Mastercard taps on tech to boost SME funding access, e-commerce needs

This article was originally published in the Business Times.

LIMITED financing options has long been a barrier to growth for many small and medium-sized enterprises (SMEs) across the region.

With the pandemic and its accompanying economic impact in tow, access to financial backing is now an immediate need for small businesses to stay afloat, said Ari Sarker, Mastercard co-president for Asia-Pacific.

The challenge in shoring up funds for survival is further compounded by a growing need to pump more money into digitalisation, as the pandemic continues to accelerate the global e-commerce boom.

"Many desperately need financial resources to weather the pandemic. They need access to technology tools that cut costs, enable them to keep up with the rapidly changing consumer and create new sales and marketing channels. And they need the skills to put these tools to good use," Mr Sarker told The Business Times.

Even before the Covid-19 havoc, the International Finance Corporation estimated that SMEs face a funding gap of US$5.2 trillion globally, of which US$2.4 trillion is in Asia alone.

SMEs form the backbone of the Asian economy, making up over 98 per cent of all Asian businesses and providing two out of three private-sector jobs in the region.

Against this backdrop, Mastercard has been building new tech platforms that help increase access to credit for small businesses, said Mr Sarker.

This is in line with the payments giant's broader target to connect one billion people to the digital economy by 2025 - which includes 50 million small businesses and 25 million women entrepreneurs - to speed up digital inclusion and the digitalisation of businesses.

As an example, the Mastercard Farmer Network digitises marketplaces, payments and transactions for about 450,000 farmers in Tanzania, Uganda and India.

The firm also partnered with N-Frnds, SGeBIZ, and Finastra earlier in September to drive greater digital efficiency across the retail supply chain in Asia and increase wholesalers' access to credit.

The pandemic has disrupted supply chain and trade networks, and reduced control over cashflow and access to credit by SMEs. A potential US$2-5 trillion shortfall in trade financing through 2021 is expected if demand returns to the global economy, according to the International Chamber of Commerce.

Mastercard will leverage supply chain data from N-Frnds, SGeBIZ's digital procure-2-pay platform, and other sources to partner with Finastra and its trade bank customers to automate access to working capital finance, among other solutions.

The programme aims to reach 5,000 retailers in Asia by the end of Q1 2021.

While Mastercard is focused on removing friction from the payments ecosystem, private capital and fintechs must ultimately take the lead in improving access to funds for SMEs, said Mr Sarker.

"A more concerted approach to funding is needed as the pandemic makes it harder for many SMEs to get credit and attract investment."

As consumers - especially in Asia - shift quickly to on-demand products and services, online shopping, and contactless payments amid the global health crisis, it is also "imperative" for SMEs to operate across physical and digital spaces.

"Concerns about safety and security have been paramount during the pandemic but it's the speed, convenience and seamlessness of digital commerce that are really driving the change in preferences and expectations," said Mr Sarker.

As more ways to deliver products and services - through connected devices and the Internet of Things - come to market, so will emerge new ways to shop. Fresh measures to authenticate payments will also surface, including the use of biometrics and other data that go beyond passwords and one-time PINs. "The embrace of digitalisation will accelerate, and the sophistication of e-commerce will rise as we go forward," he said.

Though SMEs across Asia are of varying scales and models, the need for them to digitalise is equal.

"Hawker centre owners need to be able to accept digital payments and manage their books electronically just as much as a family-owned manufacturer, even if the scale is different," he told BT.

"Creating a world where access to digital tools and knowledge is equal - even if use cases aren't - is the largest challenge ahead."

Mastercard has in place several initiatives to help SMEs go digital, including training curriculums and cyber risk management tools. Its solutions also enable smartphones to double up as payment terminals, which brings more consumers and merchants into the digital commerce ecosystem.

In the grander pursuit of digitalisation, Mr Sarker cautioned that it is crucial to avoid the "balkanisation" of standards.

As much as digitalisation removes a host of obstacles for SMEs, balkanised regulation - the absence of standards, interoperability, and dialogue between countries at the right level - is one of the biggest impediments for SMEs to grow, he said.

He noted that future innovations targeted at SMEs must also offer fully-baked solutions.

"SMEs don't have access to large technical teams, so any tool that requires significant implication and maintenance support has a problem. Solving for this is an opportunity for the world at large."