Managing finances as a small business goes beyond mere bookkeeping – it’s about mastering the complexities where late payments, uncertain cash flows and fragmented banking services can make or break a company’s future.
Carl Hasty, CEO and co-founder of CEO at CoBa, is dedicated to helping banks reclaim the revenue they’ve lost to fintechs. Here, Hasty explains why he thinks this is the year SME banking starts to consolidate after years of fragmentation.
Banks have long been the financial backbone of SMEs, but their role is under pressure as fintechs and specialist providers carve away at traditional revenue streams. To remain competitive and relevant, banks must reimagine their SME offerings, leveraging digital capabilities to provide real, tangible value to business customers.
The late payment crisis and how banks can help
Late payments are one of the most persistent challenges for SMEs. In the UK, these delays cost small businesses an average of £22,000 per year, contributing to the closure of approximately 50,000 businesses annually. The impact on cash flow is immense, yet traditional banks have done little to address the issue beyond offering generic overdraft facilities.
By integrating automated invoicing systems, real-time payment tracking, and proactive alerts into their digital banking platforms, banks can help businesses better manage receivables and reduce payment delays. Lloyds Bank is already pioneering this approach, working with CoBa to create a unified digital experience that centralises business financial management, from invoicing to FX and payments.
From transactional to strategic: banks as SME advisors
Businesses today expect intuitive digital interfaces and real-time insights – just as they experience in their personal banking. Yet only 25 per cent of businesses currently prefer using their bank’s online portal for financial visibility. Instead, 41 per cent favour their accounting or ERP system, underscoring the need for deeper integration between banking and business finance tools.
Banks can shift from being transactional service providers to strategic partners by offering predictive analytics and cash flow forecasting tools. By integrating with widely used accounting platforms like Xero and QuickBooks, banks can provide actionable insights tailored to industry-specific challenges, enabling businesses to make informed financial decisions proactively.
The B2B payments battle: why banks must innovate
The global B2B payments market is set to reach $111trillion by 2027, yet banks are increasingly losing ground to fintechs and specialist providers. Sixty per cent of businesses are willing to switch cross-border payment providers – even at a similar or higher cost – if it means accessing better service and technology.
Banks that fail to modernise risk becoming obsolete in key areas such as FX, treasury management, and international payments. Providing automated cash management solutions, real-time FX insights, and seamless multi-currency payments within a unified platform can help banks defend their position in this lucrative space.
Collaboration over competition: The future of SME banking
SMEs don’t want more banking relationships – they want better, consolidated financial experiences. The average SME now operates across four separate bank accounts, a number that is steadily increasing. Meanwhile, 84 per cent of businesses believe that the ability to automatically share financial data with their bank would improve operational efficiency.
Rather than competing with fintechs, banks should collaborate with technology providers that enhance their capabilities. Lloyds Bank’s work with CoBa is a prime example, demonstrating how fintech partnerships can enable banks to create an all-in-one financial hub where businesses manage payments, cash flow, FX and insights in a single interface.
Lloyds has already turned the tables on fintechs, matching their fintech customer service, while also providing more sophisticated services. Less than a year after launching its new FX offering, this winning combo has already helped Lloyds win back customers from Tier 1 rivals and fintechs alike.
How banks can take action
To truly support SMEs and reclaim lost ground, banks should focus on:
- Customised solutions: Move beyond one-size-fits-all services by offering flexible credit lines, tailored payment solutions, and personalised financial insights.
- Seamless integration: Ensure banking platforms connect effortlessly with accounting, ERP, and treasury management systems to improve usability.
- Predictive insights: Provide data-driven recommendations on cash flow, tax deadlines, and financial health to help businesses plan ahead.
- Frictionless experiences: Simplify onboarding, reduce paperwork, and streamline loan approvals to make banking more accessible for SMEs.
- Regular engagement: Empowering bankers with real time data about how their customers are doing, to enable them to proactively check in with SME customers and provide tailored service and ongoing financial education.
The future of SME banking lies in partnership, innovation and customer-centricity. By focusing on real business pain points – rather than merely maintaining legacy products -banks can cement their role as trusted, indispensable advisors to the SME community.
Banks still have huge advantages. If banks can create the same kind of customer experiences the fintechs have pioneered, they can stop playing defence and get back on the offensive. If your bank could operate as your financial OS, with all the integrated tools and financial services you need, why would you choose to work with anyone else?
The post Bridging the Gap: How Banks Can Address SME Financial Challenges appeared first on The Fintech Times.
