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Digitise and Grow 2017

Five ways to get the most fromyour SME banking business

Small and medium-sized enterprises remain one of the main areas of focus for the growth of the European economy. Data from the European Commission shows that they create two out of every three jobs, and provide 60% of GDP in Europe.

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For a long time, many banks regarded the SME market as unprofitable and costly to serve – a segment they’re obliged to service, rather than as an attractive business in its own right. But perceptions have changed, and most banks now see this segment as a huge opportunity for them to increase their profits. A 2015 report by Efma and Axis Corporate, Next Generation SME Banking: The future of SME revenue growth opportunity in the digitalization era, found that 80% of European banks consider SMEs as a segment for potential growth over the next five years. If we break this figure down, 5% place it as their main strategic focal point, while for 35% it is among their three most important priorities.

European banks report that small businesses contribute on average around 12% of total revenues to their organisation per year, and make up 10% their client base. What’s more is that both of these areas show promising signs of growth. The Efma and Axis Corporate report indicates that most European banks forecast an increase in their SME client segment over the next three years, although it cautions that the path to success may not be easy: previously, credit refusal and the loss of trust in the financial institutions by SMEs have resulted in this segment seeking alternative players such as crowdfunding platforms and other non-traditional and non-bank lenders. The regional factor plays a significant role in this data too, since the growth rate of companies in each country has a direct impact on this forecast made by the banks.