IT was important for South Africa to understand the needs of Small and Medium Enterprises(SMEs) to ensure that it captures growth opportunities Visa South Africa Country Manager Aldo Laubscher.
The digital payment network provider said SMEs were becoming an increasingly attractive market across Sub-Saharan Africa (SSA).
“Globally they make up 90 percent of businesses and account for more than 50 percent of employment. In emerging economies, they account for 40 percent of GDP and are expected to create at least 90 percent of new jobs by 2030. Covid-19 pandemic accelerated the rise of SMEs and drove the growth of entrepreneurship in the already expanding gig economy as people searched for new ways to make money due to changes in personal circumstances such as job losses and salary reductions,” Laubscher said.
He said that as the rise of SMEs and the gig economy continued, they offered a large customer base opportunity for both issuers and acquirers to tap into.
However, he said SME needs could not be met using a traditional Customer Value Proposition (CVP).
“They have a number of unique characteristics and need a product which sees them as not only a consumer, but also as merchant, small business and invoice payer. This means that if traditional banks want to tap into the SME market, they need to learn lessons from neobanks and fintech entrants, who have created tailored CVPs.”
Visa South Africa said there were approximately 52 million Small Medium Enterprises (SMEs) across South Africa, Nigeria and Kenya.
It said these SMEs were predominantly micro-enterprises (that is, approximately 98 percent of SMEs in Kenya and 99 percent of SMEs in Nigeria are micro-enterprises).
Trade/Retail is the dominant sector for SMEs in Nigeria (42.3 percent), Kenya (63 percent) and South Africa (39 percent). Commercial payments flow across Sub-Saharan Africa was estimated at $2 trillion, primarily driven by South Africa at $594bn.
“In our recent opinion paper titled The Rise of Small and Medium Sized Enterprises (SMEs) shows that commercial payment volume in Nigeria is $425bn and in Kenya it is 80bn SMEs in SSA contribute significantly to GDP and labour force. For example, in South Africa, the contribution of SMEs to GDP and labour force is 34 percent and 68 percent respectively. In Nigeria, SME contribution to GDP and labour force is 50 percent and 76 percent respectively. In Kenya labour force contribution from SMEs is as high as 93 percent and contribution to GDP is 40 percent. The opportunity to serve the SME market across SSA is huge.”
Laubscher said Visa’s suite of capabilities, powered by insights from VisaNet data, can be leveraged with their network of partners to help unlock SME potential by designing a CVP that was not only tailored to SME needs but also provided a best-in-class experience. This included providing a convenient and user-friendly experience since SMEs were looking for a product that adds value and makes their lives easier, which means offering quick underwriting and approval, a streamlined user experience and a focus on positive results.
He said embracing digital capabilities because SMEs want digital capabilities so that they can manage their accounts and businesses remotely. This required an offer of services such as digital onboarding and virtual issuance.
Offering end to end business management and integration with business admin features, such as sending and paying invoices was a great way to attract SMEs.
Ensuring your CVP is personalised and customised by targeting SMEs was all about meeting their needs and providing them with the right product, so it goes without saying that the CVP offered must be able to adapt to unique user needs.
Finally, it said understanding the nuisances of the local market was key since SMEs cannot be approached from a global perspective; a local approach is needed to develop a truly holistic approach and knowing that SMEs need to be looked at from both the Issuing and Acquiring perspective since their needs fall between the two categories.
Laubscher said as the rise of SMEs continued it was important that both Issuers and Acquirers do not dismiss opportunities and take the time to ensure that they had a value proposition offering that met the needs of the SME sector.
BUSINESS REPORT