SMEs to reap the benefits of a whirlwind of change

SMEs are the engine of the Australian economy, accounting for 45 per cent* of private sector employment and playing a critical role in the nation’s 25-year** growth streak. While businesses continue to face a range of limitations – a report suggesting that Australian firms are drowning in $76 billion*** worth of unpaid customer bills – the good news is that a flurry of market developments are set to unlock significant and wide-ranging benefits for SMEs and start-ups.

First of these is the change in the regulatory landscape – in particular, the decision by the Reserve Bank of Australia to abolish the red tape that has required businesses to hold a banking license to serve as an acquirer for card transactions. While this may sound like a minor legal amendment, the truth is that it signals the end of the big-bank monopoly on payments; a monumental change for banks, payment providers and SMEs alike. With in excess of $2 billion worth of acquiring fees now up for grabs, a more diverse and innovative range of payment providers – particularly those actively seeking to offer SME-friendly solutions – will be able to extend their offerings and meet the needs and preferences of previously-neglected businesses. While banks have sought to innovate, they are financial services firms rather than technology providers, and the sheer scale of legacy infrastructure and ingrained conservative behavior hindered their ability to offer truly innovative and flexible payment services. From the development of biometrics, bitcoin and data-enrichment to wearable devices and an entirely cloud-based payments ecosystem, it is nimble fintech firms that will lead the way in making payments more efficient and convenient for all.

Hot on the tails of this regulatory change is a game-changing industry initiative: the New Payments Platform (NPP). When launched later this year, this new payments infrastructure will be the world’s most advanced real-time payments capability, going further in both efficiency and effectiveness than forerunners such as the UK’s Faster Payments and Singapore’s FAST platform. Payments that previously took one to three business days to settle will be conducted in a matter seconds, with the NPP’s promise of real-time payments injecting speed, versatility and data-enrichment into everyday payments at any time of the day or night. Small firms and retailers in particular will have the most to benefit from the New Payments Platform, which will catalyse the all-important cash conversion cycle and go a long way in addressing current pain points around working capital.

A step back from the payments sector reveals even broader market changes taking place, particularly when it comes to a seismic shift in Australia’s demographic landscape. The just-announced statistics from the 2016 census reveal that a massive (and growing) 39.7 per cent**** of Australian’s foreign-born residents come from Asia. Combine this with the fact that 10 Chinese visitors arrive in Australia every five seconds (equating to 8.3 million visitors in 2016), and the rising purchasing power of the nation’s burgeoning middle class, and it’s clear that Australia’s business and their providers need to turn their attention to “Chinese-friendly” offerings.

If Australian retailers and health and education providers – the key beneficiaries of China’s growing tourism – are to not just survive but thrive in this new environment, then they’ll need to adopt appropriate payment tools. The good news is that some payment-focused fintechs are already addressing these changes, with the best of the bunch developing partnerships with third parties such as WeChat, AliPay and Weibo in order to construct integrated payment solutions.

As we enter a new financial year, the coming 12 months will prove an exciting time for SMEs and payment providers alike. While such significant changes will inevitably spell a period of transition and uncertainty, the opportunity for smart fintech businesses here is huge, and Australia’s previously under-served SME sector is sure to reap the benefits.

* https://theconversation.com/is-small-business-really-the-engine-room-of-australias-economy-60447

** http://www.dynamicbusiness.com.au/small-business-resources/economy/how-will-the-economy-impact-smes-in-2017.html

*** https://www.adviservoice.com.au/2017/01/small-business-cash-flow-crisis-costing-australian-economy-76-billion/

**** http://www.news.com.au/national/how-asian-are-we-really-what-australias-census-2016-showed-us/news-story/2f055e32e74cbe4341953006379b6394

Bradley Gerdis, CEO, Smartpay

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