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Transaction banks aren’t keeping up with small businesses

Capgemini’s latest world payments report should make transaction banks sit up and take notice. There is a lot of dissatisfaction among smaller clients with the payment services they are offered.

Photo: iStock

Small and medium-sized businesses (SMBs) have always been a less profitable customer segment for banks than either retail customers or large corporates. This is down to the degree of specialization required to service such a disparate group. Many of these enterprises suffer from cash-flow inefficiencies and long conversion cycles, both of which have negative implications for liquidity.

Nearly 80% of bank executives surveyed for Capgemini’s ‘Winning with SMBs’ report acknowledged that small businesses have problems with inefficient invoice reconciliation.

Alternative payment providers have partnered with these SaaS providers to deliver a single window option – and this is where dissatisfaction may become more pronounced
David Rego, Standard Chartered

Financial institutions have devoted a lot of – at least public relations – resources to becoming more inclusive in recent years, but that doesn’t necessarily mean that small-business banking services have improved.

The report notes that 44% of the SMBs surveyed were dissatisfied with their banking relationships and that twice as many were considering switching to services from challenger banks and alternative providers.

Anirban Bose, financial services strategic business unit chief executive and group executive board member at Capgemini, suggests that banks and payment service providers need to innovate their front-end business-to-consumer (B2C) payment capabilities and evolve their back-office payment chains.