive supplier & buyers base with complicated payment terms & tenor
Businesses do use Cloud based accountancy software like Zero; & payments platforms as iZettle in the UK which speaks of willingness to adopts technology. Mass adoption is the issue, Technology support from Banks as a valued add may have the desired effect as we have seen small businesses are not averse to technology but the ask for the same is beyond cost . This helps Banks with loyalty ,a fee while helping in the longer run transit small units to higher levels which enlarges their portfolio size.


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Prasenjit Das

Prasenjit Das

Senior Director


Member since

09 Feb 2015


Hyderabad, India

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