Small- and mid-size enterprises’ ability to cater to a cashless society is constantly being tested after the market was shaken by the worldwide lockdown. This has led experts to favour advanced payment technology as the cornerstone of SMEs digital evolution. Suzanne Morel, country manager at MasterCard South Africa explained that most SMEs in regions like South Africa, where they account for most businesses, operate in cash only and face hard times moving online.
She said SMEs that have quickly responded to market shifts and turned to contactless payment were able to keep their business running during lockdowns, despite competition and challenges. Internationally, the coronavirus pandemic has driven the growth of cashless transactions, alongside e-commerce.
A survey by the Electronic Transactions Association in Philadelphia found that 27% of business owners reported an increase in contactless payments use in late March alone. Also, a survey by The Paypers showed that mobile wallet transactions in Europe doubled to 14% in the first quarter compared with the same period a year earlier. Furthermore, three-quarters of Europeans surveyed will keep using contactless payments after the pandemic.
SMEs in the UK are others that will keep up with the trend after the pandemic. UK magazine Business Matters found in recent research that 50% of small businesses in the UK had adopted cashless payment methods or were about to do so.
3Gem for Amaiz in May said half of SMEs had either become cashless or planned to. Meanwhile, only 21% of UK SMEs still have no plans to apply cashless payment. While cash reliance seems to be shrinking for some, there are still several SMEs struggling with the fear of being overwhelmed by cashless transitions. According to Bdaily News, 42% of UK SMEs think that the trend toward a cashless society will have a negative effect on their business.
The U.S. Chamber of Commerce and MetLife said the outbreak has caused disruptions with almost 43% of SMEs afraid of not being able to survive beyond six months. The World Bank even estimated that 90% of SMEs with contributions to global economies needed immediate support to go digital.
Educating customers is one challenging problem in an era when digitization is expected to reach almost every aspect of businesses and help enterprises rebound from a low transaction volume. Tech in Asia stated that most digital wallet users are typically educated, but they account for only a small chunk of populations. To form a fully digitized ecosystem, tech innovation must extend to all SMEs and the middle-to-low socioeconomic segment who still rely on cash.
Innovation is driven by necessity in society which can be an additional burden for SMEs to immediately adopt digital payment processes and facilitate the growing needs for cashless. But as cash acceptance is dropping fast due to the pandemic, digitizing payment platforms is now fundamental to build higher conversion rates with more competitive advantage to SMEs’ businesses. Baymard Institute in September found that a frictionless payment experience could accelerate conversions by 35.26%.
According to the Visa Back to Business Study, the outbreak has been a catalyst for 78% of consumers globally to change their shopping habits including the use of contactless payments at checkout. The sudden change during economic recovery really put some SMEs to their limits as they must adopt digital payment in no time.
Fintech as primary barrier removal
This is where fintech companies could eliminate any friction by providing the needed support. Global fintech industry has the capacity to embed SMEs’ payment infrastructure into digital platforms. With better accessibility to B2B digital payment platforms, fintech addresses the specific needs of SMEs to provide safer and more relevant payment options. It provides a wide range of tools to handle transactions in an efficient and simple way.
China has been looked upon as the best example in integrating digital services nationwide. Super-apps like WeChat and AliPay have been long acknowledged to be the biggest supporters for small businesses and individuals. China’s mega fintech Ant Group also rolls out Mybank, an online private commercial bank with “zero contact” loans, with 100 Chinese banks reportedly as partners to support 10 million SMEs and local businesses across China.
MasterCard made a similar move to support small businesses to keep up with the new trend by launching new technologies that could turn mobile phones into a contactless acceptance device. Morel from MasterCard South Africa said contactless technology was surging as more consumers are refusing anything that requires touch. It is “a great equalizer for small business,” she said.
“Fintechs like iKhokha offer low-cost mobile point of sale devices to traders in the informal market to accept contactless card payments while using the transaction history to give cash advances,” Morel said.
Barriers tend to get thicker in smaller sectors and regions, pushing fintech startups to throw all punches to finally deliver a technological breakthrough. Embedded virtual cards are a joint effort by Visa and Nigerian digital startup bank Sparkle to provide greater freedom and flexibility for consumers, entrepreneurs and SMEs across Nigeria to make in-app payments.
“Working with a global partner like Visa allows us to deliver a bespoke and personalized service for our customers by tapping into large networks so they can fulfill their full potential,” said Sparkle’s founder and CEO Uzoma Dozie. Reimagining business models and re-identifying the new requirements for the new normal are as crucial as realizing digitization to disrupt any business spectrum including payment, said Endurance Group managing director Manish Dalal.
“Covid-19 has forced everyone to rethink about our daily lives. In response to the lockdown, SMEs who could embrace digital presence were able to retain some resemblance of normality and continued to serve or engage with their customers,” added Manish.