The London Stock Exchange Group’s annual report states that SMEs account for 60% of all private sector employment, generate over 50% of all private sector turnover, and they “drive growth, innovation and job creation and are the lifeblood of the British economy.” The British Business Bank also stated there is a need for more focus on making finance available for SMEs.
Challenger and specialist banks over the past six years or so has seen the launch of several banks that accommodate lending and deposits for businesses. We have several clients in that space such as Atom Bank, who have used proven technology such as Phoebus, purpose built for commercial clients, to gain operational efficiencies and attract customers.
The data requirements of commercial lending and deposits are fundamentally different to those of retail customers, and therefore working with a software supplier that offers this specialism amongst other offerings, de-risks implementation and ongoing service provision enormously.
So, is the rest of the market taking note of the additional margins and benefits that can be attained through dealing with the commercial sector compared to standard retail clients?
The big-four banks have well established commercial operations and retain most market share. However, looking at key appointments both in some larger scale challengers and building societies, the commercial finance sector is clearly being considered by more established players. These appointments will effectively be new entrants or may have done commercial lending before and now wish to move back into that space again.
An issue with launching commercial lending or savings within existing, retail, customer-focussed operations, can often be about how do you accommodate the provision of the system requirements for commercial customers within the existing IT ecosystem?
The age old debate of build or buy is usually a major consideration. If “buy” is the conclusion, is the solution proven to be able to be integrated into a company’s ecosystem effectively, allowing the observation of single customer view, group exposure and other key areas. Choosing a supplier such as Phoebus with a track record of achieving this is essential to success.
It is hugely encouraging that the commercial sector, especially focused on SMEs, is continuing to do well in what is an uncertain economic environment, and that both new and existing banks and building societies are considering this sector as a viable source of business.
Competition will drive investment in technologies and customer experience, and it will be interesting to see how those looking at this sector will view the “buy or build” option to launch their propositions.