SME customers in particular often have needs beyond the pure provision of financial services, and these needs represent an opportunity to build brand recognition and customer loyalty, as well as improving the relative credit performance of our SME portfolio. This presentation focuses on developing non-financial or Enterprise Development Services (EDS) to supplement our banking proposition to SME customers.

1. NON-FINANCIAL
SERVICES IN
SME BANKING
Approaches to developing
non-financial or enterprise
development services to
supplement financial
services to SME customers

2. Build
Customer
Loyalty
Improve
Customer
Profitability
Raise Brand
Recognition
Build
Internal
Expertise
Generate
New
Business

3.  Small and Medium-sized Enterprises (SMEs) represent an important and
substantially under-banked market, in emerging markets in particular.
 The SME segment can be a long-term, sustainable source of profits for banks
struggling with low margins in corporate banking, and intense competition in retail
banking .
 However SMEs exhibit relatively higher default rates through the business cycle, so
a careful strategy is required to ensure segment profitability, business survival, and
customer tenure characteristics (culminating in reliable Customer Lifetime Value or
CLV forecasts).
 SME customers in particular often have needs beyond the pure provision of
financial services, and these needs represent an opportunity to build brand
recognition and customer loyalty, as well as improving the relative credit
performance of our SME portfolio.
NON-FINANCIAL NEEDS OF
SME CUSTOMERS

4. FORMS OF NON-FINANCIAL OR
ENTERPRISE DEVELOPMENT SERVICES
Typical approaches include:
 business coaching and mentoring
 consulting and advisory
 accountancy and financial
planning advice
 economic insight and business
intelligence
 training and development
 peer and value chain networking
 business tools, models, and
methodologies
Typical topics include:
 strategy and planning
 finance and budgeting
 pricing and cost control
 operations and logistics
 marketing and sales
 human resources management
 risk management
Most banks offer their MSME customers business advice, financial planning guides,
and economic and industry analysis through web pages, downloads, and hardcopy
print versions, but many banks are innovating in EDS. The following case studies
provide some examples.

5. Providing SME customers with a business planning tool can be a useful way of helping them
improve the performance of their business, while also laying the groundwork for access to
finance. Web-based services such as Scotiabank’s in this example can be hosted ‘in-house’ or
outsourced to ‘cloud’ based vendors who can offer hosting and support services for a customized
and/or discounted (or free) solution for your current and potential customers. Browser based web
applications are becoming predominant over desk-top installation and offer many advantages. But
such tools can also be provided in hard-copy format if preferred by customers.
 CASE STUDY: BUSINESS
PLANNING SOFTWARE

6. Many banks offer their SME customers a suite of templates to download from their website. These might include MS
Word and Excel templates that customers can use to help solve simple problems. Examples are draft legal agreements
(e.g. for contracting staff), financial statement templates, business plan templates, and market, product or competitor
analysis tools amongst others. Here is a screenshot of a typical Excel cash flow forecasting template developed by
GBRW. Of course SME customers can also use these templates to support discussions with their bank about the
business and its financial services needs, and to support the credit application process.
 CASE STUDY: BUSINESS TEMPLATES

7.  CASE STUDY: MENTORING
& COACHING
Lloyds Bank offers a mentoring
service where businesses are linked
with a suitable mentor (on a
chargeable basis) through a web-
based ‘match-making’ service. The
mentor will be a senior business
figure with excellent coaching skills
who can provide an independent and
experienced voice for the
management team.

8. E-Learning is a great way to cascade knowledge and
expertise to your MSME customers. Scotiabank is a
member of the E-Business Coalition in Canada
which provides high-quality, fee-based, certified
training for small and medium-sized business
owners. Through their sponsorship of the E-
Business Coalition, Scotiabank are able to offer
discounted course prices to their customers.
 CASE STUDY: BUSINESS E-LEARNING

9. Hosting, moderating and cultivating an online
discussion and networking forum and
community (of both current customers and
other registered posters) can be a good way of
raising the profile of the brand, better
understanding the SME market, and also
generating new leads and product ideas. This
example from Bank of America is well executed.
 CASE STUDY: DISCUSSION FORUMS

10.  CASE STUDIES: COLLABORATIVE
MARKETING/ PURCHASING POWER
RBS has engaged in a collaborative marketing arrangement with
Moorepay, a leading vendor of payroll and HR services. Similarly Lloyds
Bank has established a relationship with Croner Consulting, an expert
in employment and health and safety. Banks can also their bulk
purchasing power to negotiate discounts for customers. In this case,
the added benefit is that HR and health and safety issues are a very
common source of business problems and interruptions, and can be
critical in the event of litigation. Similar arrangements can be set up for
utilities and telecoms, accounting and business services, and
information technology amongst others.

11. Many banks actively sponsor and/ or host
small business networking events and
seminars. Hot topics of interest to SMEs can be
covered by industry experts and product
experts. The bank’s relationship managers can
introduce new products and services. This
example is from Standard Chartered Bank.
 CASE STUDY: NETWORKING EVENTS

12.  CASE STUDY: MARKET INSIGHT
ANZ offers an innovative new
solution to its business
customers – a subscription
based business intelligence
application which analyses over
20mn card transactions through
ANZ’s merchant acquisition
network and provides detailed
analytics to subscribers. For
example, users can analyse
trends within their own
business, benchmark against
competitors, and profile the
characteristics of their
customers based on card usage.

13. MSME customers tend to exhibit unnecessarily high default rates due to some of the
following factors:
 rapid growth – SME firms on a high-growth track tend to suffer relatively higher failure rates
 high-risk attitude of entrepreneurs – the personality of individuals plays a role in the risks a
business takes
 lack of management experience – the ability to make the right decisions is improved through
practice
 low capitalization – under-capitalised firms have much less resilience to unexpected events
 niche marketing – has the potential for higher profit growth but failure rates are raised
because growth is purchased at the expense of higher risk
 chance – interruptions in business continuity can have a dramatic impact on MSMEs
WHY DO SME CUSTOMERS
NEED NFS/EDS?
One of the goals of EDS is to help MSMEs to
mitigate or interrupt these factors

14. There is a wide range of EDS, but perhaps the simplest way to define them is as the
suite of non-financial/ professional services and knowledge products which MSMEs
need or demand in order to develop and succeed. Established and/ or larger
enterprises might have professional accounting, finance, legal, and management
advice from a well-established pool of professional advisors. However smaller and
start-up enterprises, or those operating in emerging markets, often do not have the
same level of access or are not accustomed to taking up these services.
In most countries there are publically funded or subsidized support services for small
business (sometimes associated with loan guarantee schemes). Especially in emerging
markets, donors and governments have supported EDS as a means to encourage SME
creation and employment generation. Banks in developed markets usually offer a
range of non-financial services to SME customers as well.
WHERE CAN CUSTOMERS FIND
ENTERPRISE DEVELOPMENT SERVICES?
SMEs in emerging markets have limited
options when seeking good advice

15. 1. Sector Knowledge: The market research required provides many insights
into marketing and risk strategy.
2. Better Preparation: Potential and actual customers can be indirectly
encouraged to better prepare for access to finance. The credit process is
swifter and better informed.
3. Lower Customer Risk: Customers receiving good advice demonstrate a
lower risk profile than those who don’t.
4. More Profitable Customers: Customers who receive good advice are
more likely to grow and increasingly consume financial services.
5. Better Brand Perception: The Bank can use EDS as a way to build its
reputation amongst target customers
6. Better Bankers: Assimilating small business knowledge and expertise
inside the Bank, can lead to significantly improved risk judgement and
better relationship management behaviours amongst staff
7. Improved Lead Generation: Provision of EDS can be a gentle way to
generate new customer leads.
7 REASONS FOR BANKS TO PROVIDE
EDS FOR SME CUSTOMERS

16. SME owners are a diverse group and any comment on their traits is clearly a
generalisation, however there are some common themes which are of
particular note:
 Over Confidence – many entrepreneurs fail to recognise the benefits of good
advice or assistance, without sufficient regard to their personal weaknesses or
risks to their business (the Dunning-Kruger effect or ‘unconscious incompetence’).
 Timidity – there are other business owners who will need to be convinced that
seeking advice and assistance is not a sign of weakness and need not be an
intimidating or embarrassing experience – rather that it is liberating and
confidence building.
 Price Sensitivity – understandably many owners are very reluctant to pay for
services which are intangible and fail to yield an easily identifiable return on
investment. Paradoxically, many also view charitable, public/donor-funded or
volunteer services as having little value.
UNDERSTANDING SME CUSTOMERS
AND ATTITUDES TO EDS

17.  Time Poverty – many MSME owners are notoriously busy and find it difficult to
make the time required for Enterprise Development Services, once again because
they have a short-term focus and are unable to recognise the long-term benefits.
 Management Instincts – often MSME owners are highly effective producers and/
or marketers, but don’t have a strong background in or high regard for general
management – such as financial control, human resources management, or IT for
example.
 Suspicion – sometimes financial institutions offering Enterprise Development
Services find their customers evasive about the issues they are facing in their
business because they have a perception that their bankers will use this to restrict
vital credit.
UNDERSTANDING SME CUSTOMERS
AND ATTITUDES TO EDS
Take time to research and analyse these
characteristics in your own customers

18. SIMPLE RESEARCH AND ANALYSIS
METHODOLOGY
• Background research (desktop)
• Market demand study (survey, structured interviews,
focus groups)
• Stakeholder analysis (financial sector, private sector
associations, public sector, donor agencies and NGOs)
Local Market
Research
• Comparison by implementing agency or institution
• Comparison by market – emerging market versus
developed market approaches
• Comparison by target beneficiary – e.g. micro-, small-,
medium? Start-ups? Tech entrepreneurs?
Analysis of
International
Practice

19. An initial output of a research exercise should be an elaboration of the strategic
options for the development and implementation of EDS. This would consider factors
such as:
 Target market (e.g. business stage, size, sector, type, ownership structure etc.)?
 Types of service (e.g. business advice, business analytics, financial planning tools,
product and service discounts etc.)
 Funding model (e.g. loss leader, subsidized, bulk procurement discounts, fee
structure, collaborative cost-sharing etc.)?
 Distribution model (e.g. collaborative, web-based, hard copy collateral, social
networking etc.)?
 Approach to knowledge management (in-sourcing of expertise and knowledge,
recruitment, training and development of staff, outsourcing expertise)?
 Realisation of benefits (key performance indicators, risk management, budgeting,
project sponsor and stakeholder identification)?
DEVELOPMENT OF STRATEGIC
OPTIONS
Demonstrate that your EDS/NFS offer
contributes to the bottom line

20. 1. Make sure you have a detailed and comprehensive needs assessment and market
research exercise before committing too much.
2. Carefully consider the prevailing local business culture as it varies wildly from one
country to another, and indeed even regional variations are stark.
3. Watch out for other EDS providers in the market. Are there opportunities to
collaborate? Is there a threat of cannibalization?
4. If you use technology, carefully consider the sophistication of your customer base and
their familiarity with using technology.
5. Building a critical mass of online users or subscribers is hard. Don’t over-estimate the
appeal of your offer or web users’ fear and dislike of “spam”.
6. Make sure your offer is sustainable and high quality. There is nothing worse for your
reputation than introducing a poor service and/ or wasting the time of customers by
inconsiderately withdrawing the service.
7. Don’t go a full roll-out in the first instance – make sure you pilot your EDS by any
combination of offer, segment, or geography.
7 TIPS AND TRAPS IN INTRODUCING
EDS
Whatever you do, make sure your research
is robust and your pilot is thorough

21. CONTACT DETAILS AND FURTHER
INFORMATION
Mike Coates, Director
 You can find out more about GBRW
Consulting by visiting our website on
http://www.gbrw.com
 Visit my LinkedIn profile at
http://uk.linkedin.com/in/mikecoates73
and feel free to connect
 Email us at mail@gbrw.com