How consumer technology is transforming the SME banking experience

The convenience we enjoy in customer service in our everyday lives i.e. integrated, digital and personalised, we now want to be replicated in our business services.

This article explores the relationship between financial services firms have with their SME customers, and how Codat technology and the API economy is disrupting and transforming the experience for small businesses around the world.

Business is in real-time, shouldn’t banking be too?

The data issue

The inefficiency of data-processing for banks and their SME customers is an age-old problem. Opening accounts, applying for loans, processing and monitoring data is a form-driven and therefore complex and cumbersome. The core problem lies in the fact that, in the UK, SMEs with an annual turnover of less than £10.2 million are only required to file an abbreviated set of accounts with Companies House.

This data is not sufficient for lenders to make credit decisions so they have a lengthy and time-consuming process of further information gathering up-to-date information from each customer in an array of different formats. The resultant application information is a static, point-in-time, historical snapshot of the applicant’s financial status — it is error-prone and does not reflect the real-time financial health of the firm.

Codat’s software addresses this challenge…..

Bringing the relationship of lender and borrower into the digital age. Rather than manually downloading a set of management accounts from their accounting package and sending these over to the bank, the finance team at a small business can just connect their accounting package to the bank, saving both sides significant time.

Codat’s technology enables real-time, on-demand submission and analysis of data records directly from the applicant accounting platforms, bank account or payment platforms. Banks can make better credit decisions based on up-to-date information, increasing the likelihood of making good loans and avoiding bad ones. Small businesses benefit from the convenience of automated application, quicker access to capital and a suite of richer data analysis tools for the day-to-day running of their business.

The shift from bricks and mortar and beyond

The banking industry is undergoing significant permanent change, increased regulation, greater competition and shrinking profits. Digitalisation is transforming the bank’s customer relationships. Emerging challenger banks are becoming increasingly popular, with simple digital services and a strong focus on customer experience.

In response, traditional banks are shifting from bricks and mortar, in a 2018 BBC article, it stated that ‘2,900 branches closed across the UK between 2015-2018’ 1 — resulting in moving customers to cheaper mobile and online servicing. While high-street banks have begun to strengthen their front-end operations, their back-office processes are still relying on cumbersome, inefficient methods of data processing that are manual, costly and time-consuming.

It is crucial that banks streamline their processes and create a frictionless environment in order to remain profitable and relevant.

The consumer experience revolution

Consumerisation has become a key transformational strategy within the business financial services industry.

In the battle to win new customers and retain existing ones, banks are looking to establish deeper, stickier relationships with their customers — enabling the delivery of customisable, personalised and relevant services. This leads to new product innovation coming quicker to market, increased profitability and higher customer retention rates. For instance, this might be free to use cash flow forecasting tools offered by a financial institution for their SME customers pro-actively allowing them to consider their own cash position. The actionable insights from these tools can be used to leverage new lending products based on data and not collateral.

Codat is part of this revolution

Historically, data-processing methods have been laborious and time-consuming. With Codat’s API integrations SMEs can produce analytics, detailed reporting, and can transmit their data to their bank in real-time so when they need support they can draw down quickly and avoid cash flow problems.

This huge improvement in efficiency allows banks to focus their attention on customer service. SMEs sharing data with their bank in real-time enables the bank to provide more flexible products, such as a revolving line of credit based upon a SMEs ledger data synchronised each day.

Furthermore, data integration between banks and SME platforms such as Xero, Sage and QuickBooks opens new online channels of distribution for banks’ products and services.

Smarter servicing — customers want more from their banks

Customers want to feel more valued and expect their banks to work harder for their business and loyalty. These value-add services have become a key part of on-going relationship management and a competitive differentiator.

Banks need to ensure that their products work well with the internal workflows of a small business. A product free of integrations requiring the over-worked owner of an SME to manually share data between their bank, payments platform and accounting system will be noncompetitive in the near future.

SME — tech stack

SMEs have become more tech-savvy and switched on to the digital revolution. With the introduction of APIs, businesses now consider the integration between their bank and their accounting software a key part of their financial workflow. They now pro-actively make buying decisions on payment partners based on those that offer data and process integration out of the box.

Increasingly, SMEs are also focusing on how these integrations can improve the products and services for their own customers, by offering better simpler billing, data access and speed with which they offer their own products.

The rise of the API economy

Codat is an API-first company. Technology is at the heart of all that we do and our culture. The market has seen a significant increase in the adoption of APIs, reducing development costs across many industries, enabling quicker product innovation and creating ecosystems of value and content.

A single API

Through one integration point, Codat enables financial services providers to have access to their customers’ financial books and records regardless of the accounting package through one standardised data stream.

Taking away the pain and complexity, freeing up developers’ time and resources to work on more value-added projects, Codat handles all the mapping to individual formats for each third-party integration. This standardised data format simplifies the data, making it easier to manage and interpret and synchronise on an ongoing basis.

Smart sourcing

In five years’ time, all small business financial products will be directly plugged into the accounting packages used to run small businesses. Therefore, in today’s resource-constrained environment, there is no competitive advantage in building this technology.

Buy vs Build

The Codat platform is designed to make the “buy vs build” decision extremely simple. Codat’s API software is a cost-effective way to combat the difficulties of processing data and the on-going management overhead of multiple integration points and data formats. Banks that choose to source this technology intelligently can increase speed to market with new digital products whilst reducing cost and risk.


It is evident that there is an increasing need for the ability to process data quickly in financial services. Current methods are inefficient, complex and time-consuming. With Codat’s API, banks and SMEs can alleviate some of the previous difficulty — with digital, on-line processing that is standardised and accessible.

Codat’s API software gives SMEs the tool through which they can produce detailed reports, analyse data, market their product and offer a comprehensive overview of the data to their bank. On the other hand, banks can minimise risk, streamline their processes and reduce cost.