Logging in to the Online World: Digital Banking Impacts SME’s Operations
The digital world is taking over amid the coronavirus pandemic. This is mainly because of the lockdown measures imposed to prevent the further spread of the virus. With this, people are opting to access digital platforms to accomplish many tasks and even banking transactions at the comfort of their homes.
Banking via digital platforms has become necessary nowadays as more and more financial institutions are improving their online portals to meet the demand. Indeed, banking online is consistent in many sectors today, including small and medium enterprises (SME).
Digital banking impacts SME’s operations, for sure, as adjustments were made to keep up with the pace of technological advancement. On the other hand, it provides enterprises numerous perks as well, such as convenience and efficiency.
Let us have a look at how digital banking impacts SMEs.
Payment Platform for SMEs and Customers
Digital banking impacts SME’s payment platforms. With an online portal, the customers of SMEs can settle their payments via digital banking, which is easy and quick. For example, when your customers buy an item from your physical or digital store, they can simply send the money via electronic transfer or even through quick response codes. With this, SMEs can improve its presence in the e-commerce industry, keeping up with the changing consumer behaviour.
In addition, payment via digital banking is seen, reducing the hassle of issuing a physical receipt, which sometimes gets lost. All these pieces of information—the amount of purchase, items bought, and data of the transaction, among others—are now available digitally and can be accessed anytime.
Setting Up Bank Accounts for SMEs Digitally
Digital banking impacts SME’s process of opening a bank account as well. It is much easier and quicker to open a bank account via digital platforms. Just make sure that you have all the requirements the bank is seeking. These are usually identification documents but may vary depending on the bank.
In addition, you can build up your SMEs savings account digitally. Such is a necessity to make sure that your firm earmarks a portion of its money for future spending or emergencies.
Moreover, you would need a bank account, so you can receive the payments of your customers, whether they are transmitted via checks or electronic money transfers. Having a bank account can help you better manage your finances in general.
Accessing Loans Via Digital Banking
According to studies, SMEs are finding it challenging to access loans or credit because of many reasons. These include high cost, low approval rate from financial institutions, and more. Lenders are usually hesitant to extend a borrowing to the SME sector, especially if it is a startup, because of concerns over profitability. After all, banks want someone who can pay their dues on time without problems.
The so-called credit gap is being addressed by financial technology (fintech), which is also a form of digital banking. The fintech firms are serving as alternative sources of financing for SMEs. They usually have fewer requirements compared to the banks, making loan approval easier on the part of SMEs.
Banks Taking Part in Improving SME Digitalization
The banks can further support the digital journey of the SME sector, apart from these firms accessing digital banking. This is to help them survive the major economic downturn due to the coronavirus pandemic. The banks should be able to lend a helping hand to the industry badly hit by the crisis.
Expanding the Coverage of Digital Banking
The banks can help the SMEs transition to a fully digital banking solution—and not just a bank account–to address many aspects of its operations. This is considered a huge help because many physical branches are closed now due to the lockdown measures. With this, the traditional access to finance is lessened; thus, people are leaning towards digital.
According to surveys and reports, there has been a significant increase in the number of average digital banking users and e-commerce customers in the past months. These figures are even expected to rise further even after the pandemic as the current health crisis shaped consumer behaviour already.
Planning and Forecasting Amid the Pandemic
The banks can assist the SMEs in coming up with forecasting tools via innovative digital solutions. Hopefully, this can help the SMEs monitor their cash flows, supply chains, and sales more accurately. With this in place, SMEs can better outline its long-term plan and strategy to survive the ongoing pandemic.
Providing Financial Literacy
It is important for banks to educate SMEs on financial literacy, especially when we are factoring in digital platforms. With financial literacy education, more SMEs will be encouraged to make a digital shift, which is more beneficial for them. It will also help promote financial inclusion.
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