Why SMEs are ditching traditional banks

New financial solutions are making it easier for SMEs to access funding without leaving their existing platforms.

Small business owners no longer need to choose between growing their business and managing complex banking relationships. Thanks to embedded finance, the tools they already use daily are becoming gateways to tailored financial solutions.

In a recent episode of the Lula SME Growth Series, David Winter, Senior Vice President of Business Development at Lula, explained how embedded finance is revolutionising the way South African SMEs access and manage their finances.

What is embedded finance?

Unlike traditional banking that requires separate applications and lengthy approval processes, embedded finance integrates financial services directly into the platforms businesses already use, from point-of-sale systems to accounting software.

“Embedded finance isn’t just about replacing what works in your business – it’s about making everything work better,” Winter explains.

For a spaza shop in Soweto using a digital POS system, this might mean accessing stock financing based on their sales data. For a logistics company using accounting software like Xero, it could mean pre-approved funding appearing exactly when cash flow projections show a gap.

The data advantage

The revolution lies in how these platforms use real-time business data to make financial decisions. Instead of relying solely on traditional credit scores, embedded finance solutions analyse transaction history, payment patterns, and operational data to determine eligibility and terms.

This data-driven approach is particularly powerful for previously underserved SMEs who may not meet traditional banking criteria but demonstrate strong business performance through their digital footprints.

Why this matters for competition

Winter emphasises how embedded finance levels the playing field between small businesses and larger competitors. “SMEs can now access funding exactly when needed based on real-time data from their operations,” he notes.

This contextual funding allows small businesses to seize opportunities that previously required lengthy banking negotiations – whether that’s bulk purchasing during peak season or investing in equipment upgrades.

The practical reality

The transformation is already happening across South Africa. Digital payment providers like Flash and Hello Pay are enabling small retailers to expand operations while building financial histories that unlock future funding opportunities.

Traditional banks are taking note, too. Winter points to Capitec Bank’s bold moves into the SME space through simplified offerings designed specifically for micro-businesses.

Getting started

Winter’s advice for SME owners is straightforward: embrace the digital tools that generate valuable business data. Whether through payment devices, accounting software, or e-commerce platforms, consistent use of these tools builds the foundation for accessing embedded financial services.

“The economy is becoming increasingly digital,” Winter observes. “Adopting these tools isn’t just convenient – it’s essential for staying competitive. Revenue is vanity, profit is sanity, and cash flow is reality.” Embedded finance addresses this reality by providing SMEs with financial solutions that respond to actual business needs rather than arbitrary lending criteria.

Looking ahead

The shift toward embedded finance represents more than technological advancement – it’s about financial inclusion for businesses that traditional banking has historically overlooked.

For South African SMEs ready to embrace this evolution, the message is clear: your business deserves funding solutions that are as fast and forward-thinking as you are.

The question isn’t whether embedded finance will transform SME banking – it’s whether your business will be positioned to benefit from that transformation.