ARMONK, N.Y., September 18, 2024 — A new report from IBM’s Institute for Business Value and the Banking Industry Architecture Network (BIAN), in collaboration with the SME Finance Forum managed by the International Finance Corporation (IFC), reveals a significant gap between the services small to medium-sized enterprises (SMEs) need and what banks are currently offering. This discrepancy underscores a prime opportunity for agile financial institutions to capture a competitive edge in this diverse market.
The comprehensive study, titled Banking for Small and Medium Enterprises: Serving the World Economy with Data and AI, examines insights from a global survey of SME leaders, banking executives, and fintech innovators. The research highlights a critical misalignment between the priorities of banks and the expectations of SME leaders, signaling a substantial opportunity for forward-thinking financial institutions.
SMEs’ Impact and Banking Challenges
SMEs constitute 90% of all businesses, employ 70% of the global workforce, and contribute 50% of the world’s GDP. Despite their economic significance, banks may be overlooking key opportunities to support this sector effectively. The study indicates that while SMEs seek specialized solutions and networking opportunities, banks are focused on applications, dedicated relationship managers, and branch accessibility.
Shanker Ramamurthy, Global Managing Partner for Banking & Financial Markets at IBM Consulting, commented, “The stark contrast between the needs expressed by SME leaders and the current offerings from banks is evident. However, the integration of emerging technologies like generative AI, coupled with robust data strategies, provides a pathway for banks to significantly enhance their role in supporting SME growth.”
Technology and Innovation as Game Changers
John Duigenan, General Manager of Global Financial Services Industry at IBM Technology, emphasized the role of hybrid cloud strategies. “While banks increasingly use cloud solutions for high-volume transactions, core functions and sensitive data remain on-premises. A well-executed hybrid cloud approach can harness generative AI to deliver insightful customer analytics while ensuring privacy and security.”
To meet the evolving needs of SMEs, financial institutions must adopt a comprehensive approach to technology development. Steve Van Wyk, Chairman of the Banking Industry Architecture Network, noted, “A standardized technology architecture fosters efficiency and innovation, essential for enhancing competitiveness in the financial sector.”
Key Findings and Recommendations
The survey results reveal that fewer than 6% of bank executives rated their institution’s SME banking services with an ‘A,’ while nearly half awarded a ‘C.’ The primary needs of SMEs include support with compliance, legal requirements, and sustainability, while banks are more focused on fraud prevention and insurance services.
Recommendations from the report include:
Financial institutions should invest in ecosystem platforms and partnerships that foster SME growth through digital innovation.
Adopting an enterprise-wide strategy for scaling emerging technologies will maximize benefits across all business lines.
Banks should leverage generative AI and automation to enhance compliance, risk management, and operational efficiency, reallocating resources to improve SME services.
About IBM
IBM is a leading provider of hybrid cloud and AI solutions, and consulting expertise, serving clients across 175 countries. IBM’s offerings in AI, quantum computing, and industry-specific cloud solutions are designed to help organizations streamline processes, reduce costs, and achieve competitive advantages. For more information, visit IBM.
Methodology
The IBM Institute for Business Value conducted the study from June to August 2024, surveying over 1,000 SME leaders and nearly 700 banking executives across 25 countries. The research also included interviews with financial institution and fintech executives to provide deeper insights into the SME banking landscape.
