Meeting a need

How do you build a bank with SMEs at the heart of your proposition? We asked Ben Ussher-Stanley, Manager for Business Development EMEA with end-to-end Cloud-based bank operating system nCino, Kunal Galav, Global Head of Partnership Development at Mambu and Conrad Ford, Chief Product Officer, at the three-year-old UK provider dedicated to SMEs, Allica Bank

THE FINTECH MAGAZINE: How should one go about creating a bank for SMEs?

KUNAL GALAV, MAMBU: You have to start by understanding what they need, and how they operate.

SMEs are very different from an end retail customer. SMEs are building their own institutions. They have got a lot of challenges, so you need to build a bank that gets their challenges –so their accounting is sorted, their payroll is

The penny drops: SMEs are responding to banks that offer innovative solutions sorted, their expenses are sorted. It’s almost as though banking becomes invisible for them.

BEN USSHER-STANLEY, NCINO: It has to start at the centre, from a cultural standpoint. You have to ask ‘what is my bank actually going to stand for, and what am I going to provide?’.

Then there’s the discussion about shall we buy [the technology] or shall we build it? I believe buying is the right thing to do, because it enables you to take things off the shelf, and start quickly; to get the basic plumbing right.

Then you start thinking about the reasons why an SME would come and bank with you in the first place. What are your differentiating factors? That’s when you think about what you can build on top of what you’re buying. And that’s interesting because between the world of ‘I’m just going to buy everything and stand everything up’ and the world of ‘I’m going to build everything myself and it’s going to cost me a fortune, but I’m going to make this really cool thing’, there’s a hybrid model.

If you look at the Recognises, OakNorths and ThinCats of the world, that’s very much where they’re at, and that’s how they’re differentiating themselves – by using best-in-class technology to support their vision, and augmenting that with their own technical capability on top.

CONRAD FORD, ALLICA BANK: There are really two major categories of SMEs. There are microbusinesses, which in the UK would be a few million businesses. These would typically have only one or two employees. That’s kind of the mass market area. The banking needs of microbusinesses are relatively simple, albeit there are some specialist providers that are beginning to get really good at helping them with stuff that relates to financial services, like tax management.

When you move into the M in SME, medium-sized businesses, they are far less numerous; there are, in the UK, a few hundred thousand of them. But it’s a much bigger revenue pool, and a much bigger segment of the economy. Those few hundred thousand businesses are actually a much more important part of the SME segment to society as a whole.

They are complex, and have a wide range of needs. Some of them trade internationally, and they’re in very different sectors, which means their banking needs are very different, and their financing needs are very different. What they really need is a bank that understands them. One that is actually willing to get under the skin of

CASE what makes their business different from every other business out there. to have the ability to divide your accounts, and set limits, so your employees have the flexibility to spend the money, and actually make the business work. So the question is ‘can my bank do all these things for me?’.

TFM: What are going to be the new demands that SMEs have from their banking partners?

KUNAL GALAV, MAMBU: I wouldn’t say it will be new demands. I think it’s more about what demands are still unfulfilled.

And that’s where Mambu comes in. We’re in a world where solutions are available for SMEs for all their needs, but they’re all disparate. So with Mambu, you can actually get this combined in one place.

We operate on three really simple principles, which begins with flexible APIs, so it’s easy to integrate with the ecosystem that exists.

Second, with our Product Factory, you can do the configuration of products tailored to SMEs. Imagine you’ve got an SME who gets their inventory from China, and then sells in the high season, so the peak in cashflow is during April to June, but the outflows on the supplies are throughout the year. You can, for instance, create a lending product that matches their cashflow.

Thirdly, it’s about the real-time subledger, which provides insights into what problems SMEs are facing.

As an SME, you want your books to be in order, and you need your taxes to be filed. You have your employees, so you need your expenses to be automatically managed. You also need

I think now it’s time to bring the entire ecosystem together to solve SMEs’ needs, to offer configurability to solve the product needs really quickly, and have the insight so your relationship managers know how to help them even before they ask for help.