A world series of innovations: The home runs global banks hit serving SMEs
As of November, BAI’s hometown could finally call itself home of the defending World Series champions, the Chicago Cubs. It took us 108 years to get there and to put that in perspective, the drought dated back to 1908, well before BAI’s founding in 1924. I’m a proud Chicago native and to say we’re still savoring our magical 2016 victory is putting it mildly.
As in the world of sport, the financial services sphere has its champions who work hard and smart to win. And these champions share several key characteristics that make up a three-pronged approach to success:
- They grow their book of business by focusing on high-impact innovation.
- They look at their market to see how they could acquire new customers, and
- They put in place the right teams to take advantage of the opportunities.
But when it comes to applying this winning formula to business banking for SMEs, there’s clearly room for improvement. For starters, high-profile innovation in financial services usually focuses on new consumer-oriented technologies.
The business market is so crowded and competitive, innovation for this segment is critical for differentiation. To that end, some of the most progressive innovation is happening outside the U.S., led by banks taking different approaches to serving small businesses. We’ve seen it firsthand in our BAI Global Innovation Awards program. Here are some leading examples of what that innovation looks like.
The 120-second loan: DenizBank’s Fast Loan service
DenizBank in Turkey developed a very different solution: Not only do these SME owners need financing, they often need it fast. When someone’s livelihood hangs in the balance, they don’t want to wait seven to ten business days to know whether they’ll be able to start a business.
SMEs (DenizBank customers or not) can apply for a loan through a number of channels: SMS, WEB, Internet Banking, ATM or Facebook. The applicant learns the loan application results through SMS within two minutes; the message includes the approved umbrella limit, up to 80,000 Turkish lira (about $22,600). The customer can then wait for the credit card to arrive or visit any DenizBank branch immediately to withdraw his or her cash loan.
Prior to the Fast Loan service, only three percent (by volume) of DenizBank’s SME loans, credit card/ overdraft account applications and withdrawals took place through non-branch alternative distribution channels (such as the ATM and the internet branch). But after introducing this product in 2015, application and withdrawal volume from alternative distribution channels rose significantly—reaching 15 percent as of January 2016.
This is progress. It also illustrates those three winning tenets for success: innovation, growing customer base by being very customer centric and having the team in place to deliver upon it.
An alternative to the alternative: Nusenda Credit Union’s Co-op Capital
Nusenda Credit Union of Albuquerque, New Mexico solved a particular business challenge by meeting customers where they were financially to provide access that would work for them. Nusenda created Co-op Capital—a collaborative financial product that combines microlending and community sponsors—to widen access to capital usually out of reach for low-income entrepreneurs that either have bad credit, insufficient collateral or lack both.
Traditional means of financing such as banks, credit cards, investors are simply not available to this group, while alternative means of financing (community development financial institutions, credit cards, friends and family) lack the wherewithal or sufficient conditions to sustainably support the need.
The Co-op Capital product, then, represents, the “alternative to the alternative.” It is the only product on the market that allows the target population to access capital through a trusted community organization versus a financial institution. Uniquely, member organizations such as co-ops, networks and unions sponsor the loan application for their affiliates and provide the loan underwriting, while Nusenda Credit Union does the originating.
By focusing on niche entrepreneurs in member organizations, Co-op Capital combines the best of international character- and community-based microlending with the best of the American financial system. That in turn increases the growth and start of community businesses, as well as job growth, employment opportunities and revenue in the community.
Driven to excellence: From Idea Bank’s Mobile ATM to empowering low-salaried drivers
One product introduced by Poland’s Idea Bank earned them a spot as a Global Innovation Awards winner: their Mobile ATM Service for small- and medium-sized enterprise customers. Idea Bank launched a secure multi-functional mobile ATM and depository service housed in an electric BMW i3 car driven by trained bank employees and offered free of charge for the bank’s SME customers. In the vehicle, they can withdraw or deposit cash with all operations synched to their accounts within a few minutes.
Half a world away in South Africa, unemployment and poverty remain major challenges. WesBank, Uber S.A. and FNB Vumela developed an initiative that aims to create an initial 1,000 microenterprises; empower currently low-salaried drivers employed by Uber fleet-owners to purchase their individual vehicles; earn higher incomes; and build their own businesses.
Access to the vehicle ownership market is constrained by numerous factors. WesBank, supported by FNB Vumela, designed an innovative financing solution that enables Uber to expand their platform to previously unreachable owner-drivers. In so doing, WesBank unlocked the latent potential this market has to contribute to the economy by generating sustainable jobs and incomes. Meanwhile, Uber hopes to expand its current South African platform by 15,000 drivers over the next five years.
These microenterprise owners are part of South Africa’s current and future business banking economy. By thinking differently about its customers, WesBank has opened up a new market opportunity.
Bold moves for the underbanked: TEB’s Women Banking
Women’s influence on national economies represents our most substantial global progression, with women making up the biggest and fastest-growing market in the world. More than 37 percent of SMEs are owned by women and 70 percent of these SMEs report being unbanked or underbanked—which translates to a market opportunity of roughly $300 billion. In Turkey, 10 percent of equity in Turkish SMEs belongs to women and yet Turkey has the highest ratio of unemployed university graduate women in OECD countries.
TEB’s Women Banking program, established in 2015, provides financing, information and advice to women-led, small- and medium-sized businesses. It’s a multi-faceted approach that extends beyond financial goals and needs, and an extraordinary example of an innovative bank that took a bold move to serve the unique needs of a strategically important segment.
Having taken the “Consultant Bank” approach in supporting the development of SMEs for a decade, TEB is now seeking to strengthen the presence of women-owned and led SMEs via its Women Banking approach. TEB is the first and only bank in Turkey that has set up a separate department to provide women’s banking services.
Putting it all together: No need to “wait until next year”
In the sporting world, most if not all championship runs are short, even for the most formidable dynasties. And in the end, only one team can come out on top. But in the financial services sphere, innovation represents the trophy many institutions can bring home, season after season. The success of one team leads to the success of all, institutions and customers alike—not just in technology, but also in process innovation, channel innovation, marketing, human capital, and societal/community impact.
More than ever, the call is to assemble your best teams, get into the game with passion and determination … and make this year your winning year.
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Debbie Bianucci is the CEO of BAI.