While much attention has focused on exciting developments in digital services for consumers, its with businesses, particularly small businesses, where banks have an opportunity to shine.

Banks have typically serviced the SME market with a blend of retail and corporate solutions, but it is widely recognised that this no longer fits the evolving needs of SMEs. 

There’s a need for SME banking services to move “beyond banking” to address the front-of-mind needs of SME owners. As a result, holistic solutions involving collaborations with other, digital service providers can work together to address these challenges. 

At Temenos, we see this moment as a rare opportunity to fundamentally reimagine how banks serve the SME sector.

By leveraging the technology that’s now available, banks can implement innovative design-centric and data-driven products, and services that can transform the SME customer experience. 

It’s the digital experience and utilisation of data that will be at the heart of the next wave of SME banking services.

This is where Artificial Intelligence (AI) comes to the fore. It allows banks to leverage data from multiple sources to make faster, and more accurate decisions and provide individualised, frictionless customer experiences.

Explainable AI or “XAI” takes this one step further, by addressing one of the key issues for banks using AI applications that there is little if any discernible insight into how they reach their decisions. At Temenos, we’re the first to bring transparency and explainability of AI automated decision making to the banking industry.

Take lending as an example. By looking at a small business holistically across a lot of attributes, not just a credit score, banks can make better, more nuanced and fully explainable decisions that lead to 20% more positive credit decisions and fewer false positives. All this can be done in real-time using APIs to connect to third-party data sources.

If a loan is refused, the bank can use XAI to explain why the decision was made and offer alternative products or suggest ways to improve their chances of getting a loan approved in the future.

With the current increase in small business loans, including those underwritten by the government to support small businesses, the need to digitise and make smarter decisions to alleviate underwriting pressure and drive efficiency has never been more important.

We’re only just scratching the surface of what XAI can do, but as banks look at how they can leverage their capabilities it will become an integral part of product development. The transformative abilities of XAI could truly revolutionise banking for the SME sector.