How Fintech Can Help SMEs Build Resilience in the ‘New Normal’

As engines of economic growth, drivers of innovation and social development, the world needs SMEs to thrive. Not only do they account for 60% of most countries’ GDP, according to recent reports, they also contribute to more than 90% of employment worldwide. However, the COVID-19 pandemic has hit the globe’s SMEs hard.

As subsequent lockdown and restriction measures were put in place, SMEs in fast-growing economies became particularly vulnerable as they were met with reduced demand from customers, unsettled workflows, disrupted supply chains, and an increased lack of finance.

While no one knows how long the ramifications of COVID-19 will last, with it unlikely to be a short-term human tragedy, it’s clear that for SMEs to be able to survive in the “new normal” (a term coined during the 2008 financial crisis to describe a previously unknown and unusual situation becoming commonplace), they will need to build resilience.

Recovery Through Disruption

In an age of unparalleled change where uncertainty rules the day, SMEs face diverse and unpredictable challenges. The need for disruption becomes inevitable if businesses want to effectively manage their risk and recover from the shortfalls imposed on them by the flailing economy.

Resilience would see SMEs bounce back from collapsing markets, broken supply chains, and outdated finance management systems — whilst simultaneously learning to forge their way into new markets while adopting agile payment methodologies.

Although it may seem like an almost impossible feat in today’s post-crisis reality, certain fintech-based approaches can help extend financial inclusion to SMEs, spurring their growth and subsequently giving hope to the millions dependent on their survival.

A Call For Digital Transformation

The COVID-19 pandemic has created a paradigm shift that will see many businesses never going back to what they were. With a heightened need to become more digital, those who want to adapt to massive disruption should use this time to accelerate their online transition — starting with their layered financial needs.

Businesses who expand their footprint across various markets will be able to access more local currencies, making them more resilient to change or disruption in a single market. That’s why today’s SMEs require digital payment solutions so that they can better conduct cross-border transactions as well as better cash flow management. Each of these areas has seen digital innovation thanks to certain fintech providers who have made these tailored services available to SMEs at a low cost, all while offering a quick turnaround time.

Another aspect of digital transformation will see SMEs hastening their move away from physical cash thanks to the potential health hazard it possesses. Even before the coronavirus, cash usage was falling with over a third (37%) of all payments predicted to be made via contactless methods by 2028 — a number that’s expected to surge due to the crisis.

SMEs who are adapting to this trend are relying more on eCommerce platforms like Shopify and Amazon that come with the promise of digitalised payments, aggregated supply channels, and personalised online services for their customers in a time where online shopping has become mainstream.

Thanks to the ease of creating an eCommerce site, as well as their innovative payment processing platforms, SMEs can seamlessly move to online ordering and digital payments. Licensed fintech institutions allow eCommerce stores to easily link up with major marketplaces or payment gateways like Amazon, PayPal and Stripe, making the transition towards digital even more appealing.

A New Model of Lending

The COVID-19 crisis has pushed business sectors towards breaking point, which has consequently given rise to an increased outpour of business loans and financing applications, particularly from SMEs.

While governments around the world have launched significant support packages for these businesses, it has fallen on incumbent banks to actually administer these loans. And while most are working tirelessly to meet these needs, they are faced with roadblocks in the form of making credit readily available while performing necessary compliance checks.

Consequently, traditional lending has become inefficient for SMEs who are trying to stay afloat. According to a recent report, before the pandemic hit, less than 15% of SMEs in fast-growing economies had access to the credit needed to grow. The unmet finance gap for SMEs was set at an exorbitant US$5.2 trillion every year — with the pandemic only serving to exacerbate the issue further.

While traditional lending remains unviable for speed-centric SMEs, there are certain reputable financial lenders emerging, who are able to offer smaller businesses a new model of lending that is faster, easier, more cost-effective and more transparent than incumbent banks.

The Promise of Better Security

As the need for digital payment solutions skyrocketed in light of the pandemic, so did online fraud. With cybercriminals looking to capitalise on the shift in consumer behaviour as a result of imposed lockdowns and social distancing measures, fintechs have had to leverage stricter measures to help curb fraudulent online activities by introducing better policies and updates.

With over 47% of businesses having experienced fraud in the past 24 months, opting for a fintech solution means that SMEs could inadvertently be protecting themselves from cybersleuths.

Preparing Businesses for a Post-Pandemic Environment

SMEs have different pain points to larger organisations. With the COVID-19 pandemic accelerating the adoption of fintech and digital payments solutions, financial institutions like Currenxie are enabling smaller businesses to be more digital, ultimately helping them prepare for a post-pandemic environment whilst facilitating their scalability.