SMEs face a unique set of challenges and risks that traditional banks have historically been weary to take on.
But thanks to fintech, SMEs have never been better served.
Sometimes, disruption is the only way to achieve financial inclusion.
- Why SMEs have been traditionally seen as risky
- How fintech has fueled financial inclusion
- The long-term ramifications of COVID-19 for SMEs
The challenges SMEs face
Neat was originally founded in an effort to make financial services more accessible in Hong Kong, a region of the world where opening accounts can be extremely difficult.
But in the process of solving this pain point for the consumers, the company’s users kept saying that, while having a personal account was great, the real challenge was having options for their side gigs and hustles.
That led to Neat’s current mission: enabling the entrepreneur economy.
“We believe that by providing the right services and support, SMEs are more likely to be successful.” — Pedro Pinto
SMEs are poorly served by traditional banks
As Neat embarked on their mission, it became clear that banks weren’t cutting it for SMEs and the space was ripe for innovation.
The traditional players, which are usually set up for face-to-face business, often seemed to see SMEs as risky and unprofitable.
And of course, there is some truth to that — not all SMEs will make it.
But it’s a circular problem. One reason SMEs struggle is because they are poorly served by traditional financial providers.
How fintech fuels financial inclusion
These days, the gig economy is booming, which is easy to see when you realize Shopify and eBay millionaires are surprisingly commonplace.
And with these innovative and powerful new models for earning, many of these entrepreneurs are turning to equally innovative fintech like Neat to address their financial needs.
The innovations in the space are finally serving SMEs as well as traditional models have always served larger organizations.
Fintech is offering greater financial inclusion.
But that has ripple effects, too.
“It is now much easier for small businesses to get access to financial services.” — Pedro Pinto
The traditional institutions are catching on to what Fintechs like Neat already knew — offering more financial services to SMEs is good business.
So, Fintechs are not just offering new innovative services for these customers, they are also pushing the traditional players to follow suit, spurring on even more options for SMEs.
Ultimately, fintech’s disruption led to traditional financial services disrupting themselves.
The lasting effects of COVID-19
Of course, things are a little more complicated these days given the economic consequences of a global pandemic.
It’s no longer just the historical financial challenges SMEs face that need to be addressed, but new, unprecedented ones.
Still, Pedro is confident that with the financial tools now available to them, SMEs can weather this crisis.
“Fintechs are creating products for a new online, cross-border world, where often the traditional players are very much still specific to in-region businesses.” — Pedro Pinto
To do so, however, a few things need to happen.
- SMEs need financial education
Neat offers a wide range of services that can help SMEs through the pandemic and beyond, but if customers don’t know about them, they can’t benefit from them.
One of the biggest challenges right now is cash flow, so Neat are working hard to help their customers with accounting and tools to help manage their cash flow and.
- SMEs need access to alternative funding
Neat is looking into ways to educate their customers on other sources of funding available to them
- SMEs need community
Perhaps the most important element in building resiliency is creating a community where businesses can help themselves and each other.
Sometimes, the answer for struggling businesses is something as simple as pivoting — a move that’s much more apparent and much less daunting when you have a chance to learn from others who have done it themselves.
One thing is for certain: COVID-19 has accelerated existing trends and it’s unlikely that the world will look the same after it’s over.
The gig economy is stronger than ever, workforces are more distributed and SMEs are becoming more agile.
And with these long-term changes comes the certainty that ever more innovative methods of earning will need financial services that can keep up.
Until next time!