Home Digital 7 Factors Powering the SME Banking Paradigm Shift

7 Factors Powering the SME Banking Paradigm Shift

A new period in SME banking has already begun and a whole new ecosystem for how banks serve small to medium-sized enterprises are set to prosper. This new era will be driven by the SME’s needs of managing their business to sharpen competitiveness in today’s digital world.

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Starting up obviously depends on the type of business, but it is by and large much cheaper than it has ever been. The average cost in the UK is just £312, for instance. While many of these new businesses are and will remain micro-businesses, many will turn into more prominent SMEs, with higher revenues and staffing needs.

This reduction in cost is mainly thanks to advances in technology and the internet, as well as the removal of international trade barriers and faster, more secure international financial transactions, among other factors.

Talent can be located in a different city or country – even a different continent – at competitive pricing via any of a number of freelancer websites (the so-called gig economy). Communication costs have been completely eliminated thanks to free video, messaging, and call services.

An online business means that renting premises is no longer a necessity for so many SMEs. The UK has recently broken records for the number of new businesses registered, climbing to 600,000 in 2015 alone. As it is so much cheaper to start a new company, the need for value-added business management products will rise, which offers a clear opportunity to banks.