Influence of Technology in Shaping the Economics of SME’s
Today’s
global economy is such that whether a business falls under the list of
much-coveted ‘Fortune 500 Companies’ or is an SME, it must act as a global
player. The emergence of digital marketplaces in local business commercial
centers was nothing short of a blessing for everyone. Offline retailers, large
and small alike, encountered a larger digital audience that surpassed the
client base of their brick-and-mortar stores. On the other hand, the big brands
experienced greater moving volumes through direct and indirect channels as the
client penchant for buying items and administrations online expanded.
Lack of
access to the necessary financial tools creates serious challenges in the
growth of a business. For SMEs and start-ups to be in the best position to
compete and prosper, they need full and fair access to global scale financial
services. Technology is lightning fast now. Society is more connected.
Digitization allows consumers to purchase goods from sellers anywhere in the
world, without a second thought for details such as foreign currency exchange
rates. While this is great for international trade, boosting the global economy
and helping to break down borders, it requires a lot from the underlying
providers, and eventually the SME sellers take the hit – in transfer fees or
slow settlement cycles stalling cashflow.
If an SME
wants to keep up with the rest of the market, it needs the ability to restock
rapidly to expand to new markets and territories. That requires working
capital, which in turn requires faster payment processing. To deliver this,
financial services providers need to start working together more closely. We must
work together to deliver solutions that nurture, rather than create obstacles
in the growth of SME’s. Real-time or instant payments coupled with technology
to keep track of such financial records, are essential to allow SMEs to keep up
the pace.
The topic of
financial exclusion is usually associated with the underbanked or unbanked
consumer population, often focusing on those living in the developing world.
However, it also affects small businesses around the world. And don’t just
think the third world – it’s a first-world problem too. Many smaller companies are
unable to access financial services at a reasonable cost in a way that supports
business success and growth.
Banking
Circle research found that only one in five SMEs hasn’t experienced problems
borrowing from a bank to support their business. This highlights an imbalance
in the support available to SMEs. Demonstrating the potential impact of
financial exclusion, nearly a quarter of respondents to our survey said that
struggling to access additional funds would lead to having to let employees go.
More than one in 10 felt the business could ultimately fail as a result.
The economy
is experiencing a setback due to the Covid-19 pandemic as a result of an abrupt
disruption in consumer spending and the global supply chain. There is no question
that small and medium enterprises (SMEs) have been hit immensely due to cash
flow issues and lack of financial strength and solutions. The stronger growth
of SMEs in 2018 show that they were able to withstand external shocks such as
the then unresolved trade spat between the US and China as well as slower
global growth.
This is due
to the fact that the majority of the SMEs are domestically driven and have proven
to be more resilient than the larger firms. It is evident that SMEs play an important role in the economy, contributing to sustainable growth and
significant employment generation. Unfortunately, a simultaneous deterioration
in both domestic and external demand since early, this year has invariably
resulted in a jolt to SMEs and economic activities. The crisis has affected all
levels of SME businesses including supply chains, trade, and job sustainability.
Regaining
consumer confidence and pivoting business activities remain the biggest
challenges for SMEs. Even as restrictions are eased to allow certain economic
sectors to operate, SMEs still face financial constraints and inconsistent
demand triggered by the business disruptions
The value of
SMEs in the global economy must not be underestimated, and we believe it is
vital that financial services providers work together to build and deliver the
services SMEs require, at a cost they can afford and in a manner that fits
their unique business. In turn, this will help the SME reach its potential and
benefit the wider economy – including the financial services providers
themselves.
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