Small and medium-sized enterprises present a unique opportunity for banks looking to tap into new sources of profit, collect new data, and build longer-term customer relationships. Seow-Chien Chew, a partner in Bain's Financial Services practice, shares how banks can provide value-added services to small business ecosystems that will be mutually beneficial.
Read the Bain Brief: Small Business Ecosystems—Banks' Next Challenge
Read the transcipt below.
SEOW-CHIEN CHEW: If you think about small businesses—SMEs—and a lot of the day-to-day issues that they're grappling with in terms of growing the business and running the business, the last thing they want to do is to deal with some of the administrative issues that the business has to deal with. And so here's a unique opportunity where the banks can actually play a role in terms of providing an integrated solution to the SMEs in solving some of the day-to-day admin and support pain points that they have, for example, payroll, payroll services, or even accounting services.
And the benefit for the banks in terms of doing this is that they can build much stronger customer relationships in providing a full solution to the SMEs, and by doing that, really build longer term sticky customer relationships with the SMEs. And to do that, they also actually are able to tap into new sources of profit pools by providing these new businesses. And the data that they collect when they provide these services also allow them to actually build much better, deeper customer understanding that allow them to then offer new solutions to the SMEs.
What the banks need to think about as they want—as they look to provide these new business services is to pick specific themes of verticals that they can differentiate on. So for example, picking an industry vertical, let's say, with the medical professionals, so with general practitioners or doctors who own their own clinics, can banks provide a full suite of solution for these types of customers?
Or doing something at a different—at a life stage for the SME, so let's say when the SME is thinking about going regional and expanding their business, can the banks come in to actually help them take their businesses overseas? So as the banks think about building these new businesses, they also need to look at what are the areas that they actually have some core skills and core propositions and other areas where they might want to think about partnering with ecosystem partners to be able to provide the full suite of solutions to the SMEs.
There's a big world beyond core banking services. But do banks have the credibility and the right partners?