Small and medium-sized enterprises (SMEs) are integral to the UK’s economy, fuelling job creation, innovation, and economic stability. With £4.5 trillion in annual turnover and accounting for 61% of the UK’s workforce, SMEs form the backbone of the nation’s economy. The UK government’s recent “Year of the SME” initiative highlights their importance and seeks to drive sector growth. Despite this, SMEs face substantial survival challenges that often outweigh opportunities for growth.
Over the past ten years, UK SMEs have struggled with constant uncertainty, intensified by the Brexit transition, the COVID-19 pandemic, economic stagnation, and limited government support. The fintech sector is uniquely positioned to step in and offer essential support, particularly within payments. As the new CEO of payments processor DECTA, I feel it’s important to recognise the invaluable contributions of the SME community, as well as the significant challenges and opportunities they encounter.
What challenges do SMEs face?
Over the past decade, small business growth in the UK has sharply declined. The Enterprise Research Centre’s State of Small Business Britain report reveals that SME growth has dropped by 40%, a figure that represents not just numbers but countless businesses struggling to survive – many of which have had to close their doors for good. These conditions were only worsened by the pandemic, with nearly half of all SMEs reporting reduced turnover, and 30% forced to downsize.
Beyond shrinking revenues, SMEs are facing rising operational costs and limited access to financing, compounding the pressure on them. The widespread closure of bank accounts has exacerbated these challenges; a Treasury Committee inquiry found that over 140,000 business accounts were closed by major banks last year, often without adequate warning. Together, these factors are putting SMEs in increasingly vulnerable positions, restricting their access to the essential financial services they remain viable.
Fintech’s Role in Supporting SMEs
Fintech companies are well-positioned to address many challenges facing SMEs, particularly in the payments sector. Unlike traditional financial institutions, fintechs have the agility to develop innovative and customised solutions for small businesses. However, fintech firms also encounter their own set of challenges, including navigating regulatory landscapes, managing costs and mitigating risks.
To effectively support SMEs, fintech innovations must be both practical and accessible. Offering advanced technology alone isn’t enough; solutions need to be tailored to SMEs’ specific needs and straightforward to implement. The emphasis should be on creating tools that bring real value by directly addressing the day-to-day problems SMEs face.
Two of the most exciting fintech developments for SMEs are embedded finance and open banking. Embedding finance enables businesses to seamlessly integrate financial services into their workflows, streamlining payments, lending and insurance. Open banking gives SMEs greater access to their financial data, facilitating smarter decision-making and improved financial health.
The payments side
The payments sector is crucial for SMEs within the broader financial ecosystem, yet it still faces significant challenges. Payment providers must navigate complex regulatory requirements, manage operational costs, and balance risk without limiting the service they offer to small businesses.
Over the past few years, the fintech industry has still made a substantial impact in addressing these gaps, providing SMEs with new financial management options through digital banks, peer-to-peer lending, and other innovative solutions. However, more can be done to fully support SMEs in overcoming their financial challenges.
To make a lasting difference, payment providers must develop solutions that are both innovative and accessible. Products need to be easy to use, cost-effective, and truly valuable for SMEs. This requires fintechs to stay closely connected with the SME community to keep up with their evolving needs and challenges, ensuring that their offerings are relevant and impactful.
Moving forward, effective support for SMEs will require collaboration among fintech companies, SMEs, and policymakers. While the industry has the potential to drive significant change, it cannot operate in isolation. Policymakers play a vital role in fostering an environment where innovation can thrive, and SMEs can more easily adopt new technologies. This could involve reducing regulatory burdens or providing incentives for technology adoption.
For fintech companies, success lies not in building the most advanced technology but in creating practical solutions that address real-world problems that help SMEs succeed in today’s challenging economic climate.
Looking Ahead
Empowering SMEs to thrive requires fintech innovations that blend advanced technology with accessibility. However, building a supportive ecosystem where SMEs can flourish depends on strong collaboration between fintechs, SMEs and policymakers.
With the right backing, SMEs can tackle their challenges and sustain their vital role within the UK economy. In today’s rapidly shifting regulatory landscape, the partnership between fintech and SMEs is more critical than ever for mutual growth and resilience.
To learn more, visit: https://www.decta.com/
ENDS
About Scott Dawson
Scott Dawson, CEO at DECTA, he is a highly motivated and results oriented individual with over 20 years of experience within the payments industry. He is committed to driving DECTA’s UK strategy forward, with a focus on its growth within the UK and supporting small to medium businesses with its broad range of payment solutions.
Previously, he served as Director of Operations at Pixxles, a UK based acquirer, and Commercial Director at Neopay, the market leader at delivering compliance solutions to e-money and payments institutions. Scott has also held fraud management positions at PSI Holdings and Neteller, before becoming Senior Fraud Manager and then Business Development Manager at ClickandBuy, which was acquired by Deustsche Telekom.
About DECTA
DECTA group companies provide end-to-end payment infrastructure, including payment acquiring, white label payment gateway, acquirer and issuer processing, and digital banking platform. Unlike other players in the crowded payments marketplace, we offer bespoke-as-standard solutions to make payments accessible to everyone.
Its value chain includes Authorized Electronic Money Institution Licenses issued by national regulators in the UK, Ireland, and Cyprus and a PCI DSS Level 1, ISO 27001, and ISO 9001:2015 certified processor for Mastercard, Visa, and UnionPay International.
