Partnerships: The secret behind FinTechs serving SMEs better

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Partnerships are gateways that equip fintechs with a more efficient and holistic capability to better serve SMEs. They are a tool to build and streamline fintechs’ internal processes as well as level the playing field in the competitive and rapidly evolving fintech landscape. We know that partnerships are the way to go, but what kind of partnerships should fintechs look at to better serve SMEs? Who should fintechs collaborate with to improve the overall customer experience?

Partnerships with clients’ partners

Good fintechs focus on understanding SMEs’ needs and working towards problem-solving the existing issues that they face. Successful fintechs go a step further to anticipate the unique problems that various SMEs face, and work towards preventing it using a targeted approach – often involving partnerships. 

Take for instance, the age-old issue of SMEs receiving late payments. In Singapore alone, late payments to SMEs add up to over SGD$4 billion. 4 in 5 finance managers in Singapore SMEs said that late payments were an urgent issue, with 3 in 5 saying that the situation is getting worse. The crux of the cashflow problem is not just limited to late payments. These SMEs do not receive cash upon service completion, but only after 30-60 days. While these are standard payment terms, it undeniably leads to cashflow problems. Furthermore, SME buyers have to pay their suppliers earlier than their own trade cycle, which means they even have the cash in hand from the sale of a product. Fintechs can solve this problem by providing credit lines to SMEs to ensure that their cash flow remains smooth. However, successful fintechs will examine the industry and situation that the SME is in to come up with a customised solution. In particular, these fintechs will find it immensely helpful to explore the partners that their SME clients are already working with. 

For example, the SME may be a haulier that provides haulier services to other organisations. If the SME was to work directly for large customers, payments for completed jobs often take 30-60 days. Many have also started working with haulier marketplaces such as Haulio to get more business and better negotiate terms with end customers based on supply and demand. In this case, fintechs can form partnerships with haulier networks to facilitate pre-approved credit to enable SMEs to get paid shortly after performing their services, therefore allowing SMEs to have sufficient funds as bridging capital in the meantime. Through this partnership, SMEs can enjoy access to early payment services which directly solves one of their key headaches. As evident, by making financing part and parcel of the services that SMEs are presently using, fintechs can provide a targeted solution where SMEs can reap almost immediate rewards.

Similarly, SMEs who operate as sellers on e-commerce platforms tend to receive delayed payments due to delays in shipping or customer acknowledgement of receipt. The bigger problem, which recurs for many SMEs, is that even if the service provision flows smoothly and is completed, payment still takes several weeks due to the standard billing cycles of platforms. These platforms may have a payout cycle of once every two weeks, or once a month. Furthermore, delivering goods to customers can take longer in markets such as Indonesia due to the country being more spread out as compared to a market such as Singapore, which further adds to the delay in payments received by SMEs. To improve these SMEs’ cash flow, fintechs can collaborate with e-commerce platforms such as Alibaba, Etsy, EZBuy, Lazada, Shopee, Shopify, Taobao, Tokopedia, Qoo10, Zalora and more to allow SMEs to get paid for sales instantly instead of after a couple of weeks. Another alternative is to offer a Buy Now Pay Later service where fintechs can offer end-customers instalment repayment options to ensure that SME sellers can capture a wider pool of customers with different spending power.

These examples make it clear that fintechs must be problem solvers. There is a need to continuously relook at the customer journey and improve the overall customer experience. This means that fintechs cannot simply look at their SME customers, and should examine beyond and into SMEs’ partners such as anchor buyers and suppliers (which are companies that SMEs buy from or sell to) as well as any other platforms such as e-commerce, procurement, and even other fintechs. Most importantly, fintechs must be present wherever and whenever SMEs need them. If SMEs are selling their goods and services on multiple e-commerce platforms or making purchases on procurement platforms, fintechs must be there to serve. After all, only when customer needs are addressed consistently will fintechs be doing their jobs well.

The good news for fintechs is that companies are keen to partner with them. For example, 94% of financial services companies were confident that fintechs can grow their company’s revenue in the next two years, and 95% of technology companies said the same.

Partnerships to improve customer centricity

In every industry, meeting clients’ needs is integral to business longevity. Likewise, in the world of fintech, addressing our SME clients’ needs is key to staying relevant. Oftentimes, this means that fintechs have to partner with other platforms to serve the SME better.

These partnerships, which can take the form of collaborations and/or merger and acquisitions , ensure a smooth and pleasant customer experience by reducing any potential inertia that SMEs may have by flattening the learning curve. This, in turn, weeds out as many obstacles as possible to urge adoption from SMEs.

Fintechs can study various customer touch points by SMEs to identify how much to improve the overall customer experience. For example, to elevate the experience of payments, fintechs can implement mobile technology such as mobile point-of-sale (mPOS), where mPOS transaction values are predicted to exceed $1.9 trillion by 2024. Depending on the SMEs’ location and operation procedures, they may prefer a wide range of mPOS platforms not limited to AliPay, DBS PayLah!, GooglePay, GrabPay, OCBC PayAnyone, PayNow, ShopeePay, and WeChatPay. Fintechs should stay apprised and integrate various payment methods by making the relevant mPOS platforms accessible to SMEs. Over time, allowing payment by mobile wallets and even app-based payments, including customer-to-retailer transactions, can be explored.

To further achieve customer centricity, fintechs can also partner with banks, whose core services and regulatory status have proven to be valuable, but can require fintechs’ help to improve on customer experience. 14% of consumers turned to their bank for financial advice following a life event that affected their finances significantly. In contrast, fintech attracts customers, particularly Gen Zs and millennials who contribute about USD$350 billion of spending power in the US alone, as it is built on transparency, flexibility, and ease

South East Asia has emerged as a Fintech hotspot, capturing a 20% share of the total APAC Fintech funding in the first half of 2020. By collaborating, banks and fintechs can both improve on their brand reputation, offer better features to consumers, increase customer pool, reduce costs, and scale up efficiently.

One such example is the collaboration of several traditional banks with neobanks (also known as challenger banks) to provide digital savings and checking accounts services. These neobanks often have features that traditional banks lack, such as being solely online, or being able to round up transactions to automatically save the difference. Other partnerships also allow smaller fintechs to benefit from the lending ability of a traditional bank to provide small loans for SMEs. Another partnership can involve the provision of debit cards or prepaid cards to an otherwise unbanked population, therefore improving financial inclusion. With fintechs transitioning from disruptors to mature players, they can now be increasingly seen as a good partner of choice. In fact, over three-quarters of banks have considered new fintech partnerships to improve customer experience and real-time visibility.

Having these efficiencies can help significantly shorten the turnaround time of delivering products or services. Ultimately, if an SME is willing to purchase a fintech service or product, the checkout process should be as fuss-free and seamless as possible. Fintechs should maintain a fast, frictionless, intuitive, and secure process to improve the overall customer experience.

Collaboration over competition

While fintechs are considered to be disruptors in the finance sphere, true disruption cannot be done in a short-sighted, competitive and win-lose manner. On the contrary, it needs to be done in a collaborative and sustainable way through beneficial partnerships with multiple partners that improve the fintechs’ capabilities, as well as companies that SME clients interact with. These partnerships improve the overall customer experience.

Considering that 86% of buyers will pay more for a better customer experience, soon overtaking price and product as the key brand differentiator, focusing on partnerships to boost customer experience seems like the logical thing to do. By being customer centric and forming partnerships, fintechs are building valuable relationships that will build capabilities that last.

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Shrawan Saraogi
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