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As big banks focus on attracting more small business clients, they should be leaning more on digital than human, according to a recent Forrester Research study.

Peter Wannemacher, principal analyst at Forrester and an author of the study, said banks should be investing more in digital services that make onboarding processes simpler for their small and medium-sized business clients (SMEs). He emphasized that those businesses are hungry for digital banking services but feel like banks aren’t meeting expectations in that regard.

“[Banks] recognize that there is this gap between what they’re doing for their small and medium-sized business customers,” Wannemacher said. “They’re doing some things, but they’re not doing enough.”

In particular, banks aren’t investing enough in digital tools for SMEs, the study suggested. SMEs make up more than one-fifth of global banking revenue, yet many banks’ budgets don’t reflect that investment back into SMEs, Forrester observed.

See also: Digital lenders aim for small businesses underserved by large banks

“Small and mid-sized business clients account for more than half the revenue we see compared to retail customers,” said a digital bank executive who was quoted in the study. “We only budget about 10% of our digital spend for anything having to do with digital services for our business customers.”

Other issues that SMEs face are the length and complexity of signup and underwriting processes. On top of that, approval ratings for SMEs are low. According to Biz2Credit, as of this May, big bank approvals of small business loan applications sat at just 27.5%.

Banks ought to focus on SME customers because of the revenue generation opportunities they offer, Wannemacher argued. Despite the hurdles in establishing relationships, they end up becoming more profitable that retail customers, he explained.

Wannemacher noted that the study did not predict all SMEs would leave traditional banks en masse, but SMEs will rely on them solely for basic deposit accounts instead of onboarding for loans. “There’s the long-term risk of losing these relationships [with banks],” he added.

Meanwhile, fintech companies continue to make inroads on SME customer acquisition, a trend that’s likely to accelerate, Wannemacher noted. For example, startups like Kabbage, OnDeck and Square use sophisticated digital capabilities to underwrite businesses, often with minimal effort for the small business.

For established banks to stay competitive in SME banking, they need to embrace the disruptive mindset of startups, the study noted. “Leading companies will partner through ecosystems to expand their reach and capabilities and use automation and artificial intelligence to further simplify accounting and finance for SMEs,” it concluded.

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