Thanks to the weight of SMEs across the economy as a whole – over half of the private sector is made up by small businesses, according to one report by professional services company EY – a new wave of fintech innovation is aiming for the smaller end of the enterprise market.
Fintech startups and more established banking players are increasingly creating niche products aimed at small businesses, which can be used either with or without signing up for a traditional all-purpose banks account – a trend that's freeing up SMEs to pick and choose exactly the services they need from their preferred providers.
Numerous challenger and app-based banks continue to launch suites of banking services aimed at small customers while others are concentrating on bringing innovation to bear purely on specific segments of banking services.
Take small-business lending, for example – an area where small businesses have been crying out for change. Better sources of data and increased use of analytics have allowed lenders to become far more responsive to the small business segment through capabilities such as automated underwriting.
Other fintech companies have created online platforms to bring together diverse sources of funding for smaller businesses, automatically matching businesses with the diverse lenders and types of loans that suit their needs. The rise of peer-to-peer online platforms is also continuing to open up new ways for small companies to secure financing.
With these innovations, borrowing is becoming less of a pain point for small and medium-sized organisations.
Cash flow remains another area where companies are working to bring innovation to traditional SME financial services.
Managing cash flow remains a bugbear for smaller companies, and so presents an opportunity for financial services providers that can use fintech to ease the process.
Among the fintech innovations now coming online are cash flow management tools that integrate with existing accounts to identify potential risks and even predict profit levels. SME finance company Wave, for example, recently created a new cash flow product in partnership with Visa, bringing the latter's push payments into Wave's accounting software, allowing SMEs to access their earnings faster.
Open banking is another innovative trend that has the potential to transform banking for smaller business.
By opening up their financial data to third party providers, SMEs will be able to access a whole raft of new services. For example, analysing their outgoings and invoices to create unique breakdowns, not only of how the business has performed historically, but which also highlight upcoming challenges and likely spending patterns.
Open banking, along with the growing keenness of banks, fintechs and finance software companies to expose their APIs to third parties means small businesses are increasingly able to automate bookkeeping, automatically reconciling transactions based on what's coming into their bank account, manually added transactions or existing invoices.
Fintech innovation is being brought to bear on overseas payments. Traditionally, doing business with partners and customers across borders has proved both cumbersome and slow for SMEs. Thankfully, a new generation of cross-border payment solutions have sprung up: ePayments, for example, is easing the burdens associated with doing business abroad, allowing small organisations to send and receive money quickly.
Of course, general technology trends are also being adopted within fintech, and will increasingly come to impact small businesses. Artificial intelligence and machine learning, for example, will be used to govern financial institutions' relationships with their customers, making doing business easier for smaller organisations, and allowing financial companies to build more personalised services for their SME customers.
Small business banking has traditionally fallen behind consumer offerings with the speed, ease and range of what was offered to customers. Thanks to a new generation of fintech products, small businesses' financial services are forging ahead.