Fintechs and digital-first alternative payment service providers (APMs) offer advantages that small- and medium-sized enterprises can consider for boosting business resilience.
In today’s competitive landscape, small- and medium-sized enterprises (SMEs) may face an uphill battle if constrained by limited resources and tight financial constraints.
One persistent challenge is the effective management of cross-border payments and transactions. The complexity of international payments and fund transfers, arising from hidden charges and fluctuating exchange rates, can transform what should be straightforward transactions into daunting financial maneuvers.
According to one survey by EY, non-traditional payments methods and providers of digital wallets, account-to-account bank transfers and Buy Now Pay Later services may be a strong alternative in the USA in the next one to three years. These Alternative Payment Methods (APMs) may just be what SMEs can leverage for better operations and improved customer experience.
APM advantages for SMEs
First and foremost, APMs may make it easier for SMEs to send and receive payments from customers, clients, and partners abroad, cutting down complexity. Also:
- Reduced reliance on manual payment processing and paperwork can result in lower fees and cost savings in the long term. Traditional banks often take weeks to establish business bank accounts.
- Modern APM firms also provide real-time transaction data, which offers better cash flow visibility, reduced manual reconciliation, and enhanced security features such as end-to-end encryption.
- Armed with timely insights into financial transactions, SMEs can be better equipped to manage day-to-day operations and make informed decisions that strengthen their financial stability.
- Up-and-coming APM providers are agile and digital-first enough to be more adept at protecting transactions and sensitive information by incorporating robust security functionalities. Leveraging AI and ML, APM providers and fintechs can harness extensive remittance data to swiftly identify fraudulent transactions in real time, combating fraud without disrupting payment processes or customer experience.
- In countries with strong regulations over payment services, SMEs can have even more confidence in leveraging APMs.
Barriers to adoption
Despite the many advantages offered by APMs, some SMEs may still rely heavily on traditional banks and related financial service providers.
In APAC and the greater China region, this could be due to cultural nuances and loyalty to banks that may have established trust and support with SMEs over the years.
Also, resistance to change, and a general lack of awareness about alternate payment methods, can vary significantly depending on an SME’s industry type or customer profiles. For some, recognizing the advantages of utilizing an APM provider may require a clearer understanding of how it can enhance their business operations.
Nevertheless, the foundation has been established for SMEs to embrace APMs when ready, and to emerge as more robust and resourceful organizations that are prepared to embrace the evolving economic landscape.
