Bridging the gap between the bank, the SMEs and the fintechs
SMEs: A lucrative, yet neglected clientele for banks across the globe
Run a Google search on banking for SMEs and you’ll quickly understand how disparate the banking landscape is across geographies. The US SME SaaS market generates $90 billion in revenue. 78% of small businesses (approximately $30 million) will adopt cloud fully by 2020. 65% of these small businesses use cloud-based apps for backoffice, bookkeeping and accounting. 43% of business owners use a smartphone as the primary tool to run their business. In India, there is a growing realization among private banks that SMEs can be a lucrative clientele since the bigger public sector banks, plagued by colossal NPAs, are loath to servicing them. SMEs in UK are already seeing the impact of Brexit on their supply chain financing and in China, alternative lenders are grabbing the SME segment from under the noses of banks.
However, there is no denying the fact that SMEs still remain under-banked across the globe. Another common thread is the growing adoption of disruptive innovations in banking technology among SMEs. Be it proximity payments, crypto-currencies, P2P lending, crowd-funding or open APIs, SMEs tend to be the front-runners in adopting these innovations, due to obvious reasons. Furthermore, the entities who have been most adept at handling the needs of these SMEs are non-traditional financial institutions such as Prosper, Airtel and even Google and Facebook, who are now emerging as a strong threat to the large and established Tier 1 banks.
Why are the larger, established banks lagging behind?
Plagued by regulations, legacy processes, siloed operations and unwieldy core banking systems, larger banks are often found struggling to keep pace with the innovations in banking technology. Essentially, the large and established banks are not nimble enough to keep up with the breathtaking pace at which technology is evolving and niche players are quick to latch on to the window of opportunity provided by the lethargy of the bigger banks.
So, where do the bigger banks go from here? Do they abandon the SME space like they seem to be doing in India, or do they accept defeat as they have done in some markets in China? Simply put, they cannot afford to do so, because the ongoing transformation of the banking industry is not a blip, it’s a tornado. And much like the Nokias of the world who failed to predict the threat posed by Android and iOS, the bigger banks might well get swept away.
On the other hand, the banking industry does have unique traits that make it difficult for smaller niche players to dislodge the behemoth. Regulations, capital adequacy requirements, and huge asset volumes: all of these do provide a strong cushion to the larger establishments. So, how can banks leverage these positives and also deliver the benefits of disruptive innovations offered by niche fintech players to
ensure that they bridge the gap with the SMEs? How can the bank offer innovative offerings such as BaaS, P2P lending, cloud-based financing etc. while retaining its credibility and dependability?
Banker 2020: The solution the banks are looking for!
Banker 2020 is a Banking as a Service platform developed by Finaeos over the cloud that dynamically connects banking systems to innovations in fintech with its rapid process flow and API technology, the backbone of open banking.
Banker 2020 creates a seamless connection between the back-office process and data technology, with a layer that delivers the dynamics of fintech APPs to the bank. To make the banks nimble, while retaining their integrity, reliability of process flows, and compliance, Banker2020 provides the speed and dynamics of fintech, through a curated catalogue of the most important emerging Fintech solutions, and a patented process engine that enables critical elements of banking to connect to innovative technologies. The confidence, compliance and security of established systems is combined with an unprecedented flexibility in processes, innovation and insight, to help any bank engage rapidly and successfully in the emerging markets to address the needs of SMEs as well as negate the threat posed by non-traditional competitors.