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90% of all SMEs worldwide have one thing in common

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James Camilleri

August 11, 2021

One thing that 2020 has made abundantly clear for corporate service providers is that adaptability and preparedness for the unexpected are crucial to business success. Regardless of the industry, B2B companies all across the world needed to adapt quickly to continue to provide support to clients despite the work-from-home situation. The changes brought about in the way we do business are unlikely to disappear anytime soon. However, what was also highlighted were the challenges faced by these service providers. One of the biggest among them is the rising customer expectations. With increasing digitisation and investments in technology solutions, businesses today expect seamless services and faster resolution times. The challenge then becomes to connect people, assets, and businesses to deliver next-gen services. Also, with remote work and hybrid teams likely to continue beyond 2021, efficient multi-location management is key.

Challenges Faced by SMEs in Banking and Financing

From the Bank's perspective

SMEs offer huge potential for banks as a customer segment. For instance, a March 2020 survey of 1,265 small business owners and executives in the US revealed that SMEs spend approximately $225 billion on services like corporate accounting, invoice financing, bill payment, and acceptance services from third-party providers. Many would like to obtain these services from banks instead, representing a revenue opportunity of $370 billion for banks and credit unions. However, banks seem unfit (or rather hesitant) to meet the financing needs of SMEs. There are 3 main reasons for this:

Lending to SMEs Seems Risky: SMEs rarely have any securities or high-quality financial data for banks to approve loans. Banks are reluctant to provide unsecured credit, especially since the task of assessing the creditworthiness of young companies becomes complex and expensive.

Traditional Credit Scoring is Linear: The usual methods of credit scoring don’t favour SMEs. They are based on a highly selective set of data points, which do not include other valuable and non-accounting data.

Closing of Local Branches or Bank Consolidation: In 2020 alone, 368 bank branches were closed in the UK. Between March 2020 and March 2021, 3,672 branches were closed by US banks, out of which only 995 were reopened. The closure of banks has had an adverse impact on SME lending. This has also affected established relationships between small business owners and bank managers. These managers often offered “soft interventions,” which could help SMEs manage their finances and receive guidance related to business development.

Demand Side Perspective

SMEs face difficulties in accessing tailored banking products. Banks are not ready to address specific pain points of small businesses, related to their market or their business life stage. This includes invoice funding, payroll processing services, corporate multi-currency accounts, and dealing with tax returns. The lack of customised financial plans for SMEs leads to many socio-economic problems as well. For instance, research suggests that tailored financial services are important for the growth of women owned MSMEs. Some of the other pain points are:

Extensive Paperwork: Applying for working capital loans is tedious and time-consuming for SMEs. This could lead to a loss of business opportunities. Front and back-office operations in banks are tailored for retail or corporate, which leads to complex and friction-filled experiences for SMEs.

Funding: The lack of adequate credit history makes banks hesitant to offer loans to start-ups and small businesses. Poor cash flows stop business operations and damages reputation when businesses are unable to pay suppliers and employees on time. SMEs will likely require invoice funding when governments withdraw guaranteed loan programs. But banks are hesitant to step in to fill the need gap.

Late Payments: Payment delays worsen liquidity conditions for SMEs, leading to serious economic implications. This hampers their ability to pay salaries, cover operating costs and pursue growth opportunities. A lot of administrative time is spent in payment processing, chasing payments, and invoicing. This is particularly burdensome for those who don’t have a digital accounts receivable process.

Payroll Processing Services: Due to the various banking systems used by customers and vendors, SMEs face a slow outgoing payments process. Undoubtedly, advancements in the digital payments ecosystem is a boon for businesses. But this also creates additional challenges for small businesses that need to look for the best PSPs and gateways; many of which don’t remain viable for their businesses in the long run.

Creating a Tailored Business Banking experience for SMEs

We believe that technology can create better service models and customer propositions to reduce costs and increase revenues for SMEs and financial providers.The only way to address the challenges faced by SMEs is to offer them a one-stop financial platform ecosystem that seamlessly connects SMEs with a global network of banks and non-banking service providers. Enabling SMEs to manage and tailor all their finances, from one unified hub. Thus via a unified and single easy-to-use service, SMEs would be able to make use of multi-currency business accounts, payroll management system, invoice funding, customised reporting and other business services. With all banking products tailored for their requirements. It’s like a trusted account manager guiding the business owner every step of the way. This leaves them with more time to focus on core business activities. Here are some of the ways the Fyorin platform addresses business needs at the granular level.

Easy Multi-Currency Account Opening

SMEs can open accounts within minutes and transact in 41+ different currencies. They can create multiple virtual IBANs for a smoother reconciliation process, without having to operate multiple bank accounts. Moreover, businesses don’t need to have an existing bank account to open an account with us.

One Time Compliance Process

We enable businesses to skip the time and effort needed for multiple compliance processes across different financial institutions. With a one-time compliance process, they can react swiftly to their business needs.

Cost-Saving Payment Options

With our virtual debit card, companies can conduct their online payments and get rebates. They can create a multi-payment virtual card to cover all recurring online transactions for free.

Automated Payment Approval Workflow

Companies can set up multiple roles and permissions within the system, to automate their payment approval process. The platform also offers streamlined and real-time reconciliation tools across all financial services to increase operational efficiency for SMEs. Partnerships are an important component of our ecosystem. We have built a proven platform by connecting with financial institutions across the world and providing them with an opportunity to expand their profitability potential without increasing their risk exposure.

At the same time, our in-built machine learning capabilities enable us to create the best pathways for businesses to save costs and enhance profitability at every step of their journey on the platform. Ultimately, Fyorin offers immense value to business owners and banks. We believe that this is the future of business banking. Sign-up today to get started.

Fyorin, your financial partner

Fyorin, a financial operations platform for digital businesses, automates and monetizes the movement of money, making financial operations smoother, faster and more efficient. The platform eliminates 90% of manual work, allowing businesses to connect with their preferred accounting platform to automate receivables and payables.