Even as the pandemic has inspired a more protectionist world, SMEs should look at expanding overseas and adopting global technologies to grow and thrive. By Tan Bin Ru
Small and medium enterprises (SMEs), which form 99 per cent of Singapore’s companies, do not have it easy and the pandemic has only made their challenges more acute. The Business sans Border initiative, introduced by the government in 2020, is one way which Singapore is helping to support SMEs by connecting these homegrown businesses to global platforms. This includes logistics and financial services providers to find new buyers overseas.
In the meantime, SMEs continue to grapple with challenges such as financing, access to new technologies, and global expansion. In Singapore, a lack of capital is a roadblock for many SMEs to innovate and grow, where more than 60 per cent of them have to rely on bank loans to help with cash flow financing and power their growth plans. Documentation requirement is another financing challenge for SMEs, as banks often require companies to have at least three years of financial reports before they are granted credit. However, not all SMEs are able to meet this basic eligibility. Newer companies, hawkers or mom-and-pop stores tend not to have robust financial documentation and hence naturally get excluded from the financing game.
These challenges were exacerbated with the onset of COVID-19. As a result of the pandemic, many companies recorded lower customer demand and sales, and others have had to repurpose funds originally set aside for new technologies or innovation, to support day-to-day operations and the sustenance of their business.
Cross-border collaboration, business expansion an answer for SMEs
Against this backdrop, SMEs can turn to cross-border digital trade platforms to grow their business. The benefits are multifold. Akin to a one-stop shop for SMEs, these platforms allow SMEs to transcend borders, transact securely, scale quickly and digitise, as they provide access to a large overseas market and a curated suite of business-to-business (B2B) services. These services can come from banks, government agencies, logistic and technology providers, and trade associations – which can help SMEs grow and future-proof their business. For instance, SMEs will be able to discover and adopt new technologies, or collaborate with a bank to address their financial needs. Such platforms also open up new markets for SMEs, whether it be for the sourcing of products or acquiring new customers. They enable SMEs to obtain higher-quality goods which will improve their profit margins and increase customer satisfaction.
SMEs have been operating in a highly-fragmented market where many platforms prevail. Beyond the standalone platforms, cross-border digital trade hubs designed with platform-to-platform connection allow each platform operator to qualify and nurture their own communities while opening up a corridor to connect regionally, in a safe and trusted way.
The government, through public-private partnerships, has played a major role in championing digitisation and internationalisation amongst SMEs for a long time. A recent example of a cross-border digital trade hub is OneSME, a joint initiative by OneConnect Financial Technology and the Infocomm Media Development Authority in Singapore.
OneSME is a platform-to-platform aggregator connecting multiple B2B platforms and partners in Singapore with their counterparts from China. Each of these platforms has amassed up to hundreds and thousands of SME members, and owns technology and financing expertise in their domestic market. Therefore, when assembled on an ecosystem platform like OneSME, all of these platforms merge to become a useful marketplace of everything that an SME will need to expand its business into a foreign market.
Building a complete ecosystem with a clear value proposition
To build an effective ecosystem platform, deep curation – which involves a value proposition that is focused and relevant – is required. This entails identifying a need and agglomerating the right ecosystem partners such as banks and technology providers, as well as third-party data providers with meaningful data sources such as e-commerce sales figures and inputs from Enterprise Resource Planning systems to serve their needs end-to-end. These datasets, for instance, can provide a bank partner with credible and substantial information about an SME’s credit standing, thereby ensuring the approval process and disbursement of loans can be done digitally and seamlessly. On the other hand, one pitfall is having an ecosystem rife with frills and resulting in it becoming out of scope, failing to harness the cumulative leverage and scale of what a relevant ecosystem can gratify.
Moreover, there is a need to cultivate relationships with multiple platforms and ink mutually-beneficial collaborations with one another. Like any ecosystem where players thrive symbiotically, an ecosystem platform will add tremendous value to SMEs by having a well-curated network of diverse individual platforms. One example is the peace of mind when SMEs can leverage the digital technologies and government resources on OneSME to validate that all companies on the platform are legitimate and trustworthy, and that the products traded on it come with genuine certifications and reviews.
At times, building a strong ecosystem platform entails conceiving new business models and marketing strategies, so as to neatly integrate all participants and best promote the platform to SMEs. Finally, underpinning all of that is creating a seamless and positive customer experience, which can be achieved using digital solutions such as electronic know-your-customer, cybersecurity tools, cross-border data protection and sharing policies.
Cross-border ecosystem platforms go a long way in supporting SMEs as they scale their business – by helping them expand overseas and adopt global technologies to grow and thrive. As Singapore pledged its commitment to globalisation despite COVID-19 bringing about a more protectionist world – the country declared in 2020 that a less connected world would deprive people of opportunities and high-quality jobs – SMEs should take a leaf from this approach. To ensure business continuity and competitiveness in a pandemic world, SMEs must make cross-border collaboration a priority.
The writer is the CEO (Southeast Asia) of OneConnect Financial Technology, an associate of Ping An Insurance Group