A multi-service app may be the cure to what’s ailing small businesses

If Britain’s leading banks truly care about the country’s small businesses, they have a strange way of showing it. Lending to small businesses fell by £14 billion last year. The countries’ eight largest banks shut more than 142,000 accounts from small businesses as banks feared regulatory action. Banks also closed more than 600 branches, mostly in rural areas.

Banks are essential partners for small businesses, and when they show disinterest, it places stress on small businesses.

1. Limited access to capital: Retail banks are often a primary funding source for small businesses. Without their support, it can be challenging for small businesses to secure the necessary capital for growth, expansion, or even day-to-day operations.
2. Higher borrowing costs: When retail banks are not supportive, small businesses may turn to alternative lenders, such as online lenders or credit cards, which often come with higher interest rates and fees. This can lead to increased borrowing costs and financial strain.
3. Difficulty in obtaining loans: Retail banks typically have stringent loan approval criteria. Small businesses may struggle to qualify for loans without support, especially if they lack sufficient collateral or a strong credit history. This can hinder their ability to invest in new equipment, hire more employees, or pursue other growth opportunities.
4. Lack of financial advice: Retail banks often provide valuable financial advice and guidance to small businesses. Without their support, small business owners may miss out on important insights and expertise that could help them make informed financial decisions and navigate challenges effectively.
5. Limited access to banking services: Retail banks offer various essential banking services, such as merchant services, cash management, and payroll solutions. The lack of support from banks may limit small businesses’ access to these services, making it more difficult to manage their finances efficiently.

The total of these inconveniences can have a meaningful and sometimes fatal impact on businesses’ growth and financial stability. Small businesses must look elsewhere to fill these mission critical functions.

Rise of fintech and boutique services

The danger is that what was once handled by a singular representative who acted as a portal to a large financial institution will be replaced by tens or even dozens of smaller relationships with financial technology companies (fintech) and boutique services.

And this is why the multi-service app (MSA) model is so appealing. It is a major step forward as it presents the ability to have a single portal or reference point to address reactive issues such as lending, advice, or insurance. One reliable, trusted and dependable reference model where businesses can see the overall health of their enterprise and eventually be proactive, with the ability to financially plan and see issues coming down the road, spot weaknesses and correct course.

The appeal and potential of multi-service apps

An MSA is a mobile application that offers a wide range of services and features within a single platform. It combines multiple functionalities such as messaging, shopping, food delivery, ride-hailing, financial services, and more. The goal of an MSA is to provide users with a seamless and convenient experience by integrating various services into one app, eliminating the need to switch between multiple apps for different tasks.

MSAs are already common in Asia, where billions of customers access services through integrated applications offered by Grab, AliPay and WeChat. Small businesses in these countries also have products designed to meet their specific needs.

MSAs are ready to come to the United Kingdom because of the arrival and full implementation of open banking.

Open banking is a system that allows third-party financial service providers to access and use customer banking data with the customer’s consent. It is based on the principle that customers have the right to control their financial information and can choose to share it with other banks or fintech companies.

Open banking is typically enabled through application programming interfaces (APIs) that securely connect different systems and allow data transfer. This data sharing enables customers to access a wider range of financial products and services, such as personalised financial advice and budgeting tools and makes switching between different financial providers easier. Open banking can potentially promote competition, innovation, and customer empowerment in the financial industry – and provide the infrastructure needed to develop an MSA here in Britain.

The demand is here. A survey conducted in 2022 by PYMNTS and PayPal found that 72% of respondents were at least ‘slightly’ interested in an MSA (respondents were from the UK, US, Australia, and Germany). We believe this is the year that MSAs can jump from something on the horizon to an everyday part of peoples’ lives through the United Kingdom.