The world’s small- and medium-sized businesses are stressed about managing cash flow, and apparently, their banks aren’t helping enough.
New research from financial software firm Misys uncovers the dissatisfaction of SMEs across North America, Europe and the Middle East when it comes to the services their banks offer to help manage cash flow.
Released last week, the survey pinpointed exactly where SMEs’ needs are not being met by banks. Overall, it appears these businesses feel their banks are a bit behind the times when it comes to banking services.
According to Misys, SMEs are demanding more robust digital banking solutions, and the need is a direct result of their global ambitions.
“The survey highlights the challenge corporates face in managing the complexities of cash, trade and treasury requirements as they expand and work with an increasing number of suppliers, banks and customers around the globe,” said Misys senior banking strategist Alex Kwiatkowski in a statement announcing the research.
Most importantly, the research found, SMEs want streamlined visibility into their global transactions and balances. Researchers found their secondary top priority to be access to secure, efficient payment processing, followed by the need for banking systems to integrate into their trade management systems and existing ERP.
But the majority of SMEs surveyed (62 percent) said that a lack of automated bank processes is a major hurdle to access trade finance and expand their operations globally, a finding that Misys analysts says is a key deterrent to SMEs in accessing trade finance solutions through their banks.
Further, nearly half (45 percent) of SMEs cited the need for online and mobile banking services that can integrate into their ERP and TMS tools.
“Banks have not stepped up to provide the requisite automation, digitization, and multi-bank connectivity tools these corporations need,” Kwiatkowski said. “As a result, we are seeing an increasing loss of market share, particularly in straight lending and supply chain financing to non-bank alternatives.”
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While the future success of the alternative lending market is considered uncertain by some analysts, Misys research found that about one-quarter of SMEs are now accessing their financing needs through both traditional banks and alternative lenders, with 9 percent noting that their dependence on alternative lenders is now greater than it was two years prior.
Misys has been on top of this trend before. Earlier this year, the company released separate research that uncovered how traditional banks across the U.S., EMEA and Asia Pacific are reacting to the growth of the alternative lending market.
The research, published in August, found that three-fourths of traditional banks fear a loss of market share to the incoming competition. Even more (84 percent) said they fear the rising price competition related to their lending products that stems from the emergence of alternative lenders in the industry.
At the time, Misys had pointed to the SME borrowing market in particular.
“Access to finance to SMEs continues to be constrained by lackluster macro-economic performance and continued bank deleveraging,” the report said.
The latest research offers an update on the situation, and suggests that the loss of SME lending market share to alternative lenders is an ongoing trend for today’s traditional financial institutions.
But analysts are also pointing to an opportunity for traditional banks to regain the lead – if they’re willing to pick up the slack in providing digital tools for their small business clients.
“Mid-sized corporations have been less of a focus for banks from a digital services and process automation point of view, but they value working capital efficiency the most,” explained Misys Global Product Manager for FusionBanking Corporate Channels Tim Tyler in a statement.
Misys cited statistics from McKinsey & Company, which concluded that banks can access a share of the $1.85 trillion in annual revenue flowing from businesses with $1 billion in annual revenue or less.
“This represents an attractive market for banks that can digitize and provide mid-sized corporates with a cost-efficient solution to manage all corporate banking functions through a single access point,” Misys said.
Tyler agreed, adding that the new research “highlights that if banks act quickly with more connected corporate banking they can seize the opportunity and compete in a world where non-bank alternatives are here to stay.”