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Why won’t your SME customers share their financial data? It’s not them, it’s you.



By Pete Lord, CEO & Co-Founder at Codat.


The outlook for small businesses in 2023 is volatile. Along with through-the-roof inflation and dropping demand, accessing the finance needed to survive and grow is set to drift further out of reach for a great number of businesses. Even back in 2019, the Bank of England put the SME funding gap – the difference between the amount of credit growing businesses need, and the amount they can access – at £22 billion. Put simply, this gap continues to exist because the SME credit landscape is not set up for lenders nor borrowers to succeed.

As the UK hurtles into its second recession in less than two years, this funding gap will undoubtedly continue to impact and endanger small businesses, unless it is addressed.

There is another way

Improved data sharing – enabling better data flow and accessibility between lenders and the financial tools used by small businesses – is key to reducing the SME funding gap.

It is the first necessary step, which according to our recent research could close the gap by around £10bn, effectively halving it. The right initiatives have the potential to not only help SMEs but to unleash significant business opportunities for lenders and the financial services community at large. It’s a no brainer.

The technology needed to reduce the funding gap via improved data sharing already exists, therefore the onus now is on technology providers and credit providers to put it into action to better support small business access to credit.

The big myth: SMEs won’t share their data

Critical to the success of data sharing initiatives, is the willingness of SMEs to allow access to their business data. And while there is a common misconception that SMEs are not willing to do this, in fact, the opposite is true, as long as there is a clear incentive for them to do so.

Our latest research shows that over two-thirds of SMEs are happy to share their data with potential credit suppliers, a number that jumps to 90% of SMEs with 10+ employees, and 96% for those with 50+ employees. The larger the SME, the more open they are to data sharing.

Sole traders and micro businesses do tend to be more reluctant, in part due to a lack of awareness and understanding of how Open Finance and data sharing can benefit them. However, improving access to credit for larger SMBs is most important because these businesses contribute significantly more to GDP and the economy. Companies with 10+ employees represent just 5% of all businesses, but contribute 31% of turnover in the economy.

From the lender’s perspective, it’s the larger companies which also represent the main business opportunity. While their size and typical level of borrowing shouldn’t by any means preclude sole traders from accessing the credit they may need, they do borrow less often and borrow on average up to 10 times less than their larger counterparts.

Overall, it’s clear that the majority of SMEs are willing to share their data. If lenders are being met with reluctance from SMEs in doing so, the chances are that it’s down to the lender and how their services are being presented.

What should financial providers do differently?

The data shows that the best incentive for SMEs to share data is securing a lower rate. Almost a third of SMEs said they’d share more data in exchange for a better rate on a loan, and 22% would do so for greater transparency in the loan decision-making process. Therefore, for lenders to improve the willingness of SMEs to share data with them, the most important thing is to effectively communicate the value exchange, so that SMEs can draw a direct line between improved data flow and improved access to credit. In other words, something like ‘Connect your accounts for a decision in less than a week (2 weeks + without)’ is better than ‘Connect your accounts to complete your application’.

SMEs do have understandable concerns around data security – who will have access to their business data and how it will be used. However, the critical takeaway from our research is that SMEs will happily part with their sensitive financial data if they are reassured that it will be handled responsibly. For example, when we asked SMEs what they thought could be done to help alternative lenders build their trust, almost half of respondents said they wanted clearer limits around how their data would be used. To encourage more customers to share data, lenders must be explicit and transparent about data management and their approach to data security during the connection process. For instance, including a brief description of the privacy policy and security measures as well as a linking out to the full document and requiring an action from the user to confirm consent.

Our research also shows that 58% of SMEs trust high street banking, but that this drops to 18% for online-only lenders, mainly due to unfamiliarity, confusion around regulation and uncertainty about these lenders’ approach to data security. Addressing these issues will help to win over more SMEs to data sharing.

The time for change is now

The technology to improve the SME lending landscape for both SMEs and lenders is already here, as is the willingness from businesses to share their data, when provided with the right motivation and reassurance. Lenders must not let the myth that SMEs won’t part with their data be the justification for inertia. The providers that act now will find themselves ready to unlock significant growth opportunities, whilst also narrowing the SME funding gap thus improving the outlook for the UK’s small businesses.


E-commerce marketplaces have become more than third-party platforms



By Luke Trayfoot, CRO, MANGOPAY


E-commerce marketplaces have become an essential driver of e-commerce growth. As found by Ascential in their annual Future of Marketplaces Report, by 2027, third-party sellers using marketplaces will capture 59% of global e-commerce sales. A trend accelerated by the pandemic. Marketplaces are helping more brands cater to the ever-changing needs of consumers.

As businesses are continually being challenged to provide a seamless shopping experience, marketplaces can support this venture. Without the added costs of warehousing, supply chain and logistics for additional products, marketplaces can help to alleviate some of those pressures, especially as consumer demand grows.

Now, marketplaces need to further evolve their offering through payments infrastructure, whilst remaining compliant with payment regulations.


The marketplace offering – lowering barriers to entry

 Beyond access to the best deals, seamless checkout and quick deliveries, marketplaces also exceed consumer expectations for an intuitive one-stop shopping experience. Through marketplaces, retailers can continue to evolve their proposition, collecting data on what their customers want and need and continually refining their offerings at the right time and in the right place (web/app).

Marketplaces can also support businesses entering new markets or competing with bigger players in their respective fields. Entering a marketplace network allows small businesses to quickly gain influence, benefiting from larger audiences and quickly generating high sales volumes.

With multiple sellers, many with an international presence, implementing a sophisticated payments environment is much more complex than building one for an e-commerce website. Trading globally has different rules and regulations to adhere to per country which means payments environments must be multi-layered, accepting various forms of payments, which can be an inhibitor to businesses scaling at pace. Marketplace’s innate customer-centredness must be maintained end to end, including the purchase journey, so a sophisticated environment is essential.


Building the right payments environment

 A crucial part of the customer experience, it is important that merchants provide a choice of payment methods at checkout. As payments have evolved, marketplace operators should consider what options they provide to sellers, and subsequently, their end consumers.

The number one expectation is of course payment security, which is a key step in building a long-term relationship based on trust. Increased control points, however, generally means more friction being introduced into the payment process, so this is a balancing act.

As the retail landscape continues to grow, so does competition and as new players enter the market, businesses must find new ways to innovate, and the creation of payment options is one of the most important avenue to do so.


Considering regulation at every step

 Increased marketplace activity has led to the introduction of regulation for the platform economy. In the UK, HMRC has implemented changes to VAT reporting requirements for digital marketplaces and their third-party sellers, especially for overseas sales. Across Europe, KYC (Know Your Customers) regulations intended to protect customers from data breaches on a marketplace and identify the persons (legal or natural) with whom the marketplace does business, as part of anti-money laundering and terrorist financing directives, have also been enacted.

As online platforms continue to play an increasingly significant role, the implementation of the Digital Services Act supports creating a safer, online experience for citizens. This regulation enables the expression of ideas, communication, and online shopping by reducing exposure to illegal activities and dangerous goods. Regulation can seem extremely daunting, especially for those looking to enter the market. However, its purpose is to protect both the business and users.

Marketplaces need to work with payment infrastructure specialists that can support providing methods for local users, as well as options that are familiar and trustworthy for a global audience. Additional flexibility also needs to be built in to adapt to different demographics to ensure that a variety of consumers are appropriately catered for. If a brand wants to establish itself in a new market, varied payment methods are not a nice to have, but a must.

Despite the current economic climate, global e-commerce will continue to grow in the years ahead. Those that will be able to stay ahead of the curve will ensure that their customers’ experience is balanced with greater choice and varied payment options, in tandem with regulatory compliance.







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How can merchants overcome barriers to payment innovation in 2023




Kevin O’Connell, Chief Product Officer at Trust Payments


The payments sector is going through an exciting change. Consumer expectations and economic pressures have encouraged widespread innovation from Crypto to Open Banking and QR Codes to Wearable technology.

The economy is bracing for a challenging year as inflation and soaring interest rates impact consumer spending. Merchants must be flexible and adapt to keep up with the competitive landscape and consumers’ ever-changing needs and wants.

Remaining agile and innovative is easier said than done when barriers to entry in payment tech are high. Whether it’s integrating into existing systems and strict regulation, or consumer suspicions and security, friction is likely.

There is a gap in consumer and merchant knowledge surrounding the emerging payment methods disrupting the sector, which can potentially slow down progression in the long term. Merchants must collaborate closely with partners to help create an innovative and successful payment experience.

Kevin O’Connell

The domination of digital payments

Digitisation has taken payments to levels beyond what experts and analysts could predict. Research shows alternative digital payments like mobile payments and QR payments are on the rise as they become widely available and are perceived as cheaper by consumers.

Consumers have complex needs that must be secure, while catering to their individual needs. Adopting new entrants to payment tech can improve customer satisfaction, unlock new consumer groups and streamline business operations.

Merchants face legislation challenges with evolving best practices battling with outdated infrastructure, costs, and increased friction with system integration. Keeping operations up to date is critical, and making changes to payment systems can be daunting for merchants with extensive trialling, compliance and team training needed to launch successfully.

Delivering a consistent customer experience

The last thing merchants need is failing payments or fraudulent transactions to disrupt the payment process, as consumers are spoilt for choice and can jump ship to competitors with the click of a button. Demand for immediacy from consumers means merchants must deliver a single and consistent payment experience across channels to make alternative payment acceptance as easy as possible.

One way to deliver a consistent payment experience is through Cloud Payment Application Programming Interfaces (APIs). Cloud APIs optimise the payments process for merchants by connecting old and new technology easily, to execute the latest alternative payment solutions without disruption.

The power of mobile

Merchants who accept card payments will be familiar with Point of Sale terminals. Mobile-powered POS such as iOS and Android excel when delivering smarter payment solutions to consumers, as integration into existing systems is simple. Mobile iOS and Android give merchants access to a comprehensive, multi-channel map of all customer data across all customer touchpoints.

Performance, security, reliability and scalability are key for payment acceptance. Mobile iOS or Android POS payment terminals have the payment flexibility customers desire, and the connectivity staff need to take payments anywhere. These terminals offer stronger security and have a highly customised interface. Updates are also carried out in the background on Android and iOS without disrupting daily operations.

Empowering merchants and customers

As alternative payments have emerged, millions of people and merchants have benefited from innovative services with added value. However, a lack of communication within the payments ecosystem has meant knowledge and adoption among merchants and consumers have not been as successful as they could be. Merchants and consumers have been happy to minimise risk and limit themselves to certain set products, which is preventing progress.

Sharing access to financial data can allow customers to benefit from new, tailored services. Investing in the education of teams will help pass on the knowledge and benefits of alternative payments to customers. Merchants and consumers must reconcile and communicate openly to build confidence in the abilities of the new entrants in payments to drive growth and sustain innovation.

Sustaining payment innovation in 2023

Merchants are under pressure to facilitate alternative payments, which creates challenges for merchants and users across channels. Innovations in cloud APIs and Mobile-powered POS such as iOS and Android are making it easier than ever to integrate old technology with the new.

As we settle into 2023, it’s essential merchants work with the payments industry to educate consumers on the power of data to transform how they pay. If merchants remain slow to adopt new and innovative payments, the sector will stagnate, which could have long-term implications, particularly during a turbulent economic climate.

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