Electronic Payments have the Potential to Bolster SME Success: New Study

  • By Vince Kadar
  • Wednesday, July 03, 2013

new study released in June by MasterCard Advisors looked at challenges facing Small to Medium Sized Enterprises (SMEs) around the world. The study Reinvigorating Global Economic Growth, identified a number of challenges including lack of low-cost financing and inefficiency in the financial supply chain.

What caught my attention is how the issues around the financial supply chain are largely related to the fact that they cannot leverage electronic payments. The result is that SMEs end up having higher costs and have to rely on slower methods such cheques for payments. This problem intensifies as companies go global as standards are not aligned between markets. According to the study, the reality is that the technology exists and when SMEs can access it they are able to improve both their efficiency and margins.

As this article points out, Moving away from traditional electronic payments to commercial card acceptance can make a major difference. Consider this: A recent study of 50 U.S. suppliers that included many SMEs showed that commercial card acceptance enabled an order-to-cash cycle 10 times or 34 days shorter than that of checks, ACH, and wire transfer, resulting in significant improvements in working capital requirements for the suppliers.

The bottom line is that using more modern methods of electronic payment will help empower SMEs to conduct business with less lagtime and more agility. New payment technologies offer smaller organizations a powerful, cost effective way to compete globally and build their business that much faster, but barriers to getting that technology need to be removed, and the SME market educated on the value of these technologies versus wire transfers and cheques.