SMEs contribute $850bn to bank revenue –Report

A recent report has shown that Small and Medium-scale Enterprises (SMEs), around the world, has contributed about $850 billion, which amounts to 25 per cent, to global annual bank earnings.

According to the report by a global management consulting firm, McKinsey and Company, a rise in revenue generation for SMEs in Africa was also projected; thus, encouraging African banks to increase their SME banking portfolios. The contribution to the annual revenue of banks, according to the report, is expected to grow by approximately seven percent annually, over the next seven years. The report also showed that SMEs form the backbone of many economies around the world, particularly Africa. Corroborating the report findings, experts have said that finding the optimal balance between providing a great customer experience and managing the cost to serve has also proven to be difficult. As a result, many financial institutions have not prioritised SMEs, forsaking the vast potential value and leaving many SMEs feeling that their needs are ignored.

“But now, new customer propositions and better service models, enabled by technology, are creating opportunities for much more lucrative returns. Financial technology firms (FinTechs) are entering the business. Big technology firms are also coming into the arena with innovative service models that reduce costs and increase revenue. The FinTechs offerings include traditional banking products and many other business services such as invoice management, payroll support, tax preparation and inventory management.

“Even better, the fintech and big tech firms answer the primary challenge of SMEs, giving entrepreneurs more time to focus on their core business activities. While seeking creative strategies to profitably serve the SME market, a number of African creditors are leveraging SystemSpecs-owned payroll solutions, particularly Remita, as they adopt an ecosystem approach in tapping this vast market.

“For instance, Access Bank offers Remita Payroll solutions to serve its SME customers as an integral part of its beyond-banking strategy. Remita Payroll & HR is an innovative online digital solution that empowers SMEs and large organisations to easily process and pay salaries and manage other related human resource needs. The difficult and unending hours spent by SMEs to process payroll, payments, reporting and reconciliations are addressed by Remita Payroll & HR,” stated the report.