Creating opportunities with SMEs lending for banks and credit unions

In this new postpandemic credit cycle, SMEs will be not only one of the most important economic sectors, but also one of the most profitable contributors to banks’ profits. 

The World Bank estimates that micro, small, and medium-sized businesses have unmet financing needs of nearly $5.2 trillion a year, roughly 1.5 times the current lending market.

Can SMEs lending be rethought?

In rethinking their SME lending operations, banks will ensure an increase in market share and promote profitable growth.

Our experience shows that new working methods, the right technology, and continuous performance monitoring are the right combination for success.

Don’t think of SMEs as if they were corporations

SMEs should be seen as completely different from corporations when it comes to assessing risk and customer communications. Sending communications and coordinating campaigns is also simpler since you have to target only one or a couple of decision makers.

Think like an SMEs by leveraging partnerships

A partnership ecosystem allows banks to create a captive customer base and gain access to unique data sources. You can benefit from partnership for understanding pain points, access to transactional data, online sales, telco data, and other types of partner’s data to create a great product model, segments and even assess risk. Telcos, affiliate networks, insurance and online retailers are excellent partners for instance.

Greatest pain points for SMEs

The most frequent pain points for SME borrowers are uncertainty and delayed funding. An automated lending process greatly simplifies things. Banks can improve the experience of SME customers substantially by redesigning and digitizing a significant portion of the customer journey.

Digital is mandatory

In the past it was optional, now it is mandatory. Increasing the level of digital engagement with customers and reducing the number of manual processes for approval will help retain customers and attract new ones.

Not tech vendors but tech partners

Banks are partnering with fintech and tech players to revamp offerings and digitize processes across the SME lending value chain. An end-to-end process redesign doesn’t always require new IT infrastructure. Ideally, your technology vendor should be willing to partner with your bank in order to provide long-term benefits, leverage your existing architecture, and not just sell you new technology. Those can be really considered tech partners.

Structuring the documentation Structure for the docs

Also for bank employees’ the greatest pain points and time consuming in work hours in the lending process is the data arriving from the customer unstructured. A standardized credit-decisioning process and credit memo enhances the system’s efficiency. By creating a single source of truth, a bank can automate data retrieval for decision making adding A.I. for validating documents, digital signatures and track changes with a checklist for the next steps on each side. 

Success is defined by strategy and methodology 

Our experience working with clients in the financial industry has allowed us to identify common factors associated with SME lending success.


1. The Data: 

Creating a combination of products and segments that have high conversion potential by customizing product bundles. 

Sourcing data from partner ecosystems for customer data access and delivery of competitive propositions.

2. The Process: 

Developing a customer-friendly and digital journey. Defining processes and policies that support instant decisions for simple cases.

3. The Workforce: 

Create a digital workforce to pass from credit paper to an end to end digital by adding automation, A.I. for validating documents, digital signatures and next step / next actor checklist and flows.

4. The Indicators: 

Enhance credit decisions with data sources. Make credit models modular for cross-selling. Adapt pricing and limits dynamically based on risk.

5. The Culture: 

Bring employees along in the this journey. Create a new model of human talent and transfer of knowledge where new ideas and experimentation are valued.


An example of an automated customer experience for SMEs lending:


First 15 minutes:

  • Minute 0: The customer receives a promotion via email with a CTA that goes to an application form 
  • Minute 5: The customer fills the application form and upload the documents 
  • Minute 10: Documents are validated with A.I. 
  • Minute 15: The customer receives an initial answer 
  • Minute 15: The agent receives and email with a CTA for approval or rejection


And less than 24 hours: 

  • The agent evaluates and click on approval
  • The system creates the contracts in PDF and sends them via email to be digitally signed.
  • The automation connects to core system to request the cash-out
  • The business receives the funds


What’s next in SMEs lending?

Now is the perfect time for banks to expand their credit offerings. By working together with partners and integrating one truth through automation, departments can adopt new strategies that take a proactive approach to SME lending. With optimized data, processes, digital workforce, indicators, and culture, banks can embrace the boom in SME lending and prepare for success.


About the author:

The content of this article can be shared and republished, as long as its origin is acknowledged. Include the original URL and a clear reference to it originally being published on the DANAconnect Blog.