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Banks North America Thought Leadership

CI&T: Rebuilding the Relationship Between Banks and SMBs – The Post-Pandemic Fallout

In 2020, the COVID-19 pandemic disrupted just about every industry, including banking and fintech. And now, as small- to medium-sized businesses (SMBs) claw their way back and restart after the crisis, all of these players are asking one question — what’s the new reality in the post-pandemic fallout, and what does that reality mean for the relationships or roles banks, fintech companies, and SMBs have with each other?

Leonardo Mattiazzi is a partner and Executive Vice President of CI&T, an information technology and software engineering company. With over 20 years of experience in the software development sector, he has seen how SMBs adopted partnerships with banks and financial companies prior to the pandemic and how they have responded since start of the pandemic.

With this in mind, he spoke to The Fintech Times to analyse how banks can best compete with fintechs and regain the favour of SMBs: 

Leonardo Mattiazzi, partner and Executive Vice President of CI&T,
Leonardo Mattiazzi, partner and Executive Vice President of CI&T,

As some SMBs got hit hard, others escaped or even grew

Companies that relied heavily on interpersonal interactions generally felt the largest negative impact of the virus. For example, according to the US Census Bureau, in the first week of June 2021, over half (56.5 percent) of accommodation and food services companies reported that the pandemic had a large negative effect, whereas just 11 percent of companies in the finance and insurance industry said the same. Companies that could adapt quickly or meet new needs, such as grocery stores that could offer contactless delivery, fared better overall.

Although not all SMBs have struggled to the same degree, many companies across industries remain on unstable ground despite financial assistance from programs such as the Paycheck Protection Program. As other sources of monetary help dry up, SMBs will need banks more than ever to find funding, interact well with customers, and reinvent themselves to support all sectors of the economy.

Drastic changes in everyday operations

Even in industries where money is less of an issue, the pandemic has caused SMBs to operate differently than they did before the crisis. Both poor availability of staff and how to accommodate physical distancing are top issues.

One of the most notable changes is how businesses are integrating digital technologies into what they do. A survey from McKinsey found that the pandemic has accelerated the digitisation of customer and supply-chain interactions, as well as internal operations, by three to four years

Many businesses are integrating existing technologies or developing entirely new ones to improve their offerings. For instance, many healthcare providers are now turning more seriously to telehealth services. We’re seeing in real-time how much digital transformation can help SMBs recover and do well in the post-pandemic landscape.

Looking at all of these points, the main problem is that SMBs have so much to juggle. On top of separate issues like how to physically distance or find a new supply chain, they’re also trying to piecemeal together many separate digital tools. As they try to handle all this while also focusing on the core purpose of the business, there’s still heavy confusion about where to turn for the best short- and long-term financial support that acknowledges new customer/client preferences and needs.

New digital solutions from banks can increase value for SMBs

Leaders within the banking and fintech industries are looking to understand how to rebuild with SMBs, as shown by a new survey by CI&T. The survey showed that, although companies tend to feel nickel and dimed by their banks and want better interest rates, most of them (83 percent) say they still trust their banks to help them achieve their business goals, with 51 percent trusting “very much.”

Banks can build on this trust by developing new digital solutions that extend what the banks already offer to meet more sophisticated needs and therefore increase value for the businesses. However, relationships with banks have, for the most part, become very basic and limited, while technology companies have stepped up to make themselves indispensable to SMB operations and their financial management needs, such as accounting, tax management, cash flow management, payroll, invoicing, and others. All of these are adjacent to banking services, so what is the role the bank could (or should) play in it.

In the post-pandemic world, understanding the changing role of banks will help SMBs thrive

SMBs represent 47 percent of the private workforce and are a crucial part of the American economy. As they face the post-pandemic world, the stage is set for the banking and fintech industries to forge a record number of successful, supportive partnerships built on humanised, accessible digital technologies and for SMBs to leverage those partnerships to improve the relationships they have with customers. The exact role of banking within this journey is changing, but if leaders understand how, they can prepare well for what’s yet to come.

Check out the next part in this series, Rebuilding the Relationship Between Banks & SMBs: A Necessary Shift, to find out how banking’s role must change to better meet the needs of small- to mid-sized businesses.

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