SMEs are the lifeblood of the global economy but still have an outstanding digital debt—one that they can overcome with the support of banks

Small and medium-sized enterprises (SMEs) face many challenges, including digitalization to improve their processes and offer solutions to meet the new demands of their customers. For this reason, the banking sector is emerging as the technological ally capable of supporting SMEs in this transition.

These types of companies make up around 99% of all businesses and employ around 67% of the region’s workers, according to data from the Economic Commission for Latin America and the Caribbean (ECLAC). Therefore, addressing their financial digitalization is a challenge that has a major impact on all socioeconomic groups.

Given this scenario, it becomes crucial for banks to leverage their strength, technology, and experience to promote change by adapting their offerings to the specific needs of these businesses, providing modern solutions, and developing products to address the challenges that start-ups face on a daily basis.

Digital payments for SMEs

Being able to make or receive payments can bring in new customers, improve working capital, boost efficiency, and optimize processes.

Digital payments are fast and secure, since transfers can be authorized almost immediately, and the system can keep an accurate record of your activity. Accepting alternative payments from any location via cell phone, device, or card also enhances the customer experience.

Digital payments can have an impact on security at two levels: by avoiding contact with money and by preventing the accumulation of cash at small businesses, which are more vulnerable to losses or theft. With the emergence of COVID-19, cash payments have declined considerably and this trend is expected to keep growing.

Therefore, banks can offer solutions that have low commissions and are easy to use, such as payments via QR codes or mobile payments, which have become a good option during the last two years due to their simplicity and straightforward installation.

Countries such as Brazil with Pix, Mexico with CoDi and Argentina with Transferencias 3.0 are promoting the interoperability of electronic wallets, which is a first step in the expansion of virtual money in Latin America.

Financial institutions should integrate these platforms into their applications and wallets, offering their business clients the widest possible range of payment options.

Banking services for entrepreneurs

SMEs have their own pace of income, expenditure, and investment. Thus, adjusting the financial offering to match the nature of these companies is beneficial to banks, since having a better knowledge of this market opens up new business opportunities.

Imagine having a different type of loan for each stage of growth of the business and having them posted directly to the account. To achieve this level of customization, additional data must be considered and processed.

The analysis of big data is essential in order for the banking industry to become an ally of SMEs. But it requires flexible and dynamic institutions that are able to modify their structures to respond to the specific demands of this market.

Banks can also use their resources to create products or establish partnerships with other companies to help SMEs in their day-to-day business, becoming a multi-platform where firms can monitor everything from accounts to payroll.

In line with this, Peru’s Credicorp group created the Grou mobile app, where businesses can manage their finances, identify their best-selling products, set sales goals, and download the records. All this while generating relevant data so that the group, through its bank BCP, can offer flexible credit lines to each client.

Similarly in Brazil, BS2 bank has partnered with the online accounting platform Contabilizei to enable customers to open digital accounts, as it explores the alternatives presented by the advance of open banking. The partnership also makes it easier to pay bills and make transfers without leaving the Contabilizei site.

For banks, lending to a company is natural, but adding value, organizing, and simplifying SME processes is a powerful alternative.

SMEs, a new opportunity

These solutions can store volumes of income and expenses for each business. And the accessibility of this information—in a consensual manner—helps customize products while visually and intuitively organizing the entity’s balance sheet.

Similarly, account registration can allow for the automation of payroll, streamlining what is a cumbersome process for companies.

In this way, the digitalization of finance creates valuable information that can be leveraged by banks to expand their business opportunities while easing the pain of companies that provide the bulk of the region’s employment.

Andy Tran