UK SMEs Take the Lead in Europe’s Technological Advancements

In anticipation of the upcoming launch of its new debit card designed to support UK entrepreneurs, British fintech Payrow has shed light on the technological strides being made within the UK’s small and medium-sized business landscape. In an interview with financefeeds.com, the company underscored the rapid adoption of financial technology by British enterprises.

SMEs in the UK: Reasons for Digitalisation and Forecast

Based on a study by SumUp concerning contactless payments, the adoption rates among UK SMEs have outperformed those of Switzerland, Italy, France, and Germany, standing at an impressive 90%. Moreover, UK contactless payments saw a significant growth of 36% from 2020 to 2022, while cash transactions dipped by 35%.

The business community sees these developments as signs of resilience, highlighting the capacity of SMEs to innovate and thrive amid economic challenges. With more consumers opting for contactless transactions, it suggests a growing trust in digital payments.

The shift to digital financial channels accelerated during the pandemic, as many bank branches and shops were closed, and people didn’t communicate with each other as much in person. And as consumers have become more digitally savvy, the number of fintech providers has risen.

Over the past three years, digital financial companies have made significant strides in terms of development and popularity. Their uniqueness lies in providing in-demand personalised services to entrepreneurs, small businesses, startups, and freelancers. New financial services pose serious competition to traditional banks, as today, the focus has shifted to the need to integrate various databases, provide services quickly, and address customer issues individually.

Typically, modern fintech companies offer higher interest rates, lower fees (or no fees), and a higher level of service and support. The attractiveness of new fintech companies is not limited to the listed functions. They are also developing additional features and products that can help SMEs.

The future of digital financial companies in the UK holds promise, with the potential to reach $2.6 trillion by 2032, based on current trends.

The Role of Fintech in Digitising British Enterprises

London’s financial market stands out globally, with daily foreign currency transactions and exchange trades worth $3.6 trillion, surpassing the combined figures of New York, Singapore, Tokyo, and Hong Kong. The advantageous time zone and the UK’s international positioning have traditionally played a vital role, while the tech industry’s reduced focus on physical location allows London to maintain its leading position.

According to Payrow, as the UK’s largest scale-up sector, fintech continues to dominate, accounting for 41% of the sector’s overall value and attracting 34% of total investment in 2021. The British fintech landscape encompasses 23 sub-segments, with healthcare technologies (WealthTech) and payments occupying the majority. These sectors make up more than half of the British fintech companies listed in London, which cover payments, asset management, digital banking, and cryptocurrency, among others.

A 2022 Deloitte study reveals the thriving fintech ecosystem in the UK, with approximately 2,500 fintech companies, most of which are based in London. London, as a result, ranks second globally in terms of the number of fintech companies present. The study also highlights that one in three companies sees market expansion as a key objective. For instance, Payrow’s mission is to increase the number of entrepreneurs and assist them in developing their businesses by offering access to pertinent, cost-effective, and paperless global money-management tools.

According to the UK Government’s ‘Fintech State of the Nation’ report, the UK aims to double the number of fintech companies by 2030, showcasing its commitment to fostering a thriving fintech ecosystem.

Advantages of Fintech for Small and Medium Enterprises

Representatives from Payrow explained why modern financial services have become so popular among small and medium-sized enterprises (SMEs), what problems they solve, and the advantages they offer compared to traditional banks.
Streamlining Routine Financial Tasks: During the initial stages of development, SMEs often have a small team but a significant number of routine financial tasks to handle, such as company registration, sorting revenue and costs, tax calculations, and salary management. As the business scales up, the number of these tasks increases. Fintech recognises these challenges and provides automated financial operations, including invoicing, scheduled payments, report generation, income statements, expense management, and cash flow analysis. By automating these processes, financial services save time and minimise errors.

• Handling Complex Ownership Structures: If SMEs have complex ownership structures, with new investors and beneficiaries joining as the business develops, fintech companies welcome businesses with complex ownership structures and have dedicated teams experienced in corporate and fintech environments to understand and serve their specific needs.
• Expense Control: SMEs deal with various recurring payments for services like servers, email services, and CRMs. Financial services address this challenge by offering cost control services, particularly subscription management, to help businesses manage and track their expenses effectively.
  Global Payment Capability: If an SME’s target audience is spread across different regions of the world, it needs a solution to make international payments. Fintech enables SMEs to make Eurozone and international money transfers with just a few clicks.
• Cost-Efficient Pricing: SMEs prefer cost-efficient services for payments and financial management. Most financial service providers charge a flat rate for transaction fees, ensuring consistent pricing regardless of the transaction size. In contrast, traditional business payment accounts often charge a percentage-based fee, which can become more noticeable for larger transactions.
• Faster Transfer Speeds: Fintech providers within the fintech industry offer impressive transfer speeds, ensuring quick and seamless transactions compared to traditional bank transfers, which can take several days to process.
• Remote Account Opening: Fintech companies allow SMEs to open accounts remotely, eliminating the need for in-person visits or waiting in queues. This convenience enables SMEs to set up their accounts from anywhere and start using the services immediately.
• Enhanced Privacy and Security: Fintech prioritises the security and privacy of online banking and money management. When utilising a digital payment solution from financial services, businesses can trust that their sensitive information will remain private and secure.

By embracing the opportunities offered by fintech, UK SMEs can continue to lead the charge in embracing digital transformation and shaping the future of business.