There has been increasing competition in the banking sector. Banks are now realizing that acquiring more consumers is tough. This is why they are turning their attention to small businesses. Apart from banks, fintech companies have also entered the fray and are looking forward to capitalize on this opportunity.
If banks have to succeed in this environment, Bahaa Abdul Hussein points that it is vital that they do two things. One is to offer more services to the SMB (Small and midsize business) sector. The second and most important thing is to use the data they have and create experiences based on it.
Where neobanks are scoring?
Neobanks are scoring over traditional banks thanks to their innovative approach in dealing with customers. A study showed that traditional banks are 80% likely to give more importance to product factors. On the other hand, neobanks are 75% likely to give importance to engagement and building relationship. This shows the difference between the two.
Using data to reach out to SMBs better
SMBs want a single hub where they can get all the services they need. Along with services, they also would need advice. When this is offered through a single hub, it is beneficial. Digital disruptors have entered the fray and are offering closed loop ecosystems. Their work is made easy thanks to the innovations being brought out by Big Tech firms like Apple (eg. Tap on phone service to accept payments).
Banks are not effectively using the data they have. Using this data is crucial since they can offer personalized experiences to customers. When the data is used effectively, they would be able to both upsell and cross-sell to customers. It also helps them to reduce their loan risks.
To achieve this, banks need to do the following:
- They need to be prepared to offer digital experiences at scale. This can help them reduce attrition of clients.
- Banks need to invest money to harness data. It is time that they start finding partners who can help them with this. They need to look for fintech companies to work with in this space.
- While choosing a fintech partner, they need to find a smart partner. This would help them have a collaborative approach that can help in implementing the right technology.
- The alliances they forge need to focus on security, sharing financial expertise, and understanding needs of the business.
When they start to own customer data, they can be more successful in SMB customer acquisition.
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