For most consumers, technology has made the world simpler. Goods can be ordered in seconds to arrive at your door the same day. We no longer have to withdraw or carry cash, checks or even credit cards, and can make payments with a tap of our phone and maybe someday soon with a wave of a hand.
For the businesses providing the goods and services, however, it’s a different story. Those wanting to start their own business used to be able to visit their local bank branch and pitch an idea to their relationship manager who in turn could offer advice and, if the numbers made sense, provide financing. These days, things are more complicated.
A Host Of Systems
First, there are more choices than ever before.
This isn’t in itself a bad thing, as competition is good and drives efficiency. But it also means that businesses looking to succeed in 2023 must be ready to integrate a whole range of systems. From payment solutions to marketing platforms, and payroll to HR, each of these technologies must be plugged into a business if it’s to run effectively and compliantly. Then there are systems for offline activities, such as inventory, distribution and supplier management, which also need to be brought onboard.
For many small and medium-sized businesses, the business owner has a new role: a systems integration specialist. This is a far cry from the vision they had when setting out with their enterprise. Indeed, third-party systems integration has become big business, and another potential expense for SMBs.
Combine all this with research suggesting that business owners in 11 countries spend an average of 120 days per year on administrative work and we can see that, for SMBs, the cognitive burden is growing.
Alongside diverting time from business development, having multiple systems can also lead to data silos. For example, a store with an attached coffee shop might take payments with Stripe on the retail side but run the coffee shop with software designed for table service, such as Toast.
This could lead to data from the store and the cafe being in separate databases, making it harder to get a clear, bird’s-eye view of the business as a whole. Lacking this holistic view can in turn make it harder for that business to make the case for further financing or investment, or to see problems emerging on the horizon that can be dealt with in advance.
The Benefits Of Banks As Business Services Providers
So, how can businesses reduce this cognitive burden and free up more time and energy to focus on their core products and the passion that inspired their journey to own their own business?
This is where banks can step in and recapture the business support role that used to be such a key part of their mission. We’ll never go back to the days of only having a dedicated branch manager in a bricks-and-mortar bank, but what banks do have is a unique opportunity to step back into the role of providing a broad range of services, bringing disparate systems together and reducing the cognitive load for SMB customers.
This could benefit not just businesses, but also the banks themselves and third-party providers of the payment, accounting, marketing and other software that makes modern businesses run.
For business owners, having all their systems in one place means more time and energy to step back from systems integration and focus on business. Not only that, but by virtue of these systems being provided by a bank and the due diligence that implies, SMB customers can be confident that the systems are compatible, compliant and robust.
Having all these services managed by the bank also gives business owners—and crucially the bank—the single bird’s-eye view of the business that having multiple systems can make difficult. This enables better management and makes it easier to assess finance applications, understand tax and regulatory obligations, and undertake business planning.
For Fintech Companies
For fintech partners too, working with the bank could be beneficial.
It would mean that rather than spending huge sums of money on marketing to stand out in a crowded market, they could be plugged instantly into a bank with a huge audience of SMB owners. Instead of trying to market themselves to a diverse audience of millions, they could instead focus on just one relationship with the bank, and allow their customers to find them.
And finally, for the bank, there are additional advantages. By resuming the role of business services provider, the bank is adding real value to SMB customers, giving them back time and mental energy to spend on the thing they love, growing their businesses. This makes the bank a more attractive proposition and helps win back market share from digital-first competitors as well as grow loyalty with existing customers. And, by bringing tech providers and customers together, the bank would also be well-placed to generate extra revenue by monetizing relationships with tech providers.
However, resuming this broad role in a digital age will bring challenges for the banks. The scale of banks and the decision-making processes they employ can often make innovation on a big scale difficult. Then there is the competition faced by nimble, digital-first competitors, which will no doubt bring pressure to bear on bank innovation.
Nevertheless, the unique position banks have in the business ecosystem leaves them well-placed to lift this cognitive load and make life in a complicated world a little simpler. And, for business customers, the bank would once again become something more akin to the local bank branch of old—a partner as well as a bank, offering advice, a broad range of services and the holistic view of a business that is crucial to making informed decisions on investment, growth and finance.
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