FinTech companies have demonstrated that there are new ways to use and manage money, bringing greater agility, dynamism and security to traditional processes in different sectors, and therefore serve as a basis for promoting a culture of entrepreneurship and innovation. SMEs and eCommerce represent between 50% and 80% of a country’s business fabric. This type of company has suffered the most from the COVID-19 crisis. Jason Simon, a FinTech and eCommerce expert, explains how this innovative solution has helped eCommerce end SMEs find an early recovery.
The economic impact of the COVID-19 pandemic on production sectors globally, especially small companies, has led to the point where some have disappeared and others have put their competitors in a difficult situation. Given that situation, Simon argues that the technologies have been there and that “resistance to change is a long-standing regional issue” that has been overcome over time. “The adoption of technologies to improve the customer experience when requesting a service or making a purchase is not a luxury, nor should it be a complication for companies, because with the right use they are an ideal mechanism to drive business,” Simon adds.
Most eCommerce lacks the financial muscle to survive such hard knocks. Nor do they have easy access to financing that would allow them to survive. FinTechs, however, can play a key role in enabling SMEs to raise financial resources. Simon has indicated that informal businesses can take advantage of digital tools for low-cost entrepreneurship and at the same time create visibility.
The first step in entrepreneurship with FinTech is to “change the chip” and combine social networks for the first approach with consumers, through digital platforms as a way of security and guarantee to close a deal. “The first thing could be to start spreading through the networks the type of service or product, and inform about the payment buttons (existing digital payment methods), which provides greater security to users,” Simon explains.
The Latin American region was not ready to face the impact and changes brought about by the COVID-19 pandemic. For some, the changes have been adapting and for others, it has been the challenge of the year.
eCommerce has undoubtedly shown tremendous growth and has come to change the way commerce moves today. Internet shopping has registered a growth of more than 45% in one month, as a result of the pandemic and following the social containment measures to prevent the spread of the virus in many countries.
The first task, then, is to get the technology in place to bring the online platforms to the countries. SMEs barely have the economic cushions to survive a crisis like COVID-19. In the US, most of them have less money in their coffers than they need to cover a month’s payments. In addition, because they have no income now, they also lack liquidity. When small businesses lack liquidity, they die. But if small businesses close, it will be very difficult for the economy to recover. Therefore, everything possible must be done to help them in these extremely difficult times. FinTech can help a lot.
“This crisis is forcing everyone to realize the importance of SMEs and their effect on employment,” Simon explains. “When the economy is doing well, everyone focuses on small businesses that are doing very well. You think they’re going to be the next Google.” This is important because those companies drive innovation, economic activity and, in effect, could become giants. But the truth is that there are very few such SMEs. Only less than 1% of SMEs get venture capital to provide them with the investments they need. Most of them are either sole proprietorships, with no employees, or are small neighborhood businesses. Take, for example, the businesses around us. These are the companies that have been hardest hit by the crisis.
Fortunately, the crisis measures have not forgotten the SMEs and help could arrive in time. In the US, UK, and other countries, FinTech has been a very important solution. They can provide a very important point of access to financing for SMEs. FinTechs are also very agile. In the US, they are working with programmers so that SMEs can access a portal and get help through it. When there aren’t many banks, or when many SMEs don’t have one to serve them, FinTech can be a great solution.
Simon says, “Today whoever is not doing eCommerce is losing money, space, and customers by not using digital platforms that enable customer interaction and drive business growth.”