By John O. APEA
The writer is the Chief Executive Officer, eTranzact Ghana Limited, a leading financial technology entity.
Small and Medium-Sized Enterprises (SMEs), play an essential role in the economy of any country. They account for a significant portion of employment and Gross Domestic Product (GDP). Despite their importance, SMEs have consistently faced significant challenges in accessing finance. Traditional lenders have been reluctant to credit small businesses due to perceived risks and high transaction costs. However, the emergence of fintech has created new opportunities for SMEs to access finance.
In today’s digital age, small businesses are increasingly recognizing the transformative potential of financial technology (Fintech) solutions to enhance their operations, improve customer experiences, and drive growth.
SMEs are mostly in need of funding support for research and development to grow and penetrate new markets but unfortunately, traditional commercial means of accessing funds are beyond their reach due to collateral demands and other qualification requirements.
Nonetheless, fintech in recent times has made it easier for SMEs to access finance through alternative sources for sustainability and expansion into new markets.
These alternative funding sources include online lending platforms, crowdfunding, and peer-to-peer lending. These platforms have made it easier for SMEs to access capital, and they offer more flexible and accessible lending options.
Fintech plays a vital role in supporting small businesses by providing access to capital, improving payment solutions, reducing costs, enhancing financial management, expanding access to financial services, and fostering innovation and efficiency.
Therefore, embracing fintech can give SMEs a competitive edge and enable the business to thrive in an increasingly interconnected world.
Fintech for Payment Challenges
Traditional payment systems refer to the conventional methods of making payments, such as cash, cheque, and manual processing. In traditional payment systems, businesses and customers rely on physical exchanges of currency or paper cheques, which can be time-consuming and prone to errors. This process often results in delays, higher administrative costs, and increased risks of fraud or theft.
Fintech Payment Solutions: Using fintech for payment processing offers several advantages such as speed and efficiency, cost savings, enhanced security, global reach, improved customer experience and data analytics and insights
Adopting these fintech solutions puts SMEs in an advantageous position to not only streamline their payment operations and provide seamless payment services to their customers but also drive growth and success.
In Ghana, the most common ways to receive money from your customers are mobile payment apps, point-of-sale (POS) systems, digital wallets, online payment gateways, and peer-to-peer (P2P) payment platforms.
If you are a small business and you do not have at least one of these mediums tailored for your services, the time to take action is now. Thus, with a digital payment platform business can trade online beyond their geographical location at any time of the day and get goods delivered.
Fintech For Easy Access to Capital
Sometimes business owners may look for additional funding to support their initiative. One of the most notable impacts of fintech on SMEs has been increased access to finance. Fintech has made it easier for SMEs to access finance through alternative sources such as online lending platforms, crowdfunding, and peer-to-peer lending.
A traditional borrowing system for small businesses typically involves obtaining loans from traditional financial institutions like banks or credit unions. In this system, they are required to submit extensive paperwork, including business plans, financial statements, and collateral documentation, to demonstrate their creditworthiness and ability to repay the loan.
Fintech offers alternative lending models that are more accessible, efficient, and flexible compared to traditional systems. These platforms leverage digital technology, data analytics, and automated processes to streamline loan applications, approvals, and fund disbursements.
This enables small businesses with limited credit history or unconventional profiles to access funding that may not have been available through traditional channels.
Increased Competition
Fintech has increased competition in the financial services industry, which has led to better pricing and more favourable terms for SMEs. Traditional lenders have been forced to adapt to the changing landscape, which has resulted in better services and products for SMEs.
They have contributed to greater financial inclusion for SMEs. Digital platforms have made accessing financial services easier for SMEs in remote areas or underserved communities.
Fintech for Bookkeeping and Accounting
Fintech has made bookkeeping and accounting more accessible and affordable for small businesses through the development of innovative digital solutions. Fintech platforms offer cloud-based accounting software and applications that can be accessed from anywhere, eliminating the need for expensive on-premises infrastructure.
These platforms provide intuitive interfaces, user-friendly dashboards, and automated processes, simplifying bookkeeping tasks and reducing the learning curve for business owners.
Fintech for Financial Planning and Management
Fintech tools automate various financial tasks, eliminating the need for manual data entry and calculations. By integrating with bank accounts, payment platforms, and accounting systems, Fintech tools automatically fetch and categorize financial data, such as transactions and expenses.
This automation saves time, reduces errors, and provides real-time visibility into financial information. Also, fintech tools offer real-time financial tracking, allowing small businesses to monitor their cash flow, revenue, and expenses continuously.
In conclusion, customer experience has the utmost importance for small businesses as it directly impacts their success, growth, and reputation. Providing an exceptional customer experience goes beyond delivering a product or service.
Fintech tools have significantly enhanced customer experience for small businesses in several ways such as seamless payment processing, online and mobile banking, personalised financial management, improved accessibility to financial services, and personalised product offerings.
With all the aforementioned among others, all SMEs need to engage a Fintech as a business partner to discuss their business models and objectives to design a tailored solution that would propel its growth and expansion.
