SME banking – are payments an untapped digital opportunity or a threat?

Consumers get the lion’s share of attention when it comes to banking, both from within the industry, in the media and governments. Whether it’s discussing open banking, digital banking, fintech opportunities or even Generative AI, the focus both inside and outside banks has been on the consumer. However, RFI Global’s data shows that a quiet revolution has been going on in the SME sector. Historically, 1 in 10 SMEs have been looking to switch their main bank in the next 12 months. Since 2023 that has increased significantly. In the UK it is now 1 in 4, in Hong Kong, it is 1 in 3 and in the US, it is 1 in 5.

There is no doubt the pandemic is one of the drivers of this. Businesses were forced to adapt to a digital world to survive. Consumers also did this, but crucially, RFI data shows that in Western markets consumers have often reverted to pre-pandemic behaviour, the same isn’t true of SMEs.

SMEs discovered digital banking and digital payments, and their preferences are here to stay. It is also true that whether it is open banking, digital innovation or cross-border payments, what is often nice to have for consumers is a must-have for SME owners. The friction that SME owners have previously experienced with traditional banks is far greater than that experienced by consumers. This has created an opportunity for fintechs, and we now see this playing out further in the drivers of switching intentions.

Why are SME’s switching banks?

Not only has SME switching intention increased, but the reasons behind it have changed too. Previously SMEs switched for better pricing, fees or for operational reasons. Now, across every market, we see the no. 1 driver as looking for better digital solutions. In the UK better online banking or better mobile banking are the no 1 and 2 drivers for switching.

So, if switching intention is high and driven by the need for better digital solutions, what are the current pain points for SMEs? The no. 1 point of dissatisfaction is a lack of innovation in digital banking followed by a lack of transparency. When asked to define what they mean by lack of innovation, SMEs cite the ability to make payments to who they want, from where they want, as the no. 1 issue.

This is music to the ears of Surendra Chaplot, Global Head of Product, at Wise. He says “Where SMEs – just like consumers – want speed and ease, they also want convenience. SMEs value their time.” Time is critical for SME owners. Surendra says, “Price and speed matter for them but they really care about how much time they will save.” At Wise, he states that they look at what the problem is and then work out how to provide a solution, and the pain of cross-border payments for SME owners is a significant pain point. While the focus is on saving SME owners’ time, which the SMEs value, it is also on providing transparency. This is a second key pain point for SME owners.

Surendra goes on to talk about the importance of transparency overall – transparency of fees, transparency of product, transparency of decision making and the overall importance of transparency in building trust with a new brand.


Watch the podcast: How are fintechs disrupting the money transfer market?.


This trust imperative is a key point that all recent guests on RFI’s Banking Uncovered podcast have agreed on including Surendra, Rupert Lee Browne, Chairman and founder of Caxton and Richard Davies CEO of Allica: the need for transparency in banking to build trust within the SME community. While banks currently retain a significant lead in trust, if fintechs can continue to provide transparency, then they will increasingly eat away at the banks’ dominance in the sector.  


Watch the podcast: The importance of trust, culture and customer-centricity

So, what can banks do?

They need to focus on SME payments. SMEs look for speed, ease and convenience and banks need to address the friction and lack of transparency around SME payments both domestically and cross-border. Banks need to address both these issues to defend their share. RFI data shows that just in the UK, SMEs who use fintechs for cross-border payments are six times more likely to switch their main banking provider in the next 12 months, so the threat is significant.


At the end of the day, SME switching intention is increasing in all markets and the main driver is a lack of satisfaction with digital banking innovation – defined as an inability to make payments easily. In the UK, this lack of satisfaction increased over the last 3 years from 40% of SMEs that are dissatisfied to now over 50%.


Specifically, in the UK, 3 in 5 SMEs are not satisfied with their current provider and that is a concern for banks and an opportunity for fintechs. As Surendra says, “SMEs want to not worry about payments. They want to save time.” With fintechs like Caxtons and Wise looking to address this by providing transparent, easy, fast and convenient solutions to SME payment pain points, banks must address these SME concerns or forfeit overall SME banking market share.


Listen to our Banking Uncovered podcasts here or get in touch to find out more about the survey results.

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