The COVID-19 pandemic of 2019-2022 will be remembered for many things, including the deepest recession since the 1930s and subsequent economic turmoil.
Although Europe’s economies have largely recovered, turmoil remains ever-present, most notably in the form of inflation running at an official figure of around 7% in most developed economies.
A recent US SME survey by invoice automation firm Plastiq shows that 88% of small and medium-sized firms are experiencing a negative impact to their bottom line as a result of inflation, with around half of these companies looking for access to more capital to help fund their daily operations.
At the same time, SMEs are beginning to find alternative payments methods – and in particular account to account (A2A) payments – attractive, as such payment methods bypass traditional card rails and therefore do not incur interchange fees.
Meanwhile Veem report similar pressures in other markets, with more than three-quarters of SMEs world-wide saying they are changing their investment plans to cope with inflation.
Three hundred and sixty degree payments
While fees and the cost of payments are no doubt in focus at a time of high inflation, SMEs are also looking to multiply the different ways they can engage with clients.
This can include (for instance) businesses that were formerly focused on in-person shopping now offering online ordering and delivery, or businesses that used to offer products in a single market now looking to do business across borders.
In its Global e-Commerce Report for last year, McKinsey and Co reported double-digit increases in cross-border e-commerce.
“McKinsey & Co reported double-digit growth in cross-border e-commerce around the world last year.”
As SMEs come to terms with the post-pandemic environment, they are increasingly turning to FinTechs to help them integrate new kinds of payments (A2A, crypto payments and BNPL) as well as reaching out to new customer relationships, whether that’s via cross-border sales opportunities or marketing initiatives with companies in adjacent spaces.
This behaviour helps to explain why third-party payment service providers took between a quarter and three-quarters of their new revenues from SMEs, according to McKinsey.
“Payment Service providers took a high proportion of their new revenues from SMEs last year.”
PCM SAYS:
As the dust settles, it’s clear the COVID-19 pandemic has created a clear climate of winners and losers in the SME space, with those who failed to adapt to new realities falling by the wayside, while successful SMEs have created new opportunities by becoming comfortable with the concept of multi-dimensional commerce.
This has meant pivoting from (for example) in-person sales to a blend of physical and online payments, as well as shifting from domestic to international sales and marketing.
At the same time, these businesses have had to look to third parties to help them integrate new payment methods and process payments from different channels.
The fact that successful companies have managed to do all this in less than three years since May 2019 is real testament to their ingenuity.
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