Unlocking the untapped potential of SMEs in Europe
Across Europe, small and medium enterprises (SMEs) make up 99% of all businesses, employ around 100 million people, account for more than half of GDP and play a key role in adding value in every sector of the economy1.
Their ability to embrace and integrate digital technologies has never been more important. Yet while 68% of SMEs leverage digital channels where possible2 , only 17% have fully integrated digital technology3, and 25% (or 6.3m SMEs across Europe) lack conviction when operating online4. So, what are they looking for from digital payments, and how is the ecosystem responding?
Digital payments are an important part of the wider digitalisation story. At the height of the pandemic, the ability to make and accept digital payments was often a matter of business survival. Many of the new payment behaviours have now stuck and, often, the boundaries have blurred between the physical and the digital – a prime example being the rise of app-based payments, especially the type of pay-at-table apps that are now commonplace in the hospitality sector.
So, what more do small, medium and micro-businesses want from their payment providers? What pain-points need to be solved? And how is the payment ecosystem responding?
Trend 1: Super-simplicity – not just simplicity
Every single second counts for small businesses and tools that help them operate more simply – and are also simple to work with – really get a lot of attention.
For businesses in the payments industry, which has traditionally been quite complex, it can be a challenge to deliver the type of super-simplicity smaller businesses are looking for.
Recent research from Visa found that 48% of SMEs want help to better manage their business.
This process of super-simplification is still playing out. For example, mPOS solutions pioneered by companies like Square and iZettle, did much to democratise card acceptance. And another wave of democratisation looks likely to come from Tap to Phone – a software-only mobile application solution enabling the acceptance of contactless payments with nothing more than a standard smartphone.
Put simply, smaller businesses are rebelling against complexity, clunkiness and commitment – and are increasingly embracing a simple cost structure.
Trend 2: Experiences – not just payments
It is not just about easy ways to accept incoming payments – it is also about easier ways to make, control, manage, monitor and reconcile outgoing payments.
This is particularly the case when a micro-business starts to grow. More employees start to join, the finances become more complicated, and the accounting becomes more sophisticated. In fact, 62% of SMEs surveyed by Visa say they need faster access to cash to support their business. Thinking about payment experiences considers the entire digital lifecycle of a payment and an understanding of how this may fit into an SME’s wider business processes.
Trend 3: Integrated and embedded – not just compatible and aligned
When speaking to today’s small businesses, one thing that can be surprising is the extent to which they rely on – and enthuse about – the various software solutions they use as part of their everyday operations. It may be cloud-based accounting software, or the type of end-to-end software platforms that have been adopted by tightly-defined business segments – like those for e-commerce merchants, or for restaurants.
By integrating or embedding payment into their solutions, the independent software vendors (ISVs) behind these platforms have become influential players in the ecosystem. This, in turn, makes it incumbent on every other player in the ecosystem to develop their own segment-specific strategies, and to work out how they relate to or integrate with the relevant ISVs.
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1The untapped potential of SMEs in today’s digital world, Visa, https://globalclient.visa.com/vbs_sme
2The five-step journey to SME banking transformation, EY, July 2021, https://www.ey.com/en_gl/banking-capitalmarkets/the-five-step-journey-to-sme-banking-transformation
3Unleashing the full potential of European SMEs, European Commission, March 2020
4European SME market assessment, Visa, April 2021