How financial technology can help accelerate the recovery and evolution of SMEs

by jcp
Editorial & Advertiser disclosure

By: Kaushalya Somasundaram, Head of Payments Partnerships & Industry Relations, UK at Square

Last year, it seemed uncertain whether selling online would act as a temporary quick fix for adapting businesses or be a more sustainable solution to issues surrounding financial inclusion. However as the UK starts to allow businesses to run at a normal capacity, it has now become apparent that some behaviours and tools adopted by both businesses and consumers over the last 18 months, are here to stay.

Recent events have shown that by seizing every opportunity to transform both digitally and in-store, small and medium enterprises (SMEs) across the UK have proven to be resilient in the face of adversity. And although the road to recovery is still a long one, businesses have pivoted their ways of working to meet the ever-changing needs of their customers, and we are continuing to see positive change across the industry.

For many SMEs, this year has been an incredible learning curve – from finding new ways to reach customers to completely changing and updating business models to respond to new market demands. Our Cash and the Pandemic Report found that the number of businesses accepting payments online almost doubled in 2020, shedding light on the extensive growth in digital innovation. While this has certainly highlighted the resilience of SMEs, it’s also shown the importance of financially inclusive tools that enable these SMEs to further understand the inner-workings of their business through analytics.

Responding to consumer changes

A significant change brought on by the pandemic was an accelerated shift in consumer payment preferences. Research has shown that these changes are likely to stay; according to the latest ONS retail report released in August, the proportion of online sales continued to increase throughout the month. This is a clear indication that consumers have become increasingly comfortable with the ease and convenience of shopping online. In addition, the way in which enterprises accept payments has dramatically shifted over the past year, with cash payments falling by 35% in 2020. Findings from Link, the UK’s largest ATM operator, suggest that cash usage has halved in the last few months due to the shift to contactless payments, and more people spending online during the pandemic.

By leveraging fintech tools, SMEs have the opportunity to continue growth by offering a wider variety of payment options, such as online, contactless, invoice or mobile, enabling them to meet the ever-changing needs of a vast range of customers. The good news is that we’ve already noticed this continued growth across the UK retail landscape. Recent statistics from Square sellers show that the number of those selling online has crept up from 54.3% in Q3 of last year to 57.4% over the same period this year. Our research also found that half of the UK public reported that their local, independent businesses were now offering a range of different payment options for them to choose from, offering greater flexibility and choice than ever before.

A brighter, more inclusive future

Despite the adverse impacts that the pandemic has brought on the retail sector – as well as so many other industries – there has been a clear silver-lining. We’ve seen a great shift in the way Britons shop, with our own consumer research suggesting that over two-fifths of them now use local and independent stores more often since the start of the pandemic. This has brought a unique opportunity for independent retailers to grow their customer base and keep their locals engaged.

The past few years have given small and independent businesses the push to experiment with new ways of reaching customers across the country in order to continue to stay open. Emma Beattie, a small business owner, who runs Mrs Macs Sweet Treats, a bespoke cake shop in Woburn Sands, Milton Keynes, is a brilliant example of this. Her business has been able to tap into a much wider customer base beyond the geographical limits of the shop by leveraging Square’s tools and pivoting to online. Prior to the pandemic, her business had never sold online before but within three minutes of offering deliveries, her business sold 300 boxes of its treats. Adopting digital payments has helped the business to double its turnover, which they’re re-investing to get their treats to more customers.

The recipe for success

Back in 2018, a local coffee shop in Ammanford, Wales went fully cashless. And whilst this was a huge transition for its local customers and community, Scott James, the founder of Coaltown Coffee, spotted something ahead of everyone else – managing cash comes with many hidden costs. Whilst going cashless is not always the right solution for everyone, for Coaltown, this allowed them to focus their efforts on improving efficiencies in other parts of the business.

As the industry is catching up with new solutions that are now widely available to facilitate financial inclusion and promote business agility, more SMEs than ever benefit from tapping into the latest tech tools. This allows them to have increased flexibility and continue to participate in the economy, even during unstable times.

By continuing to accelerate digital initiatives, and prioritising financial inclusion, SMEs have the opportunity to access new revenue streams, and increase their potential for further growth over the next decade. It’s a space to watch!

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