FinTech vs. European Financial Institutions

Who’s Really Serving SME’s?

Mobile-first payments, banking apps, currency exchanges, investment apps, and myriad of other digital banking services have changed the way the world views and interacts with currency. These solutions are often driven by FinTech organizations rather than established, traditional banking institutions.

The European Union’s Second Payment Services Directive (PSD2) has been driving change and innovation in the payments industry. But the rise of an “everything remote” (remote working, shopping, learning) mentality, driven by the COVID-19 pandemic restrictions and ensuing behavioral shifts — including those pushed by governments, such as contactless payments — has substantially accelerated the adoption of digital financial services.

Safety, convenience, and (almost) instant availability are now even more essential in people’s daily lives, creating fertile ground for digital financial services adoption and innovations in that space — and FinTech start-ups have a leading role to play. With an overall year-to-year growth of 25% in the number of FinTech startups1, including in EMEA, the growth of FinTech shows no signs of plateauing.

FinTech solutions aiming to address stress points at the individual transactional level account for most of the innovation, but there is a significant opportunity for these companies to invest in the small and medium business (SME) sector. There are more than 22 million SMEs in Europe2, and they are the largest private employers across the territory (est. 83.8 million people employed by SMEs in the region)3 making them a vital engine for growth across the continent.

With the rise of Fintech and the disruptive potential it offers, it is time to finally provide better banking and financial solutions to SMEs. But this can only happen if marketers and insight experts bear in mind three key observations from the current situation and build better solutions for SMEs:

#1: Understand Your Customers

Administrative burdens, regulatory obstacles, payment delays, and access to finance are four major areas that pose problems for SMEs. Business owners, decision-makers and their employees continue to struggle with the complexity and snails-pace style of big banks. They need simple, transparent, fast solutions to operate efficiently and avoid unnecessary stress.

Much of the reliance on, and resultant growth of FinTech companies, can be attributed to their ability to provide exactly that to SME’s. While traditional banks tend to focus on products first, with the intent to heavily market themselves afterwards, FinTech companies benefit from their ground-level analysis of the struggles that SME’s face. This affords them a unique point of view and allows them to offer solutions that are tailored to the exact issues at hand.

The people behind FinTech businesses often have firsthand experience in being underserved by traditional financial institutions, and therefore understand intimately SME business owners’ and stakeholders’ frustrations.

Combined with a high level of maneuverability and the ability to innovate and get to market quicker, FinTech companies are in the best position to disrupt the established market.

So, what’s the takeaway the rise of FinTech provides?

From the conception to execution, be truly customer centric.

#2: Be Short, Sweet, and to the Point

Access to financing, delayed payments, and administrative burdens are all examples of disruptions in timing for SME’s looking to interact with traditional finance. In the traditional financial services sector, lending products and cashflow related products (i.e., data finance, invoice financing, trade finance products) are available, yet they have not solved the SME financing gap. Why? Because these avenues ignore the speed of modern business.

Many SME’s operate on strict time schedules, and do not have the luxury of waiting for antiquated financial services to catch up to them. With the increase in easy and quick access to new financial services taken to the market by new players, SME’s can work with businesses that value speed and efficiency as much as they do. Many FinTech businesses operate on the same type of inflexible timetable as SME’s and their solutions take less time to integrate and develop. From the point of view of SMEs, speed is not just a great perk, but an indispensable aspect of their business. One that needs to be shared by their partners, including those looking to help them market and deliver on their brand promise.

#3 Support the Digital Transformation

We mentioned in a previous article that upwards of 75% of B2B decision making could be led by GenX/GenY by 2025. These Digital Natives joining SMEs will further accelerate and reinforce the digital transformation of these organizations, and they will naturally tend to look for alternative solutions to the existing ones provided by the established institutions, tapping into the growing offer of FinTech.

GenX and GenY are characterized largely by their reluctance to work with or for brands that do not share the same values as them. As they encounter the same obstacles that previous brand leaders did when trying to interface with financial services, where do you think they will turn? To big banks? Or to the little guy who knows exactly what they’re going through? Our money’s on the latter. The digitization that will be reinforced by this Digital Native workforce at the helm of SMEs, will have implications on their choice of financial services providers. They’ll ease these tensions by relying more on highly technologically innovative solutions, rather than trying to restructure or fix decaying, outdated infrastructure.

Coming Out on Top

So, ultimately, growing and maintaining strong SME client base necessitates an entirely new outlook on how to serve them. Business as usual won’t cut it. Keep the customer at the center of everything you do, do it fast, and keep track of the new generation of leaders. These three aspects have helped FinTech companies become indispensable partners to the new generation of SME’s, but also have huge implications in how marketers should envision their role over the coming years. Marketing partners that look to provide these benefits, and offer solutions tailored to fit the SME market, can look to the future with confidence rather than apprehension.

1 Boston Consulting Group “The FinTech Control Tower”
2 Statista: Share of enterprise sizes in the non-financial business economy in the European Union (EU27) countries in 2020
3 Statista: Number of people employed by small and medium-sized enterprises (SMEs) in the European Union (EU27) from 2008 to 2021, by enterprise size