Banks must reduce their reliance on automation in credit risk management systems to enable them to manage an increased portfolio of small business customers, according to Capgemini's latest World Retail Banking Report.
The report said banks need to combine software and human interaction to manage the risks associated with small business banking.
The report warned that the small business market is risky and complex and requires strong risk management. This is due to factors such as low capitalisation, no credit ratings and high bankruptcy rates in comparison to larger enterprises.
Christian Ball, director of core banking at Capgemini, said automation is important in high-volume banking, but in the SME sector there needs to be a different balance. "Technology is an enabler, but it has to come with the reworking of how it is deployed [in relation to human interaction with SMEs]."
"Banks need to get the right balance between automation and the human relationship between the banker and the customer."
Capgemini's Small Business Banking and the Crisis report surveyed 58 large retail banks in 21 countries.
"Due to the importance of small businesses to national economies, most governments have a strong interest in supporting this fast-growing market, and as such, banks have added pressure to make development a top priority," said the report.
Key stats from report:
• Small businesses represent 99% of all companies in Europe, Japan and the US.
• 86% of respondents said increased cost of risk is considered the number one threat caused by the crisis.
• 68% of respondents said a drop in demand was the number one threat.