In recent years, we have had the opportunity, and in fact the privilege, to work with banks in Asia, Africa, Europe, and Oceania on issues related to succeeding with small and mid-sized businesses (SMEs). Beyond continental Europe, we have worked in Bangladesh, China, Egypt, Hong Kong, India, Indonesia, Kenya, Mexico, Nigeria, Russia, and Singapore, among other countries.Our work has allowed us to gain a unique and unprecedented perspective on the global SME marketplace and what makes it tick. Ten years ago, virtually all SME best practices could be found in the U.S. No more. International players in geographies as diverse as Africa and Asia as well as the U.K. can provide insights to banks operating in other geographies.

 

The Key Challenges

Across the world, we have had similar-sounding conversations (other than accents) on multiple SME issues, including:

 

• Improving the role of the branch in selling and servicing SMEs

 

• Cross-selling to the owner as well as the business

 

• Increasing the productivity of SME bankers

 

• Determining how best to align different channels with the various customer segments

 

 

* Improving branch sales activities. Worldwide, topic number one centers on the frustration that bankers experience with the inability of branch personnel to sell to business customers. Just as in the U.S, non-U.S. bankers cite multiple reasons for the branches failing to deliver on the sales opportunities that businesses offer. These include: the branches have too much turnover or house inexperienced personnel; businesses represent a small percentage of branch traffic, and the branch lacks familiarity with the businesses’ needs; branches are overwhelmed with servicing and compliance requirements related to consumer transactions. In addition, no matter the continent involved, many branch personnel appear to lack the “sales gene.” Their comfort zone centers on service, not sales, and few have the interest or aptitude to change.

 

However, versus the U.S., many branches in emerging markets are experiencing exploding volume levels. I recently visited an Asian branch in which literally thousands of customers transact each day. It effectively leverages a strong queuing system that keeps traffic moving and minimizes wait time. In contrast, we know U.S. branches that take close to a year to achieve the daily foot traffic of this one branch. Hence, it is no surprise that the focus of this branch, and branches like it, is consumer-oriented.

 

Creating a branch-based sales emphasis requires one or, more likely, more of the following initiatives:

 

• Altering incentives to highlight the importance of the small business customer. The typical business customer’s profitability far exceeds a consumer’s potential. Banks need to communicate to the branch that businesses can propel the economics of their branches.

 

• Ensuring that business deposits and loans are included in the branch P&L. Some banks take business loans and deposits out of branch totals. This practice disincents the branch from focusing on businesses

 

• Simplify the product set. Halfway around the world from our New York home, we have seen banks that confuse their branches by offering products with too much complexity. The result is to discourage the branch from aggressively selling those products.

 

However, even with these initiatives, many branches in emerging markets can only generate minor sales success, given their extraordinary daily transaction volumes. Branch staff needs to be supplemented by business sales specialists who can go beyond day-to-day requirements to focus on selling.

 

In general, we think that most U.S. banks should also give up on trying to get their branch personnel to sell. Instead of volume issues (many U.S. branches see year-to-year transaction declines), U.S. banks suffer from branch manager intransigence and unwillingness to sell. For both the emerging and developed markets, the solution entails a separate and dedicated SME sales force that mentors and sales manages the branch but which also operates with an independent sales focus.

 

Other topics of interest to banks around the world include:

 

* Linking the owner and commercial business. In many cases, non-U.S. banks appear further along than American players in highlighting the need to sell to the owner as well as the business. We have seen Asian banks, some operating in areas that Americans consider war zones, with product packages and market positioning that go well beyond what the typical U.S. bank is offering.

 

Why? In many cases, these banks are relatively new to the SME space, and internal silos have not had time to grow. Furthermore, the growth rates in this countries are so high (30-50 percent or more is achievable) that each business line has more growth opportunities than it can handle.

 

* Improving SME banker productivity. Bankers worldwide bemoan the amount of time that their RMs spend on non-sales activities. For a consultant it is startling to hear the uniformity of management comments, no matter the continent, about “time spent behind the desk instead of selling.” Again, the solutions are largely similar across borders: strong sales management procedures, a well-defined support structure, and a compensation system that encourages an outward focus.

 

* Channel efficiency. SME managers are also concerned about correctly aligning channels with customer segments. In addition, they want to determine how best to touch and market to the huge number of smaller customers who do not merit a relationship manager.

 

Leveraging telephone-based RMs is increasingly used both in the U.S. and overseas. However, Asia seems to lead the world in exploiting mobile banking. While current capabilities exist primarily on the consumer side, functionality is quickly spreading to the commercial segment. Having recently seen a demonstration of mobile banking offered over a high quality phone network, I now understand the potential power of that channel for self-servicing and, potentially, sales.

 

Concluding Thought

From the perspective of SME banking, there is no doubt that the world is getting flatter every day. We can point to industry best practices in the U.K. (segmentation) Kenya (market positioning), Pakistan (product development), Egypt (channel innovation), and many other countries as well as the U.S. It is exciting for us to be playing an active role in highlighting and transferring international best practices.