SME Cash Management – How Open Banking helps banks to better serve their SME clients

Traditionally, banks focus on 2 main customer segments – retail customers and large corporates while services to small – medium enterprises (SMEs) are lagging behind. The SME sector is heterogeneous by nature in terms of size, maturity, and types of businesses making it more difficult for banks to categorize and standardize SME services. For example a self-employed architect or a small chain of cafes present different risk to the bank while also having different financial management needs. As a result, in some cases, SMEs are rather treated like a retail customer meaning a full range of their needs is not taken into account by the banks.

With the growing competition from Fintechs and neobanks , which have already adopted customer centric approach, traditional banks are forced to look more closely at the SME needs beyond traditional banking services. These needs include tasks such as invoicing customers and getting paid, paying suppliers, accounting etc. In addition, customer needs (e.g. accelerated digitalisation or strained cash positions due to covid-19) and expectations (e.g. being serviced anytime anywhere) are changing and banks need to adjust to stay relevant to this important customer segment as the SME sectors accounts for over 90% of global businesses.

The Power of Open Banking

Luckily licensed Open Banking providers such as Worldline can help banks to better service their existing SME clients and attract new customers by provided value-added services on top of banking data.

Once SME granted Open Banking provider with an access to all their company bank accounts, the Open Banking provider can help banks to analyse SME overall financial situation, identify existing loans or payment patterns and calculate credit risk.

In addition, Open Banking providers can play an important role in SME business financial management by

-        Providing a real time extract of their bank accounts with clean and categorised transactional data that can be imported automatically to the accounting software;

-        Showing an overview of SME income and expenses using different categories;

-        Advising the SME to apply for additional financing based on cashflow prediction results using bank’s financing products;

-        Allowing SMEs to easily move funds between their banks without leaving the banking portal of the beneficiary bank;

-        Helping SMEs to pay their suppliers in a secure and cost-efficient way by submitting a bulk payment file directly to the bank without the need to implement costly SWIFT connectivity;

-        Allowing clients of the SME to pay invoices using their bank account thus reducing credit card fees;

Even though Open Banking providers (Worldline included) can significantly help banks to improve banks’ SME offering, banks in return need to improve quality of PSD2 implementation for business accounts by reducing strong customer authentication (SCA) friction, implementing SCA exemptions envisioned by PSD2 and widely supporting bulk payments for all payment products (not only standard SEPA payments but also Instant payments and cross border payments).

Learn more about Worldline's Open Banking solutions.

How Worldline can help

Worldline created an integration layer on top of the different banks’ PSD2 APIs by unifying the different API formats and flows (one API to all banks). With one integration, accounting software providers and banks will be able to access more than 3.500 banks across 21 European countries. The Worldline API provides standardised account information in real -time and allows to initiate single and bulk payments, including Instant SEPA payments. Banks can also benefit from a cash management solution designed especially for SME clients and fully integrated into Worldline’s banking offering.