to traditional banking Small Businesses Look for Other Financial Solutions

Nearly all firms in the country appear to be small businesses based on reports from the U.S. Small Business Association. One would think that getting straightforward access to financial services would be easy, given the magnitude. Nevertheless, that isn't always the situation. In fact, 89% of small businesses feel their major banks are falling short when accommodating their needs, and are resorting to other payments technology providers for assistance, Capgemini's 2022 World Payments Report showed. This is because these alternative lenders often have more flexible terms and underwriting criteria while charging only slightly more in interest. This figure is indicative of banks' increased willingness to meet the needs of their SME customers, driven by the current economic environment, capital expenses, and the introduction of new standards such as ISO 20022 which, with its abundance of data, provides banks with multiple opportunities. That is to say, banks should seize this opportunity to enhance the exposure of their assets to an almost unexplored market. They could provide SMEs with multiple working capital alternatives that are much more accessible. Banks should go beyond term loans and standard credit lines, which involve considerable paperwork, time, and effort. Instead, they should provide greater flexibility throughout the payment process – something akin to the buy now, pay later (BNPL) model that many small businesses use. Compared to other providers, banks are viewed as far more dependable sources of lending services. This is due to the fact that, because of their track record and customer base, they are more commonly trusted. As well as having an understanding of standard regulations, banks usually possess more dependable capital and income resources, which is something that alternative providers still have difficulty with. Bigger FIs can quickly meet the needs of SMEs while startup enterprises ponder the potential impacts of legislation, fluctuations in the market, and financing problems. Banks can develop this emerging sector and open up an extra stream of income by bringing in installment plans. Furthermore, they would be in a better situation to maintain their connection to SME customers if they transition to more cutting-edge options that have a consumer-like user experience. Banks can help SMEs deal with the limited capital flow they often encounter by offering a secure loan option that protects the bank while saving the businesses money. Thanks to updated financial choices, the bond between banks and SMEs can be deepened by providing the SMEs a superior customer experience with the convenience of retail banking. The general contractor needs new equipment to improve building site performance. Rather than paying for it all upfront or obtaining a loan, they can inform their bank of the transaction. Depending on its decision-making and risk management structure, the bank could offer the owner installment payments for the equipment. Banks could extend this offer beyond the sale, providing general contractors as well as other small to medium-sized business owners with more financial flexibility. In a manner similar to how buy-now-pay-later programs are advantageous for customers, SMEs no longer have to delay larger investments that can support their success and longevity. What steps can commercial banks take to assist SMBs in making installment payments? Once again, modernizing the infrastructure is key. By partnering with payment technology companies, banks can implement the necessary changes to satisfy the installment needs of small & medium enterprises. In selecting the right paytech provider, banks must consider whether the partner can meet their installment objectives without negatively impacting other aspects of the business. Additionally, banks should investigate the provider's ability to offer customization, cloud technology, and system adaptability. FIs have an extraordinary opportunity to generate transaction revenue, since the installment market is still in its infancy and does not yet have an unmistakable front-runner for small business customers. To embark on their journey to a larger segment of the market, all that's needed is the ideal technology. In the end, it will be a combination of a fast decision-making and credit approval process with an unparalleled customer experience that will deter SME customers from seeking out other providers.

Source: https://medium.com/@markelitics2022/smes-seek-alternatives-00ce430fbc35?source=rss------fintech-5