When you say ‘unbanked’ or ‘financially excluded’ what picture comes to mind? Third-world countries? People in very remote parts of the world? But this term applies just as much to SMEs in France and other developed economies. They are underserved by traditional banks, who are reluctant to serve what they see as risky and unprofitable startups and small businesses. The barriers that traditional banks put up, like having to have face-to-face meetings, time-consuming application processes, limited access to loans, and certainly not a corporate card, are enough to stop many small businesses in their tracks.
Thankfully for France’s SMEs, which account for 98.8% of France’s businesses, there is a host of Fintechs ready to give them the financial services and support they need to succeed.
Fintechs, stepping boldly in where banks hesitate
Fintechs are stepping into the financial space previously dominated by traditional banks, blasting away the cobwebs and tearing up the red tape to give today’s digital entrepreneurs and SMEs the financial tools they need to grow their business securely and compliantly.
From invoice management and payroll support to alternative loans and legal advice, Fintechs are offering an ecosystem of services that target the needs and challenges of being an SME in the digital age.
This is good news, as, according to Euractiv, 25 million SMEs operating within the EU “are not yet fully equipped to face the needs of the digital transition.”
Three Fintechs supporting SMEs
France’s Lydia is the country’s second most downloaded B2C Fintech app with more than 5.5 million customers using the app to bank, invest, and send money to each other. The need that is there in the consumer space, is now being addressed in the business space. Fintechs, such as all-in-one financial service incard, was created specifically to help digital entrepreneurs with their finances, while Fintech neatcommerce focuses on the new digital global economy and helping SMEs conduct business cross-border with ease.
Neat offers not just payment facilities but also has layers of other services to help SMEs grow their business, such as accounting services. Neat partners with other Fintechs to help SMEs with other niche issues - partnering with Zeal to give SMEs legal help, Shopify to help businesses start an ecommerce site, and Zero to help ensure businesses are spending less time reconciling and more time adding value to their business.
Fintech incard was created to serve the needs of uniquely 21st century businesses: Instagram influencers, digital entrepreneurs, drop shippers and ecommerce. With no physical assets, this group is low on the list of priorities for most traditional banks - incard addressed their needs with payment solutions designed just for them.
The cash flow problem solved by Fintechs
Digital entrepreneurs and SMEs have in the past relied on traditional banks for loans to fulfil their cash flow or investment needs. Yet banks are notoriously risk averse, and reluctant to lend to start-ups and SMEs, especially digital-first businesses with few tangible assets. The good news for France’s SMEs is the country is home to around 735 Fintechs - created to help solve their financial issues.
For example, reduced cash flow due to late invoice payment is a concern for SMEs. In France, it takes 72 days on average for invoices to be paid. Fintechs are helping by enabling SMEs to add a ‘request to pay’ or a paylink to issued invoices, so customers can instantly add their bank details via the link. Just this one refinement has resulted in as much as 40% of all SMEs invoices being paid within the first week.
Payment safety is a B2B and SME concern
Post pandemic, international cross-border payments continue to increase, with B2B payments a large part of these. According to Juniper research, by 2026 B2B virtual card payments will account for almost 71% of virtual card transactions by value. With average transactions being much higher than consumer transactions, businesses need to ensure that security features and automation are readily available to make payments both efficient and safe.
By 2024, global B2B payments are projected to reach $120 trillion. Fintechs are rightly focused on improving the experience of invoicing, security, their financial transactions and onboarding so that B2B SMEs can focus on serving their customers better. If they are concerned about fraud, they are right to be. In 2021 fraud cost SMEs globally $32.04 billion, and this is projected to rise to $32.96 bn in 2023.
A recent Statista report showed the amount of remote payment fraud on France’s businesses reached €55 million in 2020. Thankfully in 2022, Fintechs are evolving solutions that satisfy businesses' need for security with their payments as they, and their customers, increasingly shift to digital-first.
To mitigate against fraud, SMEs can, of course, tighten up their in-house measures, or they can partner with a Fintech like Currencycloud partner incard, who has rigorous onboarding procedures and measures in place like two-factor authentication to protect against fraud.
“incard chose to partner with Currencycloud because they think globally with the choice of currencies available and competitive FX rates offered, as do those aspiring to join incard. Currencycloud’s robust APIs reinforce incard's security choices. The countries served, the currencies offered as well as the different routes set up to move them, correspond to the usage patterns of our clients.”- Says incard COO Matteo Martino
Better UX equals better credibility
Fintechs are not just anticipating the security needs and the future problems of their B2B clients when it comes to 24/7 international payments. They are also helping create opportunities in this process. Fintechs can provide SME-focused features such as the ability to book a competitive fixed FX rate (FX Forwards) so a business can manage its immediate cash flow - knowing they will be able to pay a supplier in six months' time because they’ve set the rate for a chosen date - means Fintechs are expanding their market share and tightening their grip on the FX and payments sector as a whole, and their SME clients are enjoying the benefits of this.
When we outlined the top five Fintech trends of 2022, offering an excellent user experience was one of them. This means making the payment process as simple and secure as possible, embedding it within one interface. Fintechs are focused on enhancing the user experience to increase security when making payments locally or abroad, with features including accurate tracking of the payment status.
Whether an SME is embracing digitization or not, security should be at the top of any to-do list as more and more customers, and businesses, make payments virtually. Talk with Marion to find out how Currencycloud can help your business protect against payment fraud and continue to innovate and thrive.