Banks re-think approach as small and medium size businesses continue to power UK economy
GDP grows by 0.5% in the first quarter of 2019, according to the Office for National Statistics quarterly national accounts out today.
The largest contributors to this increase are the 5.7 million small businesses in the UK today – making up 99% of businesses in the UK economy . SMEs continue to be the main driving force behind employment and innovation – providing 16.3 million jobs in 2018 alone, 60% of all private sector employment in the UK .
Despite their evident importance and contribution, SMEs continue to be overlooked by banks – especially when it comes to borrowing to fund their working capital requirements and, ultimately, grow their businesses.
This has been capitalised on by fintech and challenger banks, as they increasingly offer cutting-edge financial planning tools and advice to SMEs. Cloud-based Tide now claims over 1.4% of the UK’s SMEs as clients and is aiming for 8% market share by 2023 . Banks are under pressure to salvage their relationship with SMEs, currently not the top priority for relationship managers.
Rupa Ramamurthy, executive vice president at Teleperformance D.I.B.S, comments: “Traditional banks are increasingly realising that SMEs need tailored solutions compared to larger businesses who want a broad set of services such as international trade management and advisory counsel – which is something banks are more readily equipped to do.”
“The first thing that’s an issue for a small or medium sized enterprises is cashflow – most small business owners find it difficult to track and forecast their flow. They require banks to be a strategic advisor and product specialist who can help them to navigate through their cashflow journey and enable them to fulfil their growth ambitions.”
Rupa continues, “84% of SMEs want financial planning and business growth advice delivered digitally, but only 17% of banks currently offer digital financial management tools. Banks have a real opportunity to capitalise on SMEs’ need for advice, helping small business clients manage risk, business plans and cashflow.”