Unlocking the Financial Potential of SMEs: Is FinTech the Key?

FinanceFeeds Editorial Team

The rise of the gig economy for early-stage startups and freelancers has highlighted the increasing importance of small-scale business transactions and banking requirements. Unfortunately, this has also exposed a significant gap in the SME banking landscape.

Approximately 90% of all global business entities are SMEs, making up more than half of the world’s workforce, as per data from the World Bank. These small and medium-sized enterprises serve as essential catalysts for the global economy, acting as hubs for innovation, growth, and employment generation.

Micro and small businesses, despite their crucial role in driving economies, have often been overlooked and underserved. This lack of attention towards SMEs is regrettable, considering their significant impact on economic advancement. Recently, during a discussion with a representative from the British fintech company Payrow, we explored the unmet needs of small and medium-sized businesses that traditional banks and large neobanks often fail to address. 

Unique Financial Challenges Faced by SMEs and Startups

According to Payrow, when working with SMEs, startups, and freelancers, they often encounter unique requests from clients, along with their complaints about banks, whether traditional or digital, and neobanks not being prepared to meet their needs.

Issues with Obtaining and Processing Financial Data

Challenges arise when it comes to efficiently harnessing data due to the substantial costs associated with technological infrastructure and the requirement for specialised data analysis skills. By effectively utilising data, SMEs can uncover hidden trends and market shifts, enabling them to make informed strategic decisions. This capability can provide them with a competitive edge, boost profitability, reduce expenses, and reshape business partnerships.

While established banking institutions recognise the value of data, they often struggle to use it effectively. According to a report by thefinancialbrand.com, even though 65% of traditional banks consider data a critical asset, many admit to losing clients due to their inability to translate this data into practical insights for small and medium-sized businesses. Furthermore, a mere 20% of investment in business banking is directed towards SMEs.

Fintech firms like Payrow have empowered businesses with the ability to access digital financial services, significantly simplifying their financial management processes. Furthermore, Payrow’s digital solutions have enabled businesses to make well-informed decisions by leveraging data analytics, providing them with valuable insights into their financial operations.

Resolving Complex Ownership Challenges in Financial Services

The second set of issues raised by British business revolves around the reluctance of major banks and FinTech companies to engage with businesses that have intricate ownership structures. Despite the presence of numerous companies with intricate ownership arrangements, there’s a scarcity of services in the market that can offer suitable financial support to them. Even prominent traditional banks and many contemporary FinTech firms often face difficulties when dealing with these companies. Understanding their complex ownership structures and managing the large amount of associated data proves to be a challenging task. Typically, financial services lack the technical capacity to accommodate multiple owners, leaving these businesses without the necessary support right from the outset. This often dissuades traditional banks from serving businesses with intricate ownerships, resulting in delays in business development. The bureaucratic processes and limited adaptability of traditional banks make them ill-suited to handle the unique situations presented by complex businesses.

Recognising the wide range of companies that struggle to open accounts with financial service providers, Payrow integrated this option right from the start of their operations. Their remarkable ability to work with complex ownership structures is grounded in several key factors. Firstly, Payrow’s team possesses extensive experience in dealing with large corporate structures. Secondly, their unique onboarding technology simplifies complex structures, and they collaborate with top-notch identity verification providers to ensure compliance. Lastly, and perhaps most importantly, the company’s team dedicated complex structures team offers personalised assistance to customers, providing them with answers and expert knowledge at all times.

Obstacles in Pricing Financial Services for SMEs

The third set of problems faced by SMEs is related to high or unclear pricing for financial services. Traditional banks often set limits on company turnovers and transaction amounts, making their services inaccessible to emerging businesses.

Unfortunately, large FinTech companies often have complex pricing structures. Some offer basic accounts for free but charge for advanced features and services. This tiered pricing can result in higher costs for SMEs in need of comprehensive services. Others may use pay-as-you-go models, which can be less predictable and potentially more expensive for businesses with high transaction volumes or frequent international transactions.

Recognising this, Payrow emphasises the importance of transparent pricing with no hidden fees for SMEs operating on tight budgets. This transparency is crucial for building trust and reliability, which are vital factors for businesses when choosing a financial partner. A distinctive feature of Payrow’s pricing plans is the absence of transaction limits. This ensures that businesses, regardless of their transaction frequency or volume, can select a plan that perfectly aligns with their financial operations without worrying about exceeding any limits.

What else in pricing policy can FinTech accommodate for SMEs?

Payrow also strives to address other needs of small and medium-sized businesses, such as: 

Flexible Tariffs for Various Company Types

Understanding that different companies have different transactional behaviours, Payrow’s pricing plans are uniquely structured. Companies with high turnovers but fewer transactions can benefit from plans with lower subscription fees, while those with numerous transactions might prefer plans with lower transaction fees. This flexibility ensures that each company finds the tariff that best suits its specific operational needs.

Specialised Custom Plans for Unique Business Requirements

For companies with unique demands or complex ownership structures, Payrow’s Custom Plan offers unparalleled adaptability. Unlike traditional banks and FinTech companies, Payrow demonstrates remarkable flexibility in catering to companies with non-standard requests, thereby providing solutions that are both effective and tailor-made.

Seasonal Flexibility: Change Plans as Needed

In recognition of the dynamic nature of business, Payrow allows clients to switch tariffs as their needs evolve – be it due to seasonal business changes or other factors. This flexibility ensures that SMEs always have the most cost-effective and suitable financial services at their disposal.

Enhanced Features and Transparent Pricing

These new tariffs come with a one-month free trial, allowing businesses to experience Payrow’s services without initial costs. Following the trial period, the chosen pricing structure applies, offering a transparent and predictable cost model. Payrow imposes no limits on deposits or withdrawals, providing a flexible and accommodating banking experience. Reduced commission rates are also a key feature of the new structure, ensuring cost-effectiveness for SMEs.

FinTech’s Growing Appeal: Reduced Costs and Enhanced Flexibility

The reduced costs and enhanced flexibility that FinTechs offer compared to traditional banking institutions have played a significant role in their increasing appeal.

Looking forward, the FinTech market is poised for continued growth in the years ahead. According to forecasts from Statista, the Neobanking market is projected to reach 28.20 million users by 2027. In 2023, user penetration is estimated to be at 27.8%, and it is anticipated to increase to 40.4% by 2027.

Elements like growing smartphone usage, heightened demand for digital banking services, and ongoing enhancements in FinTech infrastructure are anticipated to fuel this expansion. Moreover, the trend of these companies establishing partnerships with traditional banks and financial bodies is likely to further bolster the adoption of FinTech services.

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