The ability to open accounts, send invoices and access other financial services quickly and flexibly is crucial for businesses, whether they are sole traders or organisations employing thousands of workers. Recent research shows SMEs in particular have an appetite for new banking propositions, with support systems for managing cash flow at the top of the list.
At Unisys, we work with a number of partners to quickly and securely digitalise their businesses and launch new digital propositions. With a core focus on the financial services industry – Unisys calls many of the UK’s financial institutions clients – our technology provides seamless and personalised customer experiences that simply weren’t possible a few years ago. And as the market continues to transform, we see the SME banking sector as the next battleground for competition.
Banking on change
The RBS alternative remedies package (ARP) is set to significantly disrupt the SME banking market. Following the UK Government’s bailout of RBS in 2009, the European Commission (EC) demanded the bank sell a significant portion of its business. When this proved too difficult, the EC agreed to an alternative proposal that would see RBS invest £750m ($968.6m) into the marketplace to stimulate growth and promote competition.
Value of the RBS alternative remedies package
The ARP’s ambitions are twofold: first, it aims to provide financial support and assistance to organisations seeking to build and create new offerings for the SME market. And second, it hopes to incentivise individuals to use these new propositions by covering the costs of switching. Interestingly, SME adoption of online and mobile banking services is higher than that of consumers and, according to Unisys research, more than 50 percent regard technology as being critical to their business.
To achieve these goals, the fund is split into four different pools. The first is aimed at major players and seeks to bolster their existing capabilities. The second, meanwhile, targets new – or enhanced – current account offerings from Tier 2 players. The third supports the development of new lending and payment businesses, and the final pool is aimed at fintech firms and the commercialisation of their services. Crucially, all of these pools target new offerings that are led by technology.
Ahead of the curve
The ARP is not the only reason the SME banking landscape is opening up. Technological advances, customer expectations and changing regulations – in the form of the UK’s Open Banking initiative – are also spurring competition in the financial sector.
This can only be good news for the SMEs that have been materially underserved for years – in fact, according to our research, 42 percent of SMEs complain that their digital experience lags behind the personal equivalent.
The ARP will stimulate the financial market, encouraging growth among smaller players, as well as digitalisation among long-established firms
Incumbent institutions, meanwhile, have benefitted from SME inertia, a fact that is highlighted by the low uptake of the UK’s Current Account Switch Service. With 50 percent of SMEs ready to move to a digital, challenger or non-bank brand if it can better meet their needs, it’s clear the market is ripe for those offering the right solutions.
As the ARP is a government-administered fund, it will attract a high level of scrutiny and regulatory governance. When applying for the package, therefore, institutions will need to present a rigorous business case, demonstrating that they can provide exceptional system performance and, crucially, ensure the security of customer data.
Identifying a credible partner with a differentiated digital technology offering and a track record for providing resilient systems in a timely fashion will be vital. Banks like Aldermore and Shawbrook have already shown that it is possible to create a highly successful and profitable business by focusing on niche market segments and customer-first propositions.
The ARP will stimulate the market over the coming years, encouraging growth among smaller players, as well as digitalisation among long-established firms. These are exciting times for the financial services industry and, at Unisys, we are delighted to work with a number of partners to help them realise commercial opportunities, stay ahead of the curve and, above all, engender greater outcomes for UK SMEs.