But the credit transformation goes beyond speed. The pandemic has brought deep and meaningful changes to the SME landscape, and banks will soon be expected to rethink the way they manage their portfolios. Of the companies that received credit during the crisis, almost a third (29%) are very or extremely concerned about repayment. This is undoubtedly a risk that will have to be managed.
At the same time, there will also be new opportunities to explore while a greater number of SMEs entered the “decline” phase of their lifecycle during the pandemic than before, only 1% went into the “exit” phase. This suggests that instead of selling, SMEs are trying to adapt and refocus their business in new market conditions. Banks need to shift their focus from short to long-term profitability in order to provide them with the support they need for this transition.
4. Personalization and flexibility
As more and more data becomes available, and as competition from Big Tech puts pressure on their market share, banks will need to create new customer-centric engagement models and products that can deliver more progressive and strategic support and make them a more trusted advisor. For example, augmented relationship managers will become a cost-effective solution to meet clients’ expectations of personalized service with a human touch, but the change will entail more than AI adoption.
Moving beyond traditional segment and data silos will be crucial. Instead of categorizing SMEs based on their turnover or number of employees, banks should place greater focus on where they are in their lifecycle, from conception to growth, maturity, decline and exit. And as part of new segmentation models, getting to the heart of SME behaviors and predicting needs will be critical.
As seen above, the SME lifecycle has been accelerated by the pandemic, yet companies’ needs and expectations change dramatically throughout the journey. It is up to financial services providers to monitor their progress, predict the tools and products they will require each step of the way, and offer them in the most relevant manner.
New purchase models, such as subscriptions, will also become more prominent as the consumer trend of hyper-flexibility seeps into the SME world. Businesses will expect to be able to add and remove financial products from their portfolio seamlessly through integrated corporate or marketplace platforms.