Monday, 24 January, 2022

Rethinking SME Digitisation in Bangladesh (part-II)

Md. Kafi Khan

Rethinking SME Digitisation in Bangladesh (part-II)
Md. Kafi Khan

As more companies and the Bangladesh government recognise the critical nature and advantages of connecting the digital skills gap for SMEs, digital training programmers, training and free resources are emerging to meet the challenge. Companies are holding special sessions to develop workers’ digital skills, and in the future, traditional SMEs are required to embrace digitisation with great enthusiasm.

Bangladesh is undergoing a digital transformation. For the next few years, increasing internet connectivity, mobile use, and digital media usage would significantly affect the industry in Bangladesh. Affordable computers and low-cost network connectivity have been supported. The internet has transformed how the Bangladesh economy works, from how the urban population receives knowledge to how farmers produce and sell their crops. The conventional processing, managing, storage, and transporting of objects have undergone a tremendous change due to digitalisation.

As it is negotiating the road to recovery across the globe, SMEs are being created, reopened and renewed. SME’s needs are not only evolving but growing. In their financial partners, business owners are seeking more than just loan providers. They need partners who can provide holistic business services that enable owners to focus on what really matters to their customers. To meet the evolving needs of SME customers, banks are transforming their business models, digitising their offerings and creating ecosystems with a whole range of beyond banking services. These banking transformations, however, do not just happen overnight. With their business clients at the forefront of their efforts, some banks are going it alone. Others are bringing in forward-thinking third parties, like FintechOS, to drastically speed up their digitisation efforts.

Now is looking at the SME banking landscape and, more critically, how banks are becoming digital-first. It has been partnering locally and globally with the FintechOS to bring you insights on the changing SME banking landscape.

Sustenance for SMEs

SME banking have need for taking note of business owners and, most importantly, understanding their stories of hard work, determination and resilience. How does banking support meet the needs of the entrepreneurs should be judged in a prudent manner. Starting a business with a loan from family members or searching for capital to take a business on the next part of its journey – the life of an SME owner is complex and consuming, and each owner, partner or director is passionate, and each business is unique. All these businesses now seek financial products that fit their business needs, not the other way around.

Developments in banking services include fully digital business accounts with superior user experience, data integration and automation, self-service and 24/7 on boarding solutions, and individual business finance solutions needed to build on real-time data as well as modern digital interfaces that integrate with 3rd party business software. The question is who will really be delivering what SMEs require.

True needs of SME’s Vs Life Cycle

To understand the complexity of SME banking, it is helpful to consider the life cycle of a business: Juncture 1: Planning, creativity and ideas – an entrepreneur would generate ideas and insights for their chosen market considering the potential and seeking ideas and feedback from others in the sector and build up reserves and savings for initial investment or in case of delays and setbacks. Juncture 2: Pre-revenue planning and launch – an entrepreneur would involve the launching of the business and the creation of a separate identity and a separation of consumer and business banking. There will need to be establishment of administration for invoicing or payments. Juncture 3: Post-revenue growth– It needs understanding cash flow requirements and managing expenses and seeking support on financial matters. Juncture 4: Expansion – It needs employing staff for the first time and the legal implications, accessing loans and working capital, seeking time-saving automation of finance administration, accounting support and making international payments easy. Juncture 5: Realizing the value and next iteration growth– The greatest challenge for a successful and growing business is raising capital to realise the potential. Also, the business requires succession and exit planning. The business banks or fintechs who understand this life cycle are the ones who have been able to create meaningful and exciting next generation services.

SME banking

Initially, most of the emerging fintechs had a launch and expand strategy which featured a simple current account product with limited features free or low cost, and then premium account features at an additional cost. This is a crowded and competitive market and just to reach feature uniformity takes a lot of growth resources. Digital business banking has become a red ocean with several fintechs active in most global markets, especially European and UK markets, and as such the first mover advantage may have gone. Nevertheless, Tide Bank, for example, has created an efficient all digital and straightforward account opening application with frictionless document upload and free banking. Account opening takes minutes and a debit card is issued on completion of identification. As a business grows and moves into phase 2 and 3 of the life cycle outlined above, account costs are introduced as more sophisticated products are required, including invoicing and accountant package integration. There is phone support again at a cost.

Fast digital on boarding, and mobile apps as well as accounting integrations, are now the new norm and just offering a business bank account with a few digital features may no longer be a differentiating factor. However, great branding and marketing support and a reputation for delivery have to ensure. While not specifically aimed at SME banking, this is another sign of its potential to continue to market disruption.


The writer is the Company Secretary, City Bank Limited