SMEs, and in particular micro and small companies, are an important part of the European economy. The micro and small business segment includes over 25 million companies, with a total turnover of over €10bn, and employs just under 43% of the total number of employees in the European private sector.
Despite the overall size of the segment, these companies have been, up to now, challenging for banks to serve. Due to the small size of these organizations, they are often classified and treated as retail customers. This, coupled with their limited accounting and financial management capabilities, limits their ability to access finance. This is even before considering digitalization and e-commerce limitations due to their small size, limited management bandwidth, and limited resources.
This has left an untapped white space opportunity that is being leveraged by a growing number of new entrants, which are building their propositions based on the most recent technological and regulatory developments. The latter offer the opportunity to lower the cost-to-serve, while addressing some of the needs of these small businesses through new challenges and new data-centric technologies.
Is this a segment and an opportunity lost to banks? Not at all. On the contrary, this is a new space that banks can now also serve profitably based on the same technology and solutions that are being developed by new entrants.
CRIF, directly and through its subsidiaries Strands and CRIF.Digital, supports a number of banks and incumbents within the financial services industry to grow their businesses and address the needs of this micro and small company segment. Propositions like Business Financial Management (BFM), combined with Open Banking data, provide cost-effective ways to expand the financial management capabilities of small companies, while creating new service opportunities for financial services providers. The further integration with analytical solutions for the automated matching of transactions and invoices, a process historically performed manually, provides the ability to perform cash flow forecasting and trigger alerts for specific liquidity positions. This is further helping entrepreneurs and small business owners to manage their businesses and related finances while offering lenders a way to offer funds and manage risk without needing to rely on financial collaterals. Finally, solutions such as CRIF’s Sicurnet Business helps both owners and their stakeholders to monitor and manage the cyber risk exposure connected to their digital presence, allowing the expansion of sales and customer interaction with online channels.
By leveraging the right technological capabilities, the opportunities related to micro and small businesses are no longer lost to banks, which that can now profitably serve their needs and successfully and profitably expand into these segments.