Small and medium enterprises (SMEs) face an uphill struggle when it comes to securing certain banking services, and banks need to rethink the role they want to play in this space to capitalise on the SME banking opportunity, according to the results of a survey conducted by Strands.

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Strands, a provider of financial management technology, said that the latest findings from its study “SME Banking: Intelligence – Not Applied” show that 70% of SMEs regard their banks as a utility provider rather than a business partner. The survey covered more than 200 SMEs. Banks serving over 1.3 million SMEs were also surveyed and these results were presented separately.

Although satisfaction with bank services remains solid, with 91% of SMEs responding that their bank “understands their financial needs well or fairly well”, some of the key findings actually went against this trend, and showed that 43% of firms surveyed are considering switching to a challenger bank.

While the SMEs are often resilient to economic shocks and business cycles, the research revealed that ‘economic uncertainty’ is the number one challenge facing this segment. Payments and alternative forms of banking services will play center stage at the 2017 Finance Magnates London Summit this November.

The list of SME priorities also shows that 40 percent are focused on service personalisation, citing the lack of this feature as a major reason for leaving their current provider.

Another major stumbling block is the lack of decent plans on the part of banks to undergo digital transformation, with 83% needing 4 – 5 years to complete the process. Insufficient budgets, legacy technology and regulatory compliance are the major barriers to change.

Through the eyes of their customers

Despite differences in nature, size and composition, SMEs share common financial needs that banks are required to offer, such as digital interaction and access to budgeting or spending tools, as well as non-financial needs such as planning functionality.

Research revealed that 84 percent of those surveyed want financial planning and business growth advice to turn to automation to remain competitive. Yet, only 34% of banks felt that financial planning and business advice are key needs, and just 17% currently offer digital financial management tools.

Commenting on the survey’s findings, Erik Brieva, CEO of Strands, said: “In a period of intense economic turbulence, the existing relationships between banks and SMEs are beginning to weaken. SMEs are crying out for personalised financial advice, delivered digitally to help them manage and grow their businesses in times of grave economic uncertainty. Incumbents are failing to meet these needs and are increasingly regarded as a utility; simply a provider of transactional services.”

He added: “The situation is not insurmountable. Traditional banks have the relationships with SMEs. Traditional banks are still the providers of choice to SMEs. And traditional banks have the financial intelligence SMEs crave. Banks need to apply this intelligence – digitally, and in a personalised way – to become business partners, and in doing so retain and grow their SME market share.”