Fintech can play a crucial role in saving Europe’s SMEs from an inflationary crisis

Inflation is at rates not seen since in many countries since the 70s. It is likely to get worse and much of the globe will experience a significant recession over the next 18 months. The situation in Europe is particularly bleak with rising energy prices pushing many people and businesses to the brink. It may be hard to remember – but these problems originated in late 2021 with the supply chain crisis. It underlines the importance and fragility of the infrastructure that underpins our economies. This is why it’s crazy that the SMEs and individuals that make up the supply chain are so poorly served by traditional financial institutions.

Many small and medium-sized companies and carriers, even before the supply chain crisis started, lived uncertainly – often from invoice to invoice. In Europe, the average payment time for an invoice to this type of company is two months – this has increased by 10% in 2022, according to our own data. Due to the nature of their work, most individuals and businesses are barred from accessing credit. It doesn’t take an MBA student to see how an inflationary spiral will hit these operations even harder, sending many into bankruptcy and exacerbating Europe’s supply chain woes. This will of course lead to even more inflation as the flow of goods decreases and transport becomes even more expensive.

The sad fact is that SMEs and sole traders in the logistics and supply chain industry are not alone. Many small businesses from various verticals find themselves ignored by the financial services industry and can be bullied by larger companies into accepting late payment as a matter of course or unfair contract terms.

However, there is hope. The fintech industry is uniquely positioned to help. We just need to remember the fundamental principle on which the sector was founded and initiatives like Open Banking were created – to disrupt finance to increase access and improve services. Financial inclusion is one of the most potent tools for individual and business growth.

There is therefore a clear moral and practical incentive for fintechs to create and adapt their services to Europe’s SMEs in neglected sectors such as logistics. A relatively simple service like factoring, empowered by digitization and the latest AI and automation techniques to make it fully accessible to every customer, can be transformed into a lifeline. Not only does it give SMEs a buffer to keep operating, it helps to insulate them against inflation and even provide them with the capital to expand their business. Financial security is incredibly empowering. The significant growth 4Trans has experienced in offering this service to supply chain SMEs and carriers underlines how high the demand is. We get the satisfaction of both building a fast-growing startup and helping small and medium-sized businesses survive and thrive.

This is just one simple example. There are plenty of opportunities to offer all kinds of different financial tools and services, especially in insurance services, leasing and loans to name just a few. In fact, many of the products currently aimed directly at consumers or other start-ups would do wonders if they were tailored for SMEs in sectors such as logistics. The key is to remember that simplicity and speed are critical elements for this target group. They do not have the time or, in most cases, the technical experience to become super users on complicated platforms. Time for these businesses really is money.