The future of SME banking: How Artificial Intelligence is transforming the sector

Small and medium-sized enterprises (SMEs) account for 99% of all companies in the European Union and the United States. However, accessing adequate banking services and financing has long been a challenge for many of them. This is partly due to economic challenges and the legacy infrastructure many banks operate with, making it difficult to capitalize on the opportunities presented by this market.

But how can banks seize this opportunity while offering efficient and personalized services? The answer lies in artificial intelligence (AI) and machine learning (ML), technologies that are revolutionizing how financial institutions manage and serve their clients.

A challenging market with high potential

According to a recent analysis by the International Finance Corporation, 40% of micro, small, and medium-sized enterprises worldwide struggle to access credit. This sector faces a global financing gap of around $5.7 trillion. However, banks that manage to close this gap could reap enormous rewards.

Clemens Mueller, head of the banking platform George Labs at Erste Group, notes that "the SME market is significant and presents an untapped opportunity for many banks." Historically, SMEs have valued personalized service and close relationships with their account managers, but technological advances now allow banks to provide this level of attention more efficiently and at scale.

Artificial Intelligence as the key to transforming banking services

Artificial intelligence and machine learning are helping banks optimize their processes, reducing manual work and enabling high-quality experiences for SMEs more efficiently. A notable example is Banorte's banking system in Mexico, which has implemented Maya, a virtual assistant capable of managing inquiries and executing financial transactions. Solutions like this not only improve the customer experience but also reduce the workload of relationship managers, allowing them to focus on more complex issues.

Empowering relationship managers with AI:

One of the first steps many banks are taking is implementing AI tools to support relationship managers behind the scenes. These solutions allow them to quickly access the information they need to respond to customer inquiries, optimizing response times and improving the accuracy of information provided.

According to Susan Davies, head of business banking at Santander UK, "AI solutions can quickly provide information to our employees, helping them feel empowered and enhancing the customer experience." Additionally, Zoltan Illes, executive director of micro and small enterprise business development at MBH Bank in Hungary, comments that AI can significantly reduce the cognitive load on employees, making their work more efficient.

AI and service personalization:

One of the biggest challenges in SME banking has been offering personalized service at scale. However, with the use of AI, banks can better segment their customers, creating micro-segments with common behaviors and thus achieving a more tailored service.

"If AI helps us achieve dynamic segmentation, we can maximize the impact of the service model," notes a strategy director for small business banking in Greece. This personalization not only improves the customer experience but also directly impacts loyalty and profit margins for banks.

Optimizing lending operations:

Another key area where banks are seeing significant results is in optimizing lending operations. AI and ML allow banks to accelerate risk assessment and decision-making processes, resulting in faster access to credit for SMEs. Dominic Provencal, head of business banking at Mauritius Commercial Bank, explains that thanks to AI-based credit scoring models, they can offer financing to their customers in just minutes.

Building ecosystems with AI:

The creation of ecosystems is another emerging trend in SME banking, where banks leverage AI to integrate external data that enhances personalization and customer engagement. "Developing capabilities beyond banking is where the magic happens because it adds real value for customers," says Susan Davies from Santander.

The future of SME banking

As banks continue to adopt AI-driven solutions, they are building a future where SMEs will have faster, more efficient, and more personalized access to financial services. These technologies are not only helping banks optimize their operations but also enabling them to offer a "white-glove service" that once seemed impossible to achieve at scale.

In a context where access to credit is increasingly critical for the survival and growth of SMEs, banks that know how to leverage the capabilities of AI and machine learning will be better positioned to close the financial gap while generating long-term loyalty and value.

In conclusion, AI and ML are not just technological tools; they are the key to transforming SME banking, allowing banks to better serve their clients, improve profitability, and, most importantly, close a global financing gap that affects millions of businesses worldwide.

References

- Navigating AI & Data for SME Banking Success by Qorus & AWS: https://aws.amazon.com/es/financial-services/aws-and-qorus-banking-aiml-and-generative-ai-report-2024/