Advancing SME growth requires a suitable ecosystem

By Amar Abrol, Chief Commercial Officer, MatchMove

In conversations around economic growth and employment, the relevance of small and medium enterprises (SMEs) is often overlooked. But a look below the surface reveals their importance to economies. Indeed, SMEs form the foundation on which the global economy rests.

This is particularly true of Southeast Asian economies, in which SMEs account for between 52 and 97 percent of all employment, and contribute between 30 and 53 percent to their gross domestic products. Closer home, in Singapore, 99 percent of all enterprises are SMEs, and they account for 72 percent of employment and 47 percent of the national GDP.

Despite the substantial role SMEs play in empowering communities and supporting economic growth, they have not been rendered enough support. As digitalisation continues to leave its mark on the region’s economies, its SMEs are still grappling with how best to embark on their digitalisation journeys.

The digitalisation hitch

SMEs in Southeast Asia are faced with a plethora of digitalisation-related challenges. The common challenges are a lack of access to digital talent (64.7%), pressure to focus on the short-term benefits of digitalisation (64.7%) and balancing digital innovation with security (64.4%). Additionally, many SMEs in the region are encumbered by legacy processes (60.9%) and face challenges in upskilling or reskilling staff to suit their digital transformation needs (62.5%).

Many SME entrepreneurs are hesitant about adopting technology to help improve efficiency and productivity. Some want to digitise but do not know how to do things differently or how to integrate digital solutions to align with the company’s strategies.

Even after the need for tech adoption is acknowledged, there are other challenges relating to financial and human resource constraints. There is a growing number of digital tools available in the market today, but most SMEs in the region lack the financial resources and the knowhow to invest in them, and do not have manpower with the required skill sets to make effective use of these tools.

Why digitise?

Digitalisation is important for SMEs as it helps them to: a) reach new customers and to deepen relationships with existing customers (through efficient customer service and delivery); b) increase productivity and improve efficiency, thus helping manage costs better; c) innovate new business models and be able to pivot existing business models to new market trends; d) attract skilled talent; and e) scale more quickly at lower cost.

The adoption of technology also allows small companies to cater to the evolving tastes and needs of customers. Digitally savvy or digital native customers are very sensitive to user experience as they have interacted with several high-quality apps that have defined their experience and set their expectations.

Internally, technology helps SMEs improve efficiency. Take corporate expense management, for example, which can be an arduous process for companies. Digitising that whole experience makes life easier from an HR and employee standpoint, and helps cut costs and manage resources more efficiently.

In short, the adoption and implementation of technology enables small companies to mitigate various constraints and challenges and to close the gap on larger companies, hence levelling the playing field somewhat.

Current ecosystem

Presently, we see increased awareness among many SMEs and a willingness to adopt digital solutions – 56% of Singaporean SMEs have digital transformation strategies in place, for instance.

But while many are increasingly willing to adopt digital solutions, the challenge lies in actually integrating technology into operations and processes. Across ASEAN, three in four SMEs see digital integration into operations as an opportunity, but only 16 percent actually use digital tools. A part of the problem is the presence of several tools in the market that offer solutions addressing different aspects of business.

In this context, an integrated digital ecosystem that provides a range of complementary solutions to SMEs can make a substantial difference. The key lies in providing a product in the market that gives a suite of related solutions that SMEs can use. Banking-as-a-service wallets are one such product. They allow enterprises to offer a range of additional services to their clients. For example, traditional finance companies that earlier only accepted deposits and issued loans, and did not offer additional services, are now able to offer a secure mobile solution and issue cards to their customers as a result of these wallets.

Wallets allow greater engagement with customers who are less willing to walk into physical branches, and want to digitise their banking experience. Using banking wallets as a service is a way to provide digital services without investing time, money, resources and can help increase stickiness and engagement with customers. In their day-to-day lives, for example, customers can use cards on public transport, or to make online or offline purchases, allowing companies that use these wallets to create stickiness.

The importance of payments

The digitalisation of financial services is transforming the way business is done in Southeast Asia. According to the recently published Google & Temasek / Bain, e-Conomy SEA 2019 report, digital financial services in Southeast Asia are at an inflection point. Digital payments in the region are expected to increase from just USD600 million today to USD1.1 trillion by 2025, to account for almost half of all consumer spending in the region.

In this context, the automation of payments is proving to be a gamechanger for many SMEs and their clients. For example, companies like us, enable requirements like lending to businesses to automate disbursement in order to provide their customers with faster and safer access to funds. It also provides them with data and analytics on transaction details and how customers are spending and sending money, helps with risk scoring and loan recovery. In this manner, digitalisation through e-wallets and prepaid cards also makes doing business more seamless for SMEs and allows them to scale more rapidly. Additionally, companies can use digital tools to digitise salaries, incentives and expense payouts, thus saving resources and reducing operational and procedural costs.

Data is a critical part of the puzzle as SMEs look to digitise. For a long time, it has been assumed that SMEs cannot truly capitalise on data because they do not have the resources—in terms of people or finances—to make the best use of data. That is a misconception. Today, SMEs can gain as much from data collection and analysis as their bigger counterparts, thanks to the availability of easy-to-use digital tools.

Adapting to change

Digitisation allows SMEs to deepen existing relationships, increase customer retention and provides SMEs with a wealth of data and insights to drive growth. The most important aspect of digitalisation in its many forms is that it allows SMEs to free up resources—whether in terms of capital, time or labour—towards more productive ends. This helps them focus on their core business and reap the benefits the digital economy has to offer.

SMEs are now beginning to make this digital transformation, and while this can be an occasionally difficult journey, it will eventually be rewarding for them and their customers.

The author of the article is the Chief Commercial Officer of MatchMove.