My Opinion on SME Banking

Over the past decade, SME banking has undergone a remarkable transformation worldwide. What was once a traditional banking structure, often failing to meet the unique needs of SMEs, has now evolved into a user-friendly, comprehensive solution that addresses their pain points.

The banking experience in emerging markets has witnessed a significant upswing, driven by the pressing need for improved financial services. The imperative for innovative banking solutions is apparent in these markets, where customers often grapple with cash flow issues due to economic factors. This is why SME banking in Turkey, for instance, has surged ahead of its European counterparts.

So what has happened so far, and what will it transform in the following years?

• It all started with a high-street bank offering service without significant competition. They were/are slow, didn't listen to their customers, weren't shaping their products with the feedback and wouldn't innovate since everything was good enough for them to make some money. And I mean really good money.
• Then, the neo-banks come in. Their shiny cards, easy-to-use apps, and soft features help customers spend less time on their non-core business. When an SME founder doesn't have enough resources to get a finance manager and does everything by themselves, those fancy apps help them significantly reduce time on repetitive tasks. 'Your bank is in your pocket' was an excellent way to acquire SMEs, but they don't solve the biggest problem of your customer, which is cash flow management. The whole conversation comes to 'Are you a vitamin or pain killer?' those neo-banks are definitely vitamins.
• As VC money pours into the fintech ecosystem, 'all-in-one' spend management solutions emerge. Those players knew the pain points and had the resources to tackle problems and reach the low-hanging fruit. They used the wave of VC craziness to grow their customer base. When their customers raise money, their revenue automatically grows with them. Good lads, with minimum differentiation. It looks like the time of extraordinary cashback and rewards has slowed down.
• Then come the financing-related players( Debite is one of them). The problem is that financing for SMEs is a great way to acquire customers, but external entities shape it. The debt providers determine who to fund, how, and how fast to fund. So that's why players are primarily focusing on niche verticals, not because of the acquisition costs or to improve their underwritings but because they are fulfilling the requests of either debt providers or investors. If those guys can integrate the previous player's capabilities before the previous ones start their lending operations, they will win this race. So this is a note for myself as well. We must push hard to get the market share when we have the opportunity. Imagine all the easy-to-use, simple, all-in-one platforms with a painkiller financing option. 9/10 SME would choose it with the financing included option.
• The next big thing will come from an autopilot financing partner. Now, all actions are driven by the customer's request. 'I need a credit card, more cash, and receive my receivables faster or pay my payables slower.' What would happen if the financing platform could do its assessment and come up with an action list? Imagine you have Jarvis(the AI in Ironman) in your pocket, giving recommendations and taking action. Like: 'Tayga, you have ￡450k in your corporate bank account. Should I move it into a savings account to generate a 4.58% yield?' Or 'I see that you will have a cash flow problem in the next 14 days; why don't you finance your existing invoices and tap into the waiting cash?' kind of recommendations. This way, founders can focus on what matters most and leave the boring, repetitive financing part to the autopilot financing partner.

Seeing all those changes and improvements in the fintech world is amazing.

I don't know what will happen in the next 10 years on the SME banking side, but one thing that I'm sure of is that the customers deserve better than what's offered today.

We are lucky and well-positioned in this race since a) most of our team are coming from an emerging market to a developed environment. The solutions that we built solve real problems! b) our financing partners really understand the customers' needs and are fully aligned with our roadmap. c) we have the data, incentive and vision to shape this market with our offering.

What do you think has changed the most in the SME banking world in the last 8 years? What is missing? How do you think it will evolve in the near future?

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