Saturday, 22 January, 2022

Rethinking SME Digitization in Bangladesh (part-III)

Md. Kafi Khan

New viable model to serve users

As far as Bangladesh is concerned, new viable business models are needed, where there will be biolistic product strategies, SME banking should have owned the customers and will be a product provider i.e. a combination of both a ‘marketplace’ with customer base. There are new banks emerging now that have chosen not to provide transactional accounts but rather serve the life cycle needs of a business. They provide solutions to their customers’ challenges rather than features.

It is needed to have support from heavy technology company rapidly proliferating over the whole country. Digital SME lending platform with an office in central hub will operate aiming to foster services and to create million jobs in the country. In this model and system, the fintech platform will go for small and medium-sized business registered online for loans and will receive that credit within 24 hours after application. This process also helps SMEs build a credit history often for the first time in the country.

Another interesting feature may be considered for the incumbents in the market to offer digitized banking solutions and quick responses supplemented with field or market-based specialists who have personal relationships with their customers and differentiated higher levels of service. Again, they can provide cash flow lending and loans starting with a minimum amount. Their emphasis may be again on the specific needs of SMEs which want to develop and grow their business with less of a focus on historic track records. In this way, by the support of the platform, may have experience of huge growth loan book at any time.

It is expected that the next generation of business banks are making deliberate decisions regarding their role in the financial service value chain as well as their business models and products. And both of these organizations have chosen to specialize in funding growth through lending. There are multiple growth and innovation opportunities in SME banking in Bangladesh. It is needed to see new iterations focusing on seamless workflows and product level innovation, not just on mobile phones. There is also a return in some cases to traditional style valued service offerings. SME owners and entrepreneurs want time to focus on their business at whatever stage of development in which they find themselves.

Fintech banks and financial service providers who are successful are providing support for their customers extremely efficiently and transforming fragmented experiences into frictionless, cohesive support. It is clear that the newest entrants are intent on moving away from merely selling to serve customer needs by removing obstacles, mainly administration, and offering solutions to SMEs at the stage of their evolution they have reached. The banks mentioned to provide functions that ‘do stuff’ rather than having multiple hardly used features and solve the problems because they understand their customer base. Creating emotional connectivity to create customer loyalty and meaningful support for growth and aspirations is the next great challenge. SMEs are all unique and have an enormous number of tasks to be completed that can be solved by intelligent development and heightened connectivity. It’s not enough to focus on product features and technology to ensure successful digital transformation. In the new world heightened by months of Covid-related lockdown, success is going to be measured by delivering remarkable experiences and outstanding frictionless service. 

SME banking landscape

The financial service industry is undergoing a major period of evolution. While banks continue to provide the same financial services they did 20 years ago, current accounts, debit cards, and loans, the real evolution has taken in place in how these services are delivered. Digital services and methods of delivery are now firmly front and centre oriented. Banks exist entirely within apps on smartphones. Customers rarely step into physical bank branches anymore. These trends were present during the pre-Covid period and have been supercharged by the pandemic. Along with that evolution in delivery, expectations about what a financial institution can and should offer have also changed. Business owners are choosing banks with the expectation that they will receive more than mere money management tools. Small businesses need help not just with financial needs, but with whole-of-business needs.

2020 has been a critical time for banks to rethink their business models and expand their digital offerings. So, the next evolution of SME banking is needed in the country’s context. Across the board, efforts should take more ways to expand and digitize services.

Embryonic service model

Service models, while still maintain core banking services, have evolved and are increasingly centred around digital service offerings. This evolution is happening very quickly. Nearly every banker mentioning the pace at which everything is turning digital, especially with the pandemic proving to be a major catalyst. With the reframed strong foundation will accelerate the digitization of more of our services, enabling our customers to be in control of their finances and spend more time doing what they love running their businesses. It is immediately needed to invest required amount in technology and digital transformation to make banking simpler, safer, and more personalized for customers. In fact, business customers are innovating and adapting at pace and the Covid-19 pandemic has been an additional catalyst for that. We should keep in mind never to stop learning, that’s extremely important. That means sometimes it has to look beyond the borders of the sector. For example, inspired by the telecom sector, where it has developed a payment proposition, clients can choose between more payment packages.

New digital initiatives needed for SMEs to develop

Banks are needed to introduce impressive new offerings; needed to create a digital funding platform expressly for SMEs. It may develop a WhatsApp-based payment channel. Competition, customer expectations, and regulations are spurring institutions needed to innovate and offer better tools to their customers. If any bank isn’t providing the latest and best tech to its customers, there is someone else in the market who will. Simultaneously, there is the need to use customized tech-based architect to adopt rapidly process to escalation emergency credit requests. Changing regulation leads to the growing importance of beyond banking services as financial third-party providers are entering the SME and corporate finance market. Thus, it is needed intending approach to enhance value-added services to be able to keep existing customers and acquire new clients similarly to how third-party providers are trying to acquire our customers. And, of course, there is a necessity to develop insights from knowing small business owners, who tell their need of digital bank that can help them stay on top of their finances and understand what actions to take based on what their finances are telling them.


The writer is the Company Secretary, City Bank Limited