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SMEs need to work towards e-payment

Setting up an online payment system will give them a competitive edge and can be vital in helping them reach more customers and develop a truly global presence.
Tuesday, April 12, 2016 - 05:50

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A digital payment system not only provides convenience, safety and security for merchants, but can also be a key source of data, helping them understand and better anticipate consumer trends and preferences, says MasterCard Singapore group head and general manager Deborah Heng.

STARTING a business is a dream for many people. And in Singapore, there's also ample assistance from government agencies such as ACRA and Spring Singapore, to help these entrepreneurs fulfil their dreams.

What many don't realise is that staying the course is the tough part. There tends to be a misperception among budding entrepreneurs that once they can actually start, then the running will be well, if not easy, at least manageable. But this is often far from reality.

According to the latest research from MasterCard, small and medium enterprises (SMEs) in Singapore continue to face persistent challenges in the areas of operational costs and cash flows, recruitment and retention of talent as well as sustainable business growth. With SMEs in Singapore making up 99 per cent of all enterprises in the country, employing 70 per cent of the workforce and contributing to nearly half of the GDP, these pain points are a key focus for the government as it looks to continue to help SMEs expand and grow.

In this year's Budget, the government continued its strong focus on enterprises, the building blocks of our economy, by specifically addressing some of these challenges alluded to by the SMEs in the MasterCard research.

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Expanding access to grants

Most recently, the government has announced plans to broaden the accessibility of grants for SMEs through the Business Grants Portal, which will help consolidate and organise the many different grants available by various agencies. Furthermore, the recent Budget announcement also included a set of financial and tax incentives to support smaller businesses to scale up. And that includes raising the existing SME Mezzanine Growth Fund by S$50 million to S$150 million.

Beyond access to grants, SMEs should also look towards commercial credit solutions as a means to help them better manage challenges relating to raising and managing funds. Recent innovations on the e-payment front allow business owners to give credit cards to their employees to control and monitor spending on these cards. This in turn provides SME business owners with greater control and transparency and also improves their access to working capital.

Focus on technology

Underlying this year's Budget too was a deep focus on technology and innovation, as a tool for businesses to improve efficiency and productivity. MasterCard's own research with SMEs in Singapore found that close to half indicate they use technology extensively in their businesses, whether it is in the form of Internet usage, social media presence or incorporating technology into their day-to-day operations.

However, there's still a huge potential to help SMEs automate and leverage technology, especially to digitise and establish online payment systems that give them a competitive edge. A good electronic payment system can be vital in helping SMEs reach more customers and develop a truly global presence and can greatly improve the safety, security and convenience of payment processes for merchants and consumers alike.

Yet despite the benefits of a digital payment system, many small businesses believe that getting set up to accept electronic payments is expensive and difficult given their limited manpower. This misconception has left many small business owners turning away potential customers, hurting their growth and overall revenue potential. Furthermore, according to a 2015 MasterCard white paper on e-commerce, the smart use of data based on consumption patterns, preferences and locations will continue to shape and drive intent of purchase. A digital payment system hence not only provides convenience, safety and security for merchants, but can be a key source of data, helping them understand and better anticipate consumer trends and preferences.

Many of the solutions that are available today are essentially plug and play - developed with the small business in mind - and help SMEs get up-to-speed to start accepting online payments through a relatively simple and inexpensive process. A wide variety of solutions that enable SMEs to streamline and enable their web, mobile and social media channels for online commerce are also available, helping businesses to go from merely providing information online via a website, to actually transacting online.

Encouraging innovation

SMEs don't always see innovation as a "must have" - more often than not, it's a "good to have" - the daily operations of a business and its associated costs alone are hard enough to manage for smaller and more niche players.

However, with the advent of online commerce, opportunities and competition too are global, and SMEs from many sectors in Singapore will face the pressures of a larger, more connected marketplace. MasterCard's 2015 online shopping survey shows that in Singapore, 48.5 per cent of respondents had made a purchase through their mobile phones in the last three months, an increase from 36.7 per cent in 2014, and that the top three spend categories were clothing and other fashion accessories (37.3 per cent), coupon/deal sites (22.3 per cent) and tickets for cinema/movie theatres (22.1 per cent).

With the growing mobile connectivity of consumers, businesses must look into accepting mobile payments. This will impact businesses that are not only online, but traditional brick and mortar establishments will find they need to evolve and change the way they transact. Quick serve restaurants (QSR) are an example of a traditional business that is looking at integrating mobile payment terminals in restaurants, a payment method that is not only safe and secure but convenient for merchants and consumers alike.

To this point, the government is investing significantly not just in research and development, where it has made a S$1.5 billion top-up to the National Research Fund, but also to drive cross-sector collaboration to encourage innovation. As part of the Budget announcement, the government announced the establishment of SG-Innovate, which will match budding entrepreneurs with mentors and venture capitalists, opening new markets for these entrepreneurs and providing them with much needed access to resources.

Big corporations too have a role to play in helping SMEs bridge this gap, to inspire and encourage innovation and also practically, to act as a role model to SMEs - where businesses are able to learn from best practices and benefit from the expertise and network of larger corporates.

As a co-sponsor at this year's Emerging Enterprise Awards, MasterCard is committed to support SMEs as they continue to innovate, develop new capabilities and leverage technology to simplify business processes. While the heavy investment by the government to help SMEs in Singapore upscale and grow will be hugely helpful, success will come from leveraging the expertise and the network of the private sector and other stakeholders to build an eco-system that supports and nurtures SMEs here to take flight.

  • The writer is group head and general manager of MasterCard Singapore, a technology company in the global payments industry

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