Harnessing the power of fintech to grow your SME business.

You’ve probably heard this before – the number one reason why SMEs fail is because of cash flow problems. You might call it the ‘lifeblood’ of such organizations and, the ability to get a handle on persistent cash flow issues is a huge part of survival for many businesses. You may be somewhat familiar with personal money management for individuals. 

For SMEs, cash flow management is different when compared to large corporations for two main reasons: the debt cost is higher, and the capital return is lower.

Fintech is a term that covers a range of innovative ways in which technology is used to develop, deliver and change financial solutions and services worldwide. If you’re an investor in Malaysia, it may have even impacted your life. 

Although it has not completely made traditional financial firms obsolete, Fintech is revolutionizing the finance landscape worldwide by pressuring traditional firms to re-evaluate their existing business paradigms and find solutions that are more efficient, more customer-centred and less expensive. Fintech solutions are quickly paving a path towards better cash-flow management for SMEs the world over. 

Easier lending options

Just a few years ago, the majority of funding opportunities open to start a new business was limited. One of the most popular was approaching a bank, lending institution, or investor to borrow interest money. In general, traditional lenders are not eager to lend to smaller companies. Now, thanks to FinTech, small businesses can circumvent these conventional methods to obtain loans to set up, expand and run their businesses.

FinTech bridges the financing gap between small business borrowers and potential lenders, thereby dynamizing the business environment. Peer-to-Peer (P2P) lending platforms such as Fundaztic (a homegrown P2P financing platform licensed by the Malaysian Securities Commission) connect borrowers directly to potential lenders. Borrowers, therefore, get access to funding at lower interest rates than bank loans and lenders can earn income. They were among the first batch of licensed P2P finance operators to operate in Malaysia.

Another popular crowdfunding P2P platform in our region is Funding Societies. The Malaysian-founded regional platform offers excellent short term financing solutions to SMEs while also offering investment opportunities to individuals and institutions who wish to invest in Malaysian SMEs.

Faster invoice payments

Recent analysis shows that SMEs in Malaysia now have to wait 50% longer to acquire their invoice payments especially in comparison to just a few years ago. When large corporations are supplied by SMEs, the money does not always flow back seamlessly, often due to bureaucracy and processes that large corporations have to go through before the cash can be used. A supply-based SME may well be forced to borrow from financial institutions without sufficient cash flow to continue to cover the costs. Capital Bay is a start-up that aims to solve the cash flow problem afflicting many start-ups and SMEs, trying to provide solutions using four easy steps; supplier invoices are automatically uploaded online, users choose a date to receive their invoice payment, buyers and funders accept early payment, and finally, users receive early payment. This innovation in supply chain finance is made more affordable and faster for SMEs by utilizing the credit strength of their customers to finance rates that are much lower than those of a traditional bank.

A focus on investors

B2B Finpal is one of six operators licensed by the Securities Commission Malaysia (SC) to finance P2P platform. The company launched its platform, aiming to carve a niche in the industry by offering short-term financing products to investors that can provide higher liquidity and greater flexibility, such as invoice financing notes. At present, it is one of the few platforms in the country that offers this investment product.

Payment collection optimization

In 2018 Zac Liew and Steve Kucia founded Curlec to help companies collect recurring payments as well as gain control of their cash flow. Curlec does this by building technology on top of the bank-to-bank direct debit payment infrastructure-a system that was historically accessible only to large corporations.

The startup serves businesses like AXA Affin, Axiata, and Stashaway, and even a wide range of small and medium-sized businesses. Despite the Malaysia lockdown, the company continues to grow in transaction volumes by an average of 20 per cent month-on-month in 2020. This comes just as many of the traditional online business shifts. As the market continues to expand, Curlec is further expanding its vision to help businesses grow by allowing them to access the subscription economy in Malaysia first, followed by South-East Asia.

Efficient accounting processes

By seeking to make the accounting process more transparent and efficient, Xero is focused on helping small businesses and their advisers. SMEs can utilize Xero to automate bank reconciliation, manage accounts and monitor their financial health. With the development of its financial web and the launch of an open banking API, banks and fintechs can, with relatively little development, more quickly and securely integrate with Xero’s platform, to provide real-time banking feeds for small businesses.

Digital payment gateways

iPay88 is among the initial pioneers in Malaysia’s online payment gateway space. Founded in 2006, the company has played a crucial part in driving Malaysia’s e-commerce growth via payments. Japanese tech giant NTT Data acquired iPay88 in 2015, it is arguably one of the first successful exits within fintech space in Malaysia. iPay88 is a dominant player in Malaysia’s online payment processing space, with a growing influence across ASEAN markets.

Going cashless

TNG Digital, the company that has laid roots across the nation and the producers behind the Touch’n Go eWallet system. National campaigns and such initiatives are all part of the organization’s mission to turn Malaysia into a cashless society. TNG Digital rolled out e-donations at the start of the MCO to help the local NGOs raise money amounting to RM300,000 to carry on caring for vulnerable communities. Other initiatives launched aimed at preparing the SME community from partial lockdown’s devastating financial effects and enabling users to adopt a cashless lifestyle.

 

You May Also Like

 

How else has fintech impacted you as an SME?