What I learned about small business banking in my first 100 days at BankiFi
By Lloyd Parata, A/NZ Country Manager, BankiFi
Earlier this year, I joined BankiFi as the Country Manager for Australia/New Zealand and I'm having great conversations with local banks about using our financial technology platform to deliver a better service to the backbone of the economy - small business customers.
Small business customers have cash flow challenges and limited resources
Some 98% of Australia’s private companies are small businesses, 73% of them have cash flow problems and 62% of them don’t have any financial software in place. They also don’t have the luxury of large finance and admin teams to chase up overdue invoices and prepare cash flow forecasts. And let’s face it, no small business owner really wants to “do the banking” or “do the books.”
Banks need help to innovate for this particular customer cohort
I've been in financial technology for over 25 years and I’ve noticed that banks tend to be organised into functional silos. Business banking gets lost somewhere in between retail and corporate. As a result, small business customers don’t get offered the best range of product choices. They get stuck between a product that is either too basic … or too complex … but never just right.
Small business has been underserved by the big banks when it comes to what they need to get done and how the banks support them. I’m seeing increasing expectations from small business owners, as they ramp up the pressure on their bank, to step up and provide more and better services.
Starting with a chart of accounts is key
If you’re wondering why a start-up is working with the banks, rather than trying to disrupt them, it’s because BankiFi’s mission is to solve the late payments challenge for small business. And the best way to help small business is to work with their trusted bank.
It starts with BankiFi embedding a chart of accounts into a small business’s bank account so that bookkeeping is seamlessly driven from banking data. Through API integration with BankiFi, the bank can deliver an end-to-end packaged service that takes care of cash flow, invoicing, payments, reconciliations, reminders, bookkeeping, tax and more.
Small business owners don’t need just another app
For small business owners, convenience is everything, which is why using their current mobile banking app to send invoices, and get paid, delivers huge value. It makes financial admin extremely simple. You can create an invoice on your phone and immediately send it to your customer who can instantly make the payment. At the same time, that payment will automatically reconcile against that invoice. And if you haven’t been paid, our solution will automatically send a reminder to chase up the payment.
This is what the BankiFi platform does in real terms: we help small businesses get paid faster, and reduce the admin burden, so they can focus on selling their products or services.
Banks are starting to evaluate what’s in the market for their small business customers
With open banking top of mind, almost every banker I've spoken to wants to offer innovative products to improve their engagement with small business customers.
There are fintechs who have identified this market niche and have products in market that are actively chipping away at the banks’ small business customer base.
The Consumer Data Right is creating a massive data sharing advantage but it’s hard to understand exactly what that means unless you can see it. Normally, I use video to demonstrate the BankiFi platform so the bankers can see exactly how our technology delivers for small business. This is the “a-ha” moment when they see that data sharing and innovative technology are an opportunity not a threat.
Small business banking will be the new battlefront for the banks versus the fintechs
There are many global and local fintechs offering solutions for small business financial needs.
There’s Stripe and Square in payments, Xero and MYOB in cloud accounting, Tyro has recently become an accredited data holder under the Consumer Data Right and digital-first business bank Avenue Bank recently received its restricted licence.
However, most small businesses have very simple needs, hence they don’t want to add extra costs to pay third party providers. Out of necessity, small businesses will always welcome an easier way to manage their finances and they’d like to do it all in one place.
Fintechs and non-banks are capitalising on the small business opportunity
Historically, banks have only played a partial role in helping small businesses to manage their finances and the more value-added services have been viewed as somebody else’s responsibility.
To remain relevant and competitive, banks need to start thinking like their customers, and their customers think in terms of tasks and workflow, not product. Transforming from product to workflow will protect existing revenues around payables and receivables as well as deposits and loans.
So what did I learn about small business banking in my first 100 days at BankiFi?
I learned that banks need to:
Embrace open banking to take the competitive response back to the challengers
Offer small business customers a more holistic customer-centric solution to prevent the erosion of their small business customer base, and
Transform the bank channel into the place where small business customers go to run their business, not just make a payment or check their balance.
I’m looking forward to more conversations and I’m keen to hear what you think! Get in touch to arrange a chat by emailing Lloyd.Parata@bankifi.com or connect with me on LinkedIn.
Lloyd Parata brings more than 25-years experience selling enterprise software solutions into the Financial Services sector. Lloyd’s focus is helping clients with their digital transformation journey to improve operational efficiency, drive revenue growth and improve the customer experience.