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Digitise and GrowFive ways to get the most from your SME banking business

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Efma headquarters10, Boulevard Haussmann75009 Paris, France

Tel: +33 1 47 42 52 72Fax: +33 1 47 42 56 76

For general enquiries: [email protected] www.efma.com

Digitise and Grow: Five ways to get the most from your SME banking business is one of a series of Digest publications from Efma, examining a range of topics that are having a significant impact on the financial services industry. This Efma Digest provides a collection of insights on banking services for small and medium-sized enterprises (SMEs), with case studies that highlight related initiatives in the industry and observations from bankers that work closely with SMEs.

Compiled by:

Boris PlantierContent Manager, [email protected]

Images from www.istockphoto.com

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ForewordBanks have long taken an ambivalent stance towards small and medium-sized enterprises (SMEs), but this is beginning to change. It is reported that, on average, small businesses contribute around 12% of total revenues to European banks per year – a significant income pool, which is expected to grow in the coming years. With this in mind, banks realise that if they can offer SMEs more of the services they need, they can reap the rewards. What’s clear is that SME businesses have a large appetite for digital services. These often tech-savvy firms want to be able to conduct their banking and access all manner of services online. Experts predict that 90% of the transactions by small and medium enterprises will be carried out through digital channels by 2020. While some banks are already well on their way to meeting the needs of their SME clients, others have a great deal of progress to make. In this Efma Digest, we highlight some of the key areas banks need to focus on if they are to win and retain business from SME clients. Split into six parts, we look at why digital is such a top priority for banks, what areas SME businesses particularly want to be digitised, and how banks can boost loyalty by offering value-added services that will help their clients navigate the hurdles associated with such starting out from scratch. In part four we deliver the promise of the publication’s title, and identify five ways that banks can get the most from their SME business. This is backed up with in-practice examples from some of the most pioneering financial services organisations operating in the SME market today. We also look at how things are expected to evolve in the future. What will be the role of physical branches? And how will new players impact the market? Drawing insight from recent research, we answer these questions and more. I hope you find this a valuable resource.

Vincent Bastid CEO, Efma

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Small and medium-sized enterprises remain one of the main areas of focus for the growth of the European economy. Data from the European Commission shows that they create two out of every three jobs, and provide 60% of GDP in Europe

A top priority for banks

PART ONE

For a long time, many banks regarded the SME market as unprofitable and costly to serve – a segment they’re obliged to service, rather than as an attractive business in its own right. But perceptions have changed, and most banks now see this segment as a huge opportunity for them to increase their profits. A 2015 report by Efma and Axis Corporate, Next Generation SME Banking: The future of SME revenue growth opportunity in the digitalization era, found that 80% of European banks consider SMEs as a segment for potential growth over the next five years. If we break this figure down, 5% place it as their main strategic focal point, while for 35% it is among their three most important priorities.

European banks report that small businesses contribute on average around 12% of total revenues to their organisation per year, and make up 10% their client base. What’s more is that both of these areas show promising signs of growth. The Efma and Axis

Corporate report indicates that most European banks forecast an increase in their SME client segment over the next three years, although it cautions that the path to success may not be easy: previously, credit refusal and the loss of trust in the financial institutions by SMEs have resulted in this segment seeking alternative players such as crowdfunding platforms and other non-traditional and non-bank lenders. The regional factor plays a significant role in this data too, since the growth rate of companies in each country has a direct impact on this forecast made by the banks.

Banks can do more to better serve this segment, then. According to the Efma and Axis Corporate report, 70% of the banks surveyed assign up to 10% of their staff to rendering services specific to SMEs. There were quite a few cases where the same employees manage the services provided to SMEs and to individuals; however the trend is changing towards a segment-related model.

20%5%

35%

40%

80%

80% of respondantsconsider SME growthstrategy as a topfive priority

5% top priority35% top three priority40% top five priority20% top 10 priority

The SME opportunityEuropean banks consider SMEs as a segment for potential growth

Source: Efma and Axis Corporate report, Next Generation SME Banking: The future of SME revenue growth opportunity in the digitalization era, 2015

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SME SUMMIT

Milan23 –24 MARCH

#EfmaSME17

ENOUGH TALK ABOUT A NEW ERA IN FINANCIAL SERVICES, IT’S TIME TO GET BIG IN SMALL BUSINESS BANKING

Attend the SME Summit learn how to capitalise on the significant new opportunities.

The Summit will focus on a number of hot topics which are front of mind for SMEs today, including: ‘Clash of clans’: traditional business banks vs. the newcomers

SME customers journey 2.0

Best new strategies to improve SME acquisition

The role of digital transformation in SME banking

Big data, analytics, IoT and AI in SME Banking

How to achieve successful partnerships between banks and fintechs

Attendees will benefit from a number of new features and they will get to hear from a number of highly regarded SMEs who will discuss their real needs and expectations from banks.

Join us on the evening of the first conference day, to recognize the best players and the best apps in the SME community! Take also the chance to test the apps through interactive demos, during the new Innovillage exhibition.More info on www.efma.com/smeawards

DON’T MISS THE SME APPSBANK AWARDS CEREMONY

Stefan Andersson Head of Business Banking Nordea Bank Sweden

Pietro Candela Head of Alipay Italy, Spain& Greece Alibaba GroupItaly

Erik Van Den Eynden Head of Midcorporates & Institutionals Clients ING Belgium

Esra Kivrak SEVP SME BankingGaranti Bank Turkey

Manuel Baldasano Global Head Retail Business Banking HSBC UK

Malgorzata Szturmowicz Board member, CFO Idea Bank Poland

Giuseppe Taibi Group CMO Alliance Bank Malaysia

Mahdi Kilani EVP Head of Business Banking Abu Dhabi Islamic Bank UAE

www.efma.com/sme17

Digitise and Grow Five ways to get the most from your SME banking business

February 2017

Efma is a global non-profit organisation, established in 1971 by banks and insurance companies, that facilitates networking between decision-makers. It provides quality insights to help banks and insurance companies make the right decisions to foster innovation and drive their transformation. Over 3,300 brands in 130 countries are Efma members.

Headquarters in Paris. Offices in London, Brussels, Barcelona, Stockholm, Bratislava, Dubai, Mumbai and Singapore.

Learn more www.efma.com

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