World Payments Report 2022: Banks must accelerate payment services to support SMEs as the backbone of the economy

Consumers worldwide are confronted with new payment methods (instant payments, digital money, mobile and digital wallets, account-to-account payments, QR codes). But the looming recession and rising inflation, combined with ongoing geopolitical issues, present a host of new challenges.

Despite this global headwind, the use of new payment methods will continue to grow from around 17% of total cashless transactions now to around 24% in 2026. But as B2C payments flourish, the B2B value chain is still all too often neglected. This is evident from the Capgemini Research Institute’s World Payments Report 2022 published today.

Payment service providers have weathered recent market volatility accelerated by the introduction of innovative new digital payment methods for consumers. However, many banks worldwide fail to provide the same support to small and medium-sized businesses.

According to the report, despite promising levels of post-pandemic recovery, SMEs continue to struggle with cash flow issues and cash conversion cycles, hindering the next phase of growth for many. This has led to an increasing demand for payment service providers to re-prioritize and bring together the right tools to help SMEs explore new market opportunities.

“Small and medium-sized enterprises are the backbone of global economic growth, contributing half of global GDP and global employment. And yet they are among the companies most affected by recent market volatility,” said Jeroen Hölscher , Global Head of Payments and Cards segment at Capgemini. “Banks and payment service providers need to re-prioritize to tap into this untapped value through innovative and experiential payment services.”

Collect the right building blocks to improve SME travel
While the SME market segment is now worth more than $850 billion globally, the report says SMEs are still often overlooked by the traditional banking sector in favor of larger corporate account holders and the larger retail market. As a result, SMBs often struggle with cash flow issues, cybersecurity risks, poor liquidity and operational inefficiencies that fuel existing dissatisfaction with established payment service providers. Around 89% of surveyed SMEs worldwide feel that their primary bank does not provide them with sufficient service. They are therefore considering switching to a more flexible, alternative PayTech service provider.
A shift to a digital payment provider will allow SMEs to follow the trend already underway in consumer markets. For example, the report shows that global B2B cashless transactions are expected to grow by approximately 10% in the period 2021-2026.
To regain the loyalty of SMEs, banks will need to increase the value of their platform, which is only possible by addressing the limiting legacy systems that are currently inhibiting growth. The report finds that more than a quarter of banks struggle with infrastructure inflexibility, with 75% of executives prioritizing the cost of keeping current systems running over innovative new value propositions – a clear barrier to needed investment in innovation and flexibility as SME customers demands.

Instead, payment service providers should choose composition, which allows them to select and connect building blocks in different combinations to meet customer requirements. In this way, companies can tailor their offer optimally to the needs of SMEs. This is done on the basis of harmonized data to provide a unified value proposition by enabling payment service providers to build B2B marketplaces for SMEs.

New payment options with Distributed Ledger technology
Among the plethora of innovative technologies adopted by banks, Distributed Ledger Technology (DLT) emerges as a critical advantage. A distributed ledger is a database of transactions spread across a network of many computers, rather than stored in one central location. While many banks and payment service providers agree that this technology has the potential to transform the industry, its adoption will be cautious as limited resources limit investment opportunities. As the market evolves and payment service providers begin to explore this new technology, the report outlines several potential routes forward.

64% of SMBs believe DLT can grow into a viable complementary option for existing payment networks as cross-border B2B transactions on blockchain continue to grow alongside the cryptocurrency boom. DLT can therefore be seen as part of a strategy to better support these global and regional payment networks.

Also, the surge in more unregulated crypto-assets has led many banks to explore the possibilities of CBDC (Central Bank Digital Currency). Finally, the report highlights that aspiring industry leaders are already scaling up DLT use cases.

The report’s methodology
The World Payments Report 2022 is based on insights from two primary sources – the Global Small and Medium Business Survey 2022, with 150 respondents, and the Global Banking and Payments Executive Surveys and Interviews, with 125 executives from leading banks. These primary research sources cover insights from 17 markets: Australia, Canada, France, Germany, Hong Kong, India, Italy, Japan, Malaysia, Netherlands, Singapore, Spain, Sweden, Switzerland, UAE, UK and US.

About Capgemini
Capgemini is a global, socially responsible and multicultural market leader with 350,000 people in more than 50 countries. As a strategic partner, Capgemini supports organizations in their transformation by harnessing the power of technology. In this regard, the group is guided by its raison d’être: to release human energy through technology for an inclusive and sustainable future. With more than 50 years of experience and expertise in a variety of industries, clients entrust Capgemini to meet their business needs: from strategy and design to operations management. This is done by leveraging innovations in cloud, data, artificial intelligence, connectivity, software, digital engineering and platforms. The group achieved a turnover of 18 billion euros in 2021. Get the future you want | www.capgemini.nl

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