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Why SMEs risk falling behind Southeast Asia’s digital revolution

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Christopher Choo

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4 weeks ago

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The payments industry has been on an extraordinary trajectory. It’s not just digital wallets and alternative payments that are growing – even more traditional forms, such as credit and debit cards continue to thrive. A recent report from PWC found that digital payments using e-wallets amounted to $22 billion in Southeast Asia, and the payment form is expected to grow more than fivefold to $114 billion by 2025. 

However, not every section of the economy is reaping the benefits of this boom. Typically referred to as the “backbone of economies”, small and medium-sized enterprises (SMEs) are grappling with a host of issues in their path to digitalisation, including poor internet infrastructure, digital skills, access to technologies, funding and policy gaps. For example, in the Philippines, SMEs comprise 99.5% of all businesses and employ 65% of the workforce. Yet, they account for only 36% of value added to the economy. This gap is only going to get worse if nothing is done. 

Addressing SME needs 

In my view, the biggest barrier to digitalisation for many small businesses remains the lack of financial solutions that actually address the specific needs of SMEs. With the current crop of cashless payment solutions today, SMEs are forced to use systems with multiple payment terminals, which can be quite daunting. Additionally, they have to manage separate software solutions for various processes, including sales, inventory and accounting, which can be costly and complex – and as a result, end up paying a few different vendors, all of whom operate in silos.

This is where integrated QR code payments come in. QR codes offer a low-cost, easily installed payment solution for merchants, and the process is just as simple and easily accessible for consumers. For SMEs to take advantage, these solutions need to be ‘plug-and-play’, without requiring a complete overhaul of existing payment systems or changes in business operations, and they must accept all major e-wallet QR payments. Physically, the POS device must be wifi or SIM-enabled, allowing merchants to operate flexibly. It should offer smooth checkout experiences and provide real-time transaction records for easy reporting. Additionally, merchants should receive payouts from transactions within the next business day, ensuring stronger cash flow. These conditions can help solve crucial pain points that SMEs face in streamlining daily operations.

Enhancing opportunities

Southeast Asia’s favourable demographics and significant smartphone penetration have propelled the use of QR codes, with one Juniper research report expecting the volume of QR code payments in Southeast Asia to jump 590% to reach 90 billion in 2028. For these numbers to bear out, ecosystem players must make the technology inclusive.

A promising stride forward has been the implementation of a standardised ‘national QR’ system for e-payments in nearly every Southeast Asian country, ensuring a smoother QR code experience for all. Nonetheless, there’s still much room for growth, especially for fintech businesses and policymakers to drive adoption in the region’s large unbanked and underbanked markets.

Emphasising on accessibility, user-friendly interfaces, robust internet connectivity, and merchant education will be key to driving widespread adoption. While payment companies constantly come up with innovative programs, these programs need to be consistent and long-lasting for real success to come through. For example, financial support programs that offer significant discounts for SMEs can help increase accessibility for smaller businesses to POS and payment systems.

Furthermore, there is immense potential for the fintech industry to integrate artificial intelligence (AI) to drive not only innovation but also inclusion. By harnessing AI, fintech firms can utilise alternative data points to extend credit services to unbanked SMEs and micro-SMEs, opening doors to economic opportunities previously out of reach.

There are plenty of fintech companies exploring similarly remarkable opportunities. In order for one to set themselves apart, their programs need to be consistent and long-lasting, not just temporary, flash-in-the-pan initiatives.

This article is written by Christopher Choo, Chief Executive Officer and Co-founder, Qashier

The insight is published as part of UPTECH MEDIA’s thought leadership piece, written within its repository of contributor articles. 

UPTECH MEDIA welcomes partner article contributions about the latest technology trends in the Asia-Pacific region. For inquiries and submissions, please send them to ed*******@up**********.com.

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