5 minute read 24 Sep 2021

COVID-19 lockdowns have pushed SMEs to rethink the way they do business. This includes reviewing their expectations toward banks.

Belgian banks must act fast to redefine their relationship with SMEs

Authors
Fabien Lorent

EY Belgium Financial Services Digital & Customer Senior Manager

Passionate about innovative digital transformation programs. Entrepreneurial, client-oriented and strategic mindset. Father of two.

Yannick Grecourt

EY Belgium Financial Services Consulting Leader, EY EMEIA Financial Services Digital Service Leader

Innovative leader. Passionate about understanding clients. Curious about new technology. Energized by team success. Married sailor with 2 daughters.

5 minute read 24 Sep 2021

COVID-19 lockdowns have pushed SMEs to rethink the way they do business. This includes reviewing their expectations toward banks.

In brief

  • EY surveyed 5,698 SMEs of over 250 people in 16 countries.
  • Results show that Belgian SMEs borrowed less money than in the rest of the world, turning to their own assets to fulfill treasury needs.
  • Belgian banks need to redefine their relationship with SMEs and come up with a future-proof offering.

While the impact of the pandemic on Belgian Small and Medium Enterprises (SMEs) is lower than elsewhere in the world, the COVID-19 lockdowns have pushed these companies to rethink the way they do business. In this context, EY’s global SME banking survey shows that 40% of Belgian SMEs are considering switching main financial provider. Some of the reasons for this could be the frustration related to the speed of access to credit, and the appetite for progressive offering. There is an urgent need for banks to redefine their relationship with SMEs.

EY surveyed 5,698 SMEs of over 250 people, in 16 countries – including Belgium – around their banking experience and expectations. The study included a series of one-on-one in-depth interviews, out of which nineteen with SMEs and eight with representatives from major banks.

1. Belgian SMEs less impacted by COVID-19 than the rest of the world

SMEs Survey

62%

of Belgian SMEs declare that COVID has had a negative impact

As is the case for most companies in the world, the COVID-19 crisis has had a profound impact on SMEs. The challenges they face are diverse and go from ensuring business recovery to increasing their profitability, margins & revenue or even reconsidering their technology needs and business models.

In Belgium, the total negative impact of COVID-19 on SMEs, is slightly lower (62%) than in the rest of the world (74%), showing better resilience. Still, the pandemic has had a serious impact on their revenue, margins and profit. Surprisingly, 21% of Belgian SMEs declare that COVID has also impacted their brand negatively (VS 14% internationally).

2. SME funding, a missed opportunity

SMEs Survey

23%

of SMEs have borrowed money from banks during COVID period

SMEs view recovery from COVID as a priority. In this regard, Belgian SMEs feel less supported by the government than those located in other countries, with only 38% declaring they received government funding support in our country, against 51% internationally. However, this lack of government support does not mean that they resorted to credit to ensure their survival. Only 23% of SMEs have borrowed money from a bank (against 45% internationally), while 24% chose alternative ways to fulfil their treasury needs such as their own private equity/assets. This is a missed opportunity for Belgian Financial Services providers as they could have reinforced their relationship with SMEs through attractive credit services. Moreover, SMEs shareholders have likely had to reinject money into their businesses instead of investing it via the bank’s private banking channels.

SMEs have stressed out that they believe banks are the right partners to help them out but they are frustrated with the speed of access to credit. There is a segment prepared to pay for a faster service and better advice. Banks might need to redesign the SME customer experience when it comes to funding. This could involve achieving a better segmentation and credit scoring through new technologies such as data crunching or artificial intelligence.

3. What is the servicing model of the future?

SMEs Survey

40%

of Belgian SMEs declare that they are likely to consider switching main financial provider

There is an opportunity for Belgian banks to redefine their relationship with SMEs. They need to come up with digital solutions that not only meet their evolving needs today, but that also help build a long-term profitable partnership. In Belgium, 29% of SMEs still consider banks as the primary source of financing when they need money for their business (against 45% at international level). But banks need to act fast as 40% of Belgian SMEs declare that they are likely to consider switching main financial provider, with 28% considering switching to a Fintech and 32% to a traditional bank.

One explanation of this propensity to switch can be found in the lack of relationship, as 17% of Belgian SMEs declare not having a relationship at all with their primary financial service provider (against 7% at international level) and only 7% mention they have a strong one (against 18% at international level).

First and foremost, the basic services need to be of the highest quality. This goes through:

  • leading-edge digital marketing and engagement strategies;
  • a world-class and frictionless customer experience during onboarding;
  • effective product onboarding that uses data to adapt product offer and to allow for rapid decision-making processes; and
  • integrated and seamless relationship management underpinned by state-of-the-art CRM.

Our research shows that satisfaction levels are solid, but they are arguably coming from a low expectation base, where the similarities between banks are seen to be greater than the differences.

Delivering high-quality basic services requires the bank to ensure frictionless customer journey, supported by data analytics and CRM that allow proactive contacts with SMEs. These techniques must also turn the relationship manager into a central player to elevate the relationship.

4. How prepared are we for the future?

SMEs Survey

29%

of Belgian SMEs, consider themself neither digitally nor financially savvy

In the study, EY explores seven potential ancillary services, looking at SMEs’ interest, willingness to access via a bank and preparedness to pay additional service fees. What the evaluation of the ancillary services and product initiatives has demonstrated is that there is an appetite for progressive offerings that address existing challenges in the business. However the appetite depends on the SME’s size and sector.

Another aspect which has a big impact in terms of SMEs’ expectations towards their bank is the level of digital and financial savviness. Only 15% of Belgian SMEs consider themselves to be both digitally and financially mature (second to last in the study). and 29% of the companies (second in the study) consider themselves neither digital- nor financial-savvy. Out of these 29%, only 4% are willing to pay for additional services around business management functions such as risk, legal or payroll. This proportion, however, raises to 20% within the financial- and digital-savvy SMEs.

SMEs look to improve the way they engage with customers, bringing more efficiency into the business and trying to differentiate against competitors. COVID-19 and its lockdowns have accelerated SMEs’ endeavour to design new ways of doing business, breakdown barriers and overcome resistance to change.

The voice of the SME

Banking experiences and expectations

Download the full report

Newsletters EY Belgium

Subscribe to one of our newsletters and stay up to date of our latest news, insights, events or more. 

Subscribe

Summary

COVID-19 has accelerated SMEs’ need for change. These companies are more inclined to switch financial provider. To remain relevant in the market, banks have to offer them future-proof solutions and they need to do it fast.

About this article

Authors
Fabien Lorent

EY Belgium Financial Services Digital & Customer Senior Manager

Passionate about innovative digital transformation programs. Entrepreneurial, client-oriented and strategic mindset. Father of two.

Yannick Grecourt

EY Belgium Financial Services Consulting Leader, EY EMEIA Financial Services Digital Service Leader

Innovative leader. Passionate about understanding clients. Curious about new technology. Energized by team success. Married sailor with 2 daughters.