How can fintech help MSMEs to shift toward digitization and tackle its challenges?

How can fintech help MSMEs to shift toward digitization and tackle its challenges?

The shift from offline to online commerce will not occur if technology fails to provide MSMEs with any appreciable benefits or does not correspond to the typical business practices of small business owners.

Scaled digitalization of business operations for small firms is a recent development. For the effectiveness of their business operations and financial requirements, small businesses have lagged for a variety of reasons.

Traditional challenges to digital adoption included:

  • A lack of accessible cellphones.
  • Poor data connectivity in rural areas.
  • A lack of understanding of digital.
  • A reluctance to make the switch.

On the infrastructure side, we have made good strides toward promoting digital adoption. While MSMEs are slowly embracing digital in India, we as tech innovators must actively work to create digital platforms that offer real value specific to the challenges encountered by small enterprises.

The transition from offline to online will not occur if the technology cannot provide MSMEs with appreciable value or does not match the typical business activity patterns of small business owners.

How can fintech help MSMEs to shift toward digital and tackle digitization-related challenges?

Because of first-time digital consumers or first-time solution phenomena, there is frequently a lack of benchmark for the problem you are trying to tackle while innovating for MSMEs. Here are some of the business- and user-related insights relating to MSMEs that we have learned from our ongoing interactions with MSMEs.

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For the fintech community to provide a seamless transition of the MSME community to digital and overcome issues linked to digitization, it is crucial to keep these MSME business behaviours at the forefront while developing for the segment.

Pay Attention to Cash

For the foreseeable future, India’s economy will continue to be dominated by cash, in semi-urban and rural areas. The management of money is a significant challenge for all small local businesses.

Although it’s fantastic that we have a system for online payments in place, we also need to concentrate on technologies that provide easy cash management and support businesses with the collection of overdue payments.

The most significant benefit of digitization for an unorganized sector is adequate cash flow

Consider a seller who is selling vegetables and manages cash transactions for 25% of her customers regularly. This needs time and resources to manage cash change, record customer payments in a notebook, send reminders for overdue payments, etc.

In practice, more than 25% of consumers who shop at small businesses prefer cash transactions. So, they try to make innovations to make it easier for MSMEs to conduct cash-driven business.


Benefits of Cloud Backup

Anything tangible could be misplaced. Accountancy books and even a smartphone, to be honest. But cloud-backed data is something you cannot lose. The merchant’s data is always secure is among the most important benefits of digitalization. For MSMEs, losing or injuring a phone, a notebook, or a page of business records is a common issue.

Data backup is therefore a big value addition. Users’ knowledge that their password-protected data is accessible anytime and from any device is a crucial motivator for MSMEs to switch to digital.

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Offering smartphone technology with the most straightforward, most intuitive user interface is merely the first step when designing for the tiniest of the economy’s retailers. It would be beneficial if you considered simplicity outside of the user interface. Can technology make accounting, finance, and payments simple enough for everyone to enter and interpret data?

Can small firms access data analytics for business in plain, understandable insights? Can they avoid the time-consuming paperwork and administrative headaches when looking for company loans? The degree to which technology streamlines MSME enterprises’ procedures and methods significantly affects the value they place on digitalization.


Enhance Trust Factor

Every data input or transaction in the MSME supply chain can have real-time visibility with digitization. MSMEs are a particularly trust-driven community in India as they respect their ties with and business relationships with their partners. Therefore, it’s crucial to focus on finding solutions that might reduce mistakes and complaints.

Meanwhile, when records are kept in physical books, there is a significant likelihood of error and it can be challenging to spot and fix afterwards.

With digitalization, all people participating in a commercial transaction can instantly produce and exchange records on their mobiles. The digital process can reduce disagreements that may arise in the future.

The ecosystem will become more efficient as we automate more and more facets of MSME finance and business. The biggest benefit digitization has brought to this community is the reduction of time spent on tedious manual labour.

A retailer can save daily hours by automating ledger administration, payment collecting, and cash management. Time is the most significant factor for any MSME because it directly affects how much money they make.

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Without a doubt, digitization is a game-changer for MSMEs. Since there is no such thing as a tiny concern for the MSME community, I think it is essential to actively listen to them.

We must pay attention, comprehend, and find the appropriate solutions to these issues. Continuous product testing also aids in determining whether the technology fits well with MSMEs’ business behaviour patterns. The tech sector must ensure that MSME’s digital transformation goes smoothly.


Article proofread & published by Gauri Malhotra.

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