For years, the payment sector has neglected SME and sole trader payment solutions. But today, more than ever, the payment sector has become genuinely interested in this gaping opportunity – creating tailor-made financial services for this underserved sector.
But why was the SME payments sector so underserved?
Until recently, SMEs and Sole Traders have had to make do with scaled-down versions of products conceived for larger businesses. Few tailored financial services were available, with no personalised banking solutions or business management tools.
However, with SMEs accounting for more than 99% of the UK business population, they now play a vital role in the payments industry and the country’s economy. Today, growing opportunities and a digital-first future are on their way as SMEs and sole traders have finally been given a voice.
Furthermore, SMEs were not considered profitable, as Basel III’s “Global Regulatory System for Banks” requires them to hold twice as much capital as other sectors when applying for a loan. Thus, SME investments have led to a lack of basic infrastructure and an inability to grow or operate daily. Unlike larger enterprises, SMEs were unable to access the following:
- Rapid onboarding
- Transparent decision-making
- Customised products and services
- Low-cost transaction rates
Without support from the payments industry, SMEs were being offered products and services they didn’t need and very few features that met their needs.
Today, things are changing. With the launch of PSD2 and Open Banking in early 2018, the UK’s payments landscape has been disrupted more than ever. These directives have enabled the development of new technologies and numerous business opportunities, giving SMEs access to the same financial data and infrastructure that were previously available only to larger businesses.
Why are banks starting to listen?
Since the global economic recession of 2009, SMEs have played an essential role in driving change and modernisation in the financial industry. As a result, most fintech and payment enterprises now fall within the SME sector.
And now, SMEs and fintech companies are well on their way to becoming pioneers of digitalisation, elaborating and providing an array of personalised solutions.
A great example of a payment solution provider is SimplyPayMe. The award-winning global payments company’s mobile application provides everything a sole trader or small business needs to operate their enterprise successfully every day.
It is no wonder that fintech startups are gaining popularity, as they focus on specialised areas and provide innovative solutions to common industry problems.
Is the payments industry doing enough for SMEs now?
Change in the financial services industry is indisputably underway. Yet, for some, it is not happening fast enough. This is because the banking industry is tightly regulated, making the transition more challenging.
Regardless, change is well underway, and progress is more noticeable as fintech companies provide SME alternative solutions. Traditional banks may catch up to this growing demand. Still, it is promising to know that SMEs are finally being seen and catered to.
In summary, it is fair to state that the payments industry has long neglected SMEs and sole traders. But things are starting to change as banks and other financial institutions are finally beginning to understand the needs of this vital target group. With more personalised products and services on the way, the future holds more payment-related opportunities for SMEs.
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About the Author: Gary Prince is the Chief Strategy Officer at SimplyPayMe.
Editor: Derin Cag is the Founder of Fintechly.