Thomas Becher

Head of SME Banking

North American SMEs still don’t have the digital banking they need!

Abstract: Despite their critical role in the North American economy, small and medium-sized enterprises (SMEs) remain underserved by digital banking services, according to recent reports from Cornerstone Advisors and Aite-Novarica. While consumer and corporate banking have advanced rapidly, only 35% of SMEs feel their banks fully meet their digital needs. This gap drives many SMEs, particularly those led by younger entrepreneurs, to consider switching financial institutions. Embedded finance and partnerships offer banks a substantial opportunity to tap into the $22 billion market for SME digital services, projected to grow substantially. By enhancing offerings such as purchase order financing, real-time payments, and integration with SME operations, banks can address SMEs’ demand for seamless, personalized, and efficient digital banking solutions, helping these businesses thrive and diversifying banks’ revenue streams.


Another year, another set of reports on how North American small and medium-sized enterprises (SMEs) still aren’t getting the digital banking they need. SMEs are the backbone of the US economy, making up 99.9% of US businesses, employing just under half of US employees and producing 60% of job growth, according to the US Small Business Association and yet this year we’ve seen numerous surveys and reports, including two from Cornerstone Advisors and Aite-Novarica, exposing just how under-serviced this vital segment is.

While consumer and corporate banking has rapidly evolved, SMEs have been left behind: only 35% feel that their bank is fully catering to their specific digital banking requirements, according to Aite-Novarica’s report. Little wonder that 19% of all small businesses and 27% of businesses run by millennials and Generation Zers are looking to switch primary financial institutions within the next two years. The opportunity for banks here is not new, but there’s still plenty of low-hanging fruit, with a large potential SME client base desperately underserved and ready to pay for real value.

A missed opportunity

Back in 2021, the market for embedded payments, lending, and banking was already pulling in $22 billion in the US alone, according to Bain & Company. Fast forward to 2026, and services embedded in e-commerce and other platforms are projected to surpass $7 trillion. For banks, this is a huge opportunity to connect with new customers, especially SMEs.

SMEs may be price sensitive, but they’re willing to pay for value, and in their long-standing dissatisfaction lies a clear opportunity for banks. And banks recognise it: 72% of bank executives believe small business deposits are very important in 2023 versus just 41% in 2022, according to Cornerstone Advisors.

One key to unlocking this potential lies in simplifying and automating the customer onboarding process. ​​Among banks that offer retail and small business deposit origination, abandonment rates during digital account origination exceed 50%. But with technology that streamlines the customer journey and enables the likes of improved digital identity verification process and automated document preparation, banks can more effectively cater to the SME segment.

Yet, banks have largely overlooked this opportunity, perhaps seeing the challenge of expanding services as too daunting, costly, and time-consuming. But banks don’t need to build this offering in-house. Instead, they can harness the potential of embedded finance to integrate their financial services into the user journeys of B2B businesses, developing their SME banking capabilities.

By enhancing SME-specific digital banking services with the help of the right partner, banks can not only tap into a new customer segment but also diversify their revenue streams – all while addressing the gaps in existing SME banking relationships.

What do SMEs want?

Take purchase order finance. SMEs currently struggle to effectively manage cash flow to secure the necessary supplies for delivery, and are forced to endure delays associated with payment processing. By collaborating with large corporations, banks could use enterprise resource planning (ERP) data to provide financing to support their SME suppliers. This would not only smooth SMEs’ cash flow but also strengthen corporates’ supply chains, reducing the risks of stockouts and delayed deliveries.

SMEs also want more innovative use cases, a need which is currently going unserved. 49% of small businesses want more sophisticated capabilities than what their primary financial institution offers. There’s increasing demand for international payment solutions, improved mobile banking, better reporting tools, and real-time payments. While less than a quarter of SMEs surveyed in Aite-Novarica’s report are currently using real-time payment solutions, 40% are considering their adoption in the next year. Millennials and Gen Z business owners, in particular, prioritise speed in transactions.

But it’s not just fulfilling use cases. SMEs want simplicity and ease of use – a digital banking experience that’s intuitive and saves them time. They’re looking for personalisation – like payment initiation workflows that align with how they think about payments. They need transparency – especially the less tech-savvy who value clear information and confirmation of their transactions. And they demand integration – with external and internal systems that talk to each other seamlessly, from auto-syncing with accounting systems to single logins. 26% of all small businesses and 32% of businesses run by millennials and Gen Zers would consider switching financial institutions for a more modern and user-friendly digital experience.

The future of SME banking

The digital transformation of SME banking is long overdue. Banks that harness technology to deliver seamless, personalised services – from AI-powered chatbots for customer service to machine learning for credit assessment and robotic process automation for back-office tasks – will stand to win this still largely untapped and valuable market segment.

At SAP Fioneer, we’re tuned into the urgent need for a banking experience that’s crafted for SMEs in the US. Our SME Banking Edition enables banks to provide tailored financial services to smaller businesses at scale, transforming financial institutions into true partners for SMEs and helping them grow their business. The revolution in SME banking has been in reach for too long – now’s the time to grab it.