Amidst the conflicting priorities of low interest rates, regulation, and rising customer expectations, FinTechs have achieved initial success in lending to small and medium-sized enterprises (SMEs) and have been able to take market share away from banks. Many banks use manual or highly standardized credit assessment procedures to process loan requests from SMEs. These credit models often lead to an unnecessarily negative or distorted assessment of the applicant, which results in rejections. 

In order to ensure sustainable relevance in the segment and to have an influence on the development of SMEs, banks must take on the role of a “financial coach”. An understanding of the SME’s general level of maturity must be established so that products and services can be derived around the SME’s activities and ultimately a reliable valuation can be made.

Potential solutions thus address previously unmet needs, such as cash flow management, working capital solutions or rating support. As a positive side effect, the business valuation, often perceived as a necessary evil, can be transformed into a service with added value for the business customer. An active exchange on developments, instead of periodic regulatory requests for business figures, creates added value on both sides. 

Banks need to rethink and not just limit themselves to providing financial resources. In principle, local banks still have a trust advantage over FinTechs. This trust must be maintained through targeted support of SMEs and harnessed by means of business expansion.