Where SMEs want Investors to put their money

The 2021 Visa Back to Business study of Small and Medium Enterprises (SMEs) has revealed the major pain points for the world’s small businesses when it comes to payments – and highlights those areas where SMEs want change.

Although Visa’s study doesn’t state this implicitly, it’s clear SMEs are looking for more support with the costs of accepting payments – and a reduction in the complexity of technology upgrades.

The payments industry has long accepted the importance of SMEs, which make up more than 90 percent of the world’s business landscape and contribute at least half of global GDP, even in advanced economies such as Germany and the US.

“SMEs are looking for support in instalment payments – but to what extent is recent growth in instalments sustainable?”

As all businesses now switch from cash to electronic payment, the importance of the SME segment has arguably never been greater to the payments business. Visa surveyed 250 small businesses with less than 100 employees in selected markets across North America, Europe and Asia. The top five areas highlighted by SMEs were as follows:

• Payment security and fraud management: almost half (47 percent) of the businesses surveyed would like to see fraud protections strengthened. This finding will make sense to those familiar with recent data on fraud attempts, which shows the arrival of new kinds of payment fraud (such as non-delivery of online orders) and stratospheric growth in recently established forms of fraud like account takeover and ID theft. SMEs are right to look to industry for more protection in this area.
• Contactless and mobile payment: COVID-19 led to soaring growth in contactless payment, which constituted 43 percent of all in-person transactions on cards globally in 2020. It’s no surprise, then, to learn that 44 percent of SMEs surveyed are looking for faster and cheaper ways to upgrade to contactless capability – despite continuing consumer concerns (see facing page) about fraud on contactless.
• Mobile payment acceptance: with JP Morgan projecting that around $740 billion will be spent using mobile wallets by 2025, and wallets accounting for 40 percent of all spending in some developing economies, the fact that two in five businesses want support in this area is again unsurprising.
• Buy now, pay later: in a more interesting development, Visa says that more than one in three (36 percent) of SMEs are looking to industry for support in building a “buy now, pay later” infrastructure for their online sales outlets. SMEs have obviously noticed the fast growth of “buy now, pay later” – especially in Western Europe – though the extent to which this growth is sustainable remains in question.
• Infrastructure upgrades: around one in three (31 percent) of SMEs surveyed would like to see processing infrastructures upgraded to make it easier for these businesses to accept and receive a wider range of payments, with real-time payments (RTPs) specifically mentioned. RTPs are now active in 53 markets world-wide – just last month FIS/Worldpay predicted this number would grow by around a third in the next twelve months.

PCM SAYS: Visa’s study points out those areas in which SMEs are looking for solutions, and should be welcomed. However, underpinning these results there is, perhaps, a more simple truth – that SMEs find payments acceptance increasingly risky and expensive, especially when it comes to upgrading their infrastructure.

One of our features this month (see “Mission imPOSsible”) shows how new solutions are coming to market which promise to dramatically reduce the cost of acceptance for merchants. As we move into the digital world, the problem of rising fraud appears real – and intractable.

The onus will be on industry to work harder to improve both the safety and security of digital payments – and at present, there are no easy or obvious answers.