Eyal Nachum, Bruc Bond’s fintech guru and board member, has a message to SMEs struggling with banking and cross-border payments: jump on the fintech bandwagon, it’s a lifeline you can’t refuse.
It’s no small secret that small- and medium-sized enterprises (SME), the real backbone of the world’s economy, are in a tight spot when it comes to getting their banking needs met. This is especially true for cross-border payments, an issue that affects a large part of SMEs, especially those operating in the import/export arena.
The causes for this downturn are varied and complex, but suffice to say that the banking industry is itself in a state of semi-crisis. A cursory glance at Europe’s banking sector serves up a grim example. Since 2008, the banking workforce has shrunk from 3.23 million people to only 2.7 million, while bank branches have been trimmed from 240,000 to some 183,000. These losses, respectively 16.5 and 24 percent, conceal a convoluted tale of external and internal pressures leading to losses of profitability and a reduction in banks’ ability to serve their clients. Sadly, in this case, the clients are the very SMEs the economy cannot afford to leave behind.
The effect on SMEs has been, in some cases, debilitating. Many struggle to access financing, or even acceptable levels of service. For the backbone of the economy, this is a dangerous state of affairs. And when it comes to those SMEs dealing in the import/export industries the struggles are even greater. Profit margins in this industry are often small, and most SMEs don’t have the necessary trading volume to achieve high gains and profits.
These trends, of course, set banks and SMEs on a collision course, says Eyal Nachum. Import/export SMEs are desperate for payment solutions that take their unique-yet-widespread concerns to heart, while banks are eager to increase earnings while reducing workloads. These goals are diametrically opposed. Most banks simply don’t have the resources to deal with the variety of business cases presented by SMEs, especially when their margins are so slim and profit potentials so low. The SMEs, on the other hand, are in dire need of solutions that don’t gouge their slim margins out, while taking their needs into account.
Eyal Nachum and the team here at Bruc Bond believe that solutions can be found in the burgeoning fintech and non-bank financial institution (NBFI) sectors. These companies, of a wholly new variety, attempt to circumvent the traditional banking way of doing things, often to tremendous results. Their methods, means and approaches radically depart from those of traditional finance and banking, which allows them to offer services at much reduced costs compared to their entrenched (and struggling) competitors.
There are many options out there. From old-school payments à la Western Union with MoneyGram and the likes, through the buzzy TransferWise, to hybrid approaches like Bruc Bond’s, all the way to attempts and revolutionising the industry entirely by upstarts like Ripple, each of us could find the right solution for our individual needs. Do your research and don’t despair, owners and managers of SMEs. These solutions could give you breathing room, go get ‘em.