Digital payments and trade for MSMEs: Encouraging inclusion and growth through digital transformation

Event report

[Read more session reports and updates from the eWeek of Online Event: Dialogues, Webinars and Meeting]

This session, moderated by Ms Yan Xiao (Project Lead for the Cross Border Digital Payments Portfolio, UNCTAD), featured professionals who discussed the various issues facing micro, small, and medium sized enterprises (MSMEs) in the digital age, including the impacts of fintech (financial technology); policy considerations for cross-border payments; creating international ecosystems for MSMEs; addressing the MSMEs’ financial needs; creating and maintaining competition; and issues related to gender disparities. Each of these topics was introduced as an issue that pertains to encouraging inclusion and growth for MSMEs in the context of digital transformation.

Mr Mike Gallaher (Fellow from Visa and WEF Representative) spoke about the need to support MSMEs to access the digital market, referring to digital trade as a ‘big upgrade for small and medium enterprises.’ He discussed a paper titled, ‘Policy Considerations for Cross-border Payments’ that he is working on with his colleagues, Nigel Cory and Usman Ahmed. This paper intends to outline recommendations for regulatory reforms and new trade commitments to improve cross-border commerce. Thus far, the paper is focused on four broad issues:

1. barriers to supplying services;
2. standards and interoperability;
3. security and trust; and
4. innovation enabling oversight.

Gallaher noted that the challenges facing cross-border payments included delays in payment and inability to supply products according to demand.

Mr Jaspreet Singh (Global Innovations Lead and Regional Lead Inclusive Digital Economies, UNCDF) spoke on the various issues related to digital infrastructure, including global fintech, eco-systems for MSMEs, and the importance of addressing the MSMEs’ financial needs. Singh said that the increased use of digital platforms is what precipitates the need for the development of digital infrastructure. He noted that digital financial transactions are 80-90% cheaper to process than non-digital transactions, and that 90% of the developed world’s trade is executed by computer investment algorithms. This highlights the need to support MSMEs in transitioning their services online. On the topic of addressing the MSMEs’ financial needs, Singh described a two-pronged approach to empowering demand of MSMEs products: developing digital skills, networking, and financial literacy, as well as strategies for supply integration to diversify finance choices for MSMEs; and engaging fintech companies, techfin companies, and traditional financial institutions.

Mr Ayman El-Sherbiny (Chief of ICT Policies Section, Economic and Social Commission for West Asia (UN-ESCWA)) offered his perspectives on digital finance and e-commerce in the Arab region, speaking mainly on the topics regarding the challenges and opportunities presented to MSMEs by digital finance. He spoke about the status of fintech and e-payments in the Arab region; the region has one of the lowest levels of financial inclusion in the world, with only 37% of adults having bank accounts, compared to the global average of 69%. El-Sherbiny noted the gender gap within these statistics, that men are almost twice as likely to have a bank account than women in the region. This alludes to structural barriers, regulatory hurdles, and market issues in the region, which contribute to this gap in access to financial services. El-Sherbiny said that one of the opportunities that fintech services provide is increased inclusion of MSMEs, which contributes to stimulating job creation, economic diversification, and inclusive growth. He mentioned that the COVID-19 crisis lockdown has led to the deeper and accelerated digitisation of trade and commerce at the global, regional, national, and local levels. As a closing remark, El-Sherbiny noted that those who will be left behind, will be those who are left offline.

Mr Usman Ahmed (Head of Global Public Policy and Research, PayPal) began by noting that while the rapid digitisation of trade during the pandemic offers both opportunities and challenges to MSMEs, the challenges presented to them should not be undersold, as this rapid transition online has caused many MSMEs to lose sales as consumer spending has decreased. He noted that it is fascinating that many MSMEs have successfully turned to e-commerce as their main source of profit in a matter of weeks, and that the assistance of governments has contributed to this shift. While policy issues such as data localisation and cybersecurity pose a challenge, digitalising businesses is critical to the inclusion and growth of MSMEs.

Mr Gordon Janzen (E-commerce and Digital Marketing specialist, Western Union Business Solutions) offered descriptions of the strategies that MSMEs can undertake to achieve this digitalisation. He noted that MSMEs can participate in the worldwide digital economy if they initiate their online services, execute their sales by managing their credit/working capital and managing risk, and growing their business to partake in economies of scale.

Mr Magellan Fetalino (Co-founder and CEO, Acudeen Technologies) spoke on various issues in the context of Acudeen, a digital platform focused on helping financial institutions in the Philippines and Myanmar invoice MSMEs. He noted that while certain sectors in the Philippines are thriving, such as restaurants which have been able to transition to online delivery services, other sectors have been negatively impacted, such as lending loans to institutions who have faced a surge of demand. Capital which was supposed to be provided for MSMEs is no longer available due to the pandemic. Even considering the success in some sectors, Fetalino noted the challenges that these currently successful sectors may face in the future, such as the slow return to regular business practices after the threat of the pandemic subsides.

By Diana Gavrykh