Going Beyond the Deposit Account: Transforming Banks into Dynamic Financial Operations Hubs for Small and Medium-sized Businesses

As small and medium-sized businesses (SMBs) grow and evolve, their financial needs become increasingly complex. While a simple deposit account may have been sufficient in the early stages of their business, SMBs now require more from their banks to succeed in today's competitive business landscape. They are looking for comprehensive financial solutions that address their financial challenges, streamline their operations, and improve their efficiency, and banks need to shift from being transactional service providers to becoming dynamic financial operations hubs that use technology to provide end-to-end financial solutions.

Traditional Banking Services and Limitations

While traditional banks have long been the primary source of financial services for SMBs, they are often limited in providing access to capital. As their business expands, business owners often need access to credit to fund their growth however, incumbent banks are often limited in their ability to provide credit facilities to SMBs due to their strict lending criteria. 34% of SMEs cite long wait times, and 54% of potential customers chose not to apply because of strict lending requirements. This can hinder their growth and prevent them from taking advantage of new opportunities. 

Furthermore, small businesses often have unique financial needs and traditional banks may struggle to provide the level of personalization and customization to meet their specific requirements. One of the critical financial services that SMBs require is cash flow management. As their business grows, so does the complexity of their cash flow. SMBs need to be able to manage their cash efficiently and effectively to ensure that they have enough liquidity to meet their financial obligations. 

SMBs are increasingly demanding comprehensive financial solutions from banks, rather than piecemeal services. Traditional banks are often limited in their ability to provide these services, but banks that can provide personalized financial solutions, such as customized credit facilities and tailored cash management solutions, can differentiate themselves from their competitors, win the loyalty of SMB customers, and boost their revenues.

The Concept of a Dynamic Financial Operations Hub

A dynamic financial operations hub brings together various financial services to offer businesses a comprehensive solution to their financial challenges. Small and medium-sized businesses (SMBs) face unique financial challenges that require tailored solutions. They need access to a wide range of financial services that can help them manage their finances effectively and efficiently. A dynamic financial operations hub can provide them with just that. By transforming into a financial operations hub, your bank becomes a one-stop shop for all of the financial needs of your business clients, offering them a seamless, personalized experience. 

For example, a dynamic financial operations hub may offer SMBs access to financial management software that allows them to track their expenses and revenues in real time. This provides SMBs with a clear picture of their financial performance, allowing them to make informed decisions about their business operations. In addition, a dynamic financial operations hub may offer SMBs access to financial experts who can provide advice and guidance on financial management. This can be particularly valuable for SMBs who may not have the resources to hire a full-time financial expert.

Here are three key components of a dynamic financial operations hub:

1. Tailored lending and credit facilities are essential in meeting the financial needs of SMBs. A dynamic financial operations hub should provide a range of lending products tailored to the unique needs of each SMB. For example, a business that needs short-term financing to cover seasonal fluctuations may benefit from a line of credit, while a business that needs to purchase new equipment may benefit from a traditional loan.
2. Payment reconciliation and invoicing systems play a significant role in the efficient management of SMB finances. Automating reconciliation tasks can improve accuracy and efficiency, resulting in reduced administrative burden and time savings for your small to medium business clients. This, in turn, can lead to a reduction in errors and discrepancies, improving financial reporting and decision-making. Automation can also help accelerate payments processing, reducing the Days Sales Outstanding (DSO) and Cash Conversion Cycle (CCC), while improving payment accuracy and reconciliation. Ultimately, by freeing up time from manual reconciliation tasks, businesses can focus on higher-value tasks, allowing for more efficient scaling of operations.
3. Financial analytics and reporting tools are essential in managing the financial performance of SMBs. These tools provide businesses with real-time insights into their financial performance, enabling them to make informed business decisions and operate more efficiently. Improved financial insights also can identify areas of cross-sell opportunities for your product, cash flow forecasting can improve liquidity and reduce the risk of cash shortages, and smooth bank transitions can maintain cash flow and avoid disruptions to business, reducing the risk of late payments or missed opportunities.

How the Railz API Helps

The Railz API provides a single connection to all major accounting services providers, banking, and eCommerce platforms, such as QuickBooks, Xero, Sage, Shopify, and Square. This always-on connection to the business financials creates new opportunities for banks and financial institutions to make better, data-driven decisions.

What can you do with the Railz API?

• Embedded Finance: Railz automates payment tasks, such as bank data reconciliation, merchant reconciliation, and accounts receivable/payable reconciliation, reducing administrative burden.
• Business Financial Management: Railz provides a business credit score and a holistic view of the SMB's financial health. Railz also provides detailed cash flow forecasting, while also presenting a comprehensive understanding of opportunities to offer your business clients new products, enhance cross-selling services, and tap into actionable insights.
• Credit Underwriting: With Railz, you can make fast, strong, calculated decisions about the creditworthiness of businesses. This includes optimizing the credit approval and monitoring process, streamlining the loan origination and servicing process, and providing real-time visibility into loan status and performance.

Banking cores like FIS Global, use the Railz API to build a dynamic financial operation hub making it easy for banks and financial institutions to get a 360 picture of the financial health of their SMB clients without leaving the banking experience. Banks that adopt this approach stand to reap benefits such as strengthened customer relationships, expanded revenue streams, and a competitive edge in the market. Want to learn more, contact our sales team to book a demo.

Conclusion

SMBs now require more from their banks. They are looking for comprehensive financial solutions that can address their financial challenges, streamline their operations, and improve their efficiency. Banks need to shift from being transactional service providers to becoming dynamic financial operations hubs that use technology to provide an end-to-end financial solution for SMBs. With technology like Railz, banks, and financial institutions are able to integrate with third-party applications, providing customers with a seamless experience across multiple platforms. To succeed in the evolving financial landscape, banks need to adapt to these changing demands and become dynamic financial operations hubs that use technology to provide an end-to-end financial solution for SMBs.