The world economy has experienced a chasm between traditional banks and SME clients looking for more flexible, agile, and bespoke services in recent years. This has led to a growing number of banks offering commercial banking experience to make sure small businesses get the features larger companies receive.
The need for accessible commercial banking is long overdue, and a gap is being revealed for banks to fill.
Foreign exchange for SMEs
SMEs account for around 95% of the world’s businesses. Yet, some banks have somehow underserviced and overlooked this market segment. Reasons for this include regulatory to legacy issues, but it all boils down to SMEs often being regarded as too small to be worth the resources of a big bank.
Thus, FX has become a part of SME banking mishandled for years. Banks usually won’t offer FX risk advice, even though many small business owners only have limited knowledge of the risks they face. Small businesses would need to find ways of paying suppliers abroad and receiving payments, typically at a high cost.
It’s difficult to justify this mismanagement in a globalized world where very few companies operate using a single currency.
These issues are also aggravated by the “one size fits all approach” some banks use to accomplish international payments. Without a proper solution customized to a customer’s exact needs, businesses are forced to use services that were not designed for them. This leads to high transaction fees and payments systems offering several processing days.
SMEs need a commercial bank account with bespoke global features, combined with a treasury management system that fits the purpose.
Fintech innovation started transforming financial services rapidly, boosting customer experiences and making services quicker and more affordable. These innovations also benefitted the SME banking space, and banks need to consider this if they wish to retain their SME clients.
The handling of payments from booking to settlement and legacy post-execution management involves different suppliers and vendors, creating complex paper trails with inefficient communication flows. Solutions for these problems have been largely unavailable and inaccessible for SMEs.
Most hedging programs for FX risk management were limited to offering analytical outlooks, ranging from three to six months, because of a lack of connectivity and visibility. This limited SMEs ’ capability to manage their FX risk strategies.
Similarly, commercial banking features like buying and selling currencies, effective risk and hedging management, cash flow management, international multi-currency bank accounts, and prompt payments all in one place are no longer restricted to a handful of big corporations.
SMEs are finally getting the services they deserve
More experienced banks can provide SMEs with commercial banking solutions. SMEs are now finally getting the level of attention they deserve. FX is just one of the many areas offered today to offer cheaper, smarter, and more efficient services to their customers. Innovative banks are setting the customer experience standards in all areas of banking, and it’s time for SMEs to reap the benefits.