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 making up more than 99% of the UK business population, they now play a vital part 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” makes it mandatory for SMEs to hold twice as much capital as any other sector when applying for a loan. Thus, SME investments have resulted in lacking basic infrastructure and an inability to grow or function 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 functionalities serving their requirements.
Today, things are changing. With the launch of PSD2 and Open Banking in early 2018, the UK’s payments landscape has been disrupted like never before. These directives have allowed for the development of new technologies and numerous business opportunities, giving SMEs access to the same financial data and infrastructure that was previously only available to larger businesses.
Why are banks starting to listen?
Since the global economic recession in 2009, SMEs have started to play an essential role in promoting 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 requires to operate their enterprise daily successfully.
It is no wonder that fintech startups are gaining popularity as they focus on specialised areas and provide innovative solutions to common problems in the industry.
Is the payments industry doing enough for SMEs now?
Change in the financial service industry is indisputably taking place. 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 on its way, and progress is more noticeable with fintech companies providing SME alternative solutions. Traditional banks may catch up to this growing demand. Still, in the meantime, it is promising to know that SMEs are finally being seen and catered for.
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.
About the Author: Gary Prince is the Chief Strategy Officer at SimplyPayMe.
Editor: Derin Cag is the Founder of Fintechly.