How can Fintech help MSME switch to digital
How can fintech help MSME move towards digitization and tackle the challenges?
The shift from offline to e-commerce will not occur if the technology fails to provide MSMEs with any noticeable benefits or does not conform to the typical business practices of small business owners.
Scaled digitization of small business operations is a recent development. For the efficiency of their business operations and financial requirements, small businesses have lagged behind for a number of reasons.
Traditional challenges for digital adoption include:
- Lack of available mobile phones.
- Poor data connection in the countryside.
- Lack of digital understanding.
- An aversion to switching.
On the infrastructure side, we have made good progress towards promoting digital adoption. While MSME is slowly embracing digital in India, we as technology innovators must actively work to create digital platforms that offer real value specifically for the challenges facing small businesses.
The transition from offline to online will not happen if the technology can not provide MSMEs with significant value or does not match the typical business activity patterns of small business owners.
Due to first-time digital consumers or first-time solution phenomena, there is often a lack of benchmark for the problem you are trying to tackle while innovating for MSME. Here are some of the business and user insights related to MSMEs that we have learned from our ongoing interaction with MSMEs.
For the fintech community to provide a seamless transition from the MSME community to digitization and overcome digitalization issues, it is crucial to keep these MSME business behaviors ahead as they evolve for the segment.
Pay attention to cash
In the foreseeable future, India’s economy will continue to be dominated by cash, in semi-urban and rural areas. Managing money is a significant challenge for any small local business.
While it’s great that we have an online payment system in place, we also need to focus on technologies that provide easy cash handling and support companies with collection of overdue payments.
The most important benefit of digitization for an unorganized sector is sufficient cash flow
Think of a salesperson who sells vegetables and manages cash transactions for 25% of their customers on a regular basis. This requires time and resources to manage cash change, record customer payments in a notebook, send reminders of overdue payments, etc.
In practice, more than 25% of consumers who shop at small businesses prefer cash transactions. So they’re trying to innovate to make it easier for MSMEs to run cash-driven businesses.
Benefits of Cloud Backup
Everything tangible can be misplaced. Account books and even a smartphone, to be honest. But cloud-backed data is something you can not lose. Seller’s data is always secure is among the most important benefits of digitization. For MSMEs, it is a common problem to lose or damage a phone, notebook, or page of business documents.
Data backup is therefore a great added value. Users’ knowledge that their password-protected data is available at any time and from any device is a crucial motivator for MSMEs to switch to digital.
Simplification
Offering smartphone technology with the simplest, most intuitive user interface is just the first step when designing for the smallest of the economy’s resellers. It would be beneficial if you considered simplicity outside the user interface. Can technology make accounting, finance and payments simple enough for anyone to enter and interpret data?
Can small businesses access data analytics for businesses in simple, understandable insights? Can they avoid time-consuming paperwork and administrative headaches when looking for corporate loans? The extent to which technology streamlines MSME companies’ procedures and methods significantly affects the value they place on digitization.
Improve the confidence factor
Each data entry or transaction in the MSME supply chain can have real-time visibility with digitization. MSMEs are a particularly trustworthy community in India as they respect their ties and business relationships with their partners. Therefore, it is crucial to focus on finding solutions that can reduce errors and complaints.
Meanwhile, when records are kept in physical books, there is a significant likelihood of errors, and it can be challenging to detect and fix afterwards.
With digitization, anyone involved in a commercial transaction can instantly produce and exchange records on their mobile phones. The digital process can reduce disagreements that may arise in the future.
The ecosystem will become more efficient as we automate more and more aspects of MSME finance and business. The biggest benefit digitization has given this community is reduced time spent on tedious manual work.
A reseller can save daily hours by automating ledger management, payment collection and cash handling. Time is the most important factor for any MSME because it directly affects how much money they make.
Without a doubt, digitization is a game-changer for MSME. Since it is not a small concern for the MSME community, I think it is important to actively listen to them.
We must be aware, understand and find appropriate solutions to these problems. Continuous product testing also helps determine if the technology fits well with MSME’s business behavior patterns. The technology sector must ensure that MSME’s digital transformation runs smoothly.
Article proofread and published by Gauri Malhotra.
