SA: Banks’ servicing of SMEs does not correspond with the economic importance of this sector – New Research

Data-driven experiences critical to bank success, as industry reaches ‘inflection point’

New research from international digital SME banking specialist, Pollinate,  reveals traditional banks’ servicing of SMEs does not correspond with the economic importance of this sector.

From talking to nearly 1,000 banking leaders around the world, Pollinate’s latest guide has plotted a path for how traditional banks can accelerate the pace of change by focussing on harnessing the power of data to become the single digital hub for SMEs.

At a global level the guide reveals how traditional banks need to:

• Remove the causes of SME attrition. The guide shows that traditional banks need to build on their own product and distribution advantage by delivering digital experiences at scale. While 65% of traditional banks say a strength is data, more than one-third report losing customers through a lack of data and insights.
• Focused investment for maximum impact. Acquiring could be banking’s sweet spot. For 60% of traditional banks that see ‘BigTech’ as a major competitor, owning customer data (particularly both issuing and acquiring) could position banks as a strong competitor against these tech giants.
• Rethink “supplier” relationships. Traditional banks need to extend relationships with Fintechs from a supply arrangement to collaborating on a range of elements, from initial strategy to launch of new products and services. 36% of traditional banks are looking for partners that can provide strategic business advice, not just platforms or services.

SMEs across South Africa represent more than 98% of businesses, employ between 50 and 60 percent of the country’s workforce across all sectors, and are responsible for a quarter of job growth in the private sector. Despite this, Pollinate’s data reveals that traditional banks use only 20% of business banking budgets for SMEs. Furthermore, only 47% of banks across the board will be increasing their investment in SMEs in the next financial year, with 11% of banks expected to decrease their investment.

The rapidly changing SME landscape has seen fintechs rise to the challenge to provide the digital solutions this sector needs. Traditional banks, often constrained by red tape and legacy structures, have struggled to keep up – 22% of traditional banks say fintechs are the biggest competition when it comes to serving SMEs.

This has caused ripples across the industry, with banks often opting to partner or acquire fintechs instead of building their own solutions. In South Africa, 22% of traditional banks partner with fintechs collaboratively to build specific digital solutions from scratch, compared to 50% of challenger banks. Traditional banks are also more likely to acquire fintechs (25%) compared to challenger banks (17%).

Fiona Roach Canning, Co-Founder and President at Pollinate, said: “SMEs are fundamental to communities and economies. The race for customer primacy is about becoming the single digital hub for SMEs to manage and grow their businesses.”

“SMEs are fundamental to communities and economies around the world. Reducing the cognitive burden for these companies is key to their growth.  They need a central hub to manage and grow their business – and banks have all the assets to be that single place.  Banks are showing that, through partnerships, they can leverage these assets and leapfrog digital disruptors, and Pollinate is proud to be one of their partners of choice.”

The guide is available for download on the Pollinate website and is the latest in a series of publications from the in-house Horizons thought-leadership team.

About Pollinate

Pollinate is more than just a collection of individuals. We are passionate about small businesses, and together with our banking partners, are transforming commerce for SMEs. Our vision is to combine our strengths with the expertise and reach of the largest banks in the world, to provide small business owners with the 21st century tools they need – now more than ever – to grow and succeed. Launched in 2017, we work with leading banks around the world to implement the Pollinate platform for their customers. Our mission is to unlock the power of bank data to create small business success, at scale. Pollinate empowers banks to give their SME customers a single place to manage their business, with bank-grade privacy and security for complete peace of mind.

Research methodology

The data from Pollinate, a platform which empowers banks to give their SMB customers a single place to manage their business, came from over 975 senior banking and investment decision makers providing their insights on what SMEs want, what they are doing to help them, what they think of challenger banks, and what more needs to be done to engage with SMBs. Pollinate is already in partnership with Canadian Imperial Bank of Commerce (CIBC), Insight Partners, NatWest in the UK, National Australia Bank, Mastercard, Fiserv, and EFM Asset Management.