Leapfrogging Indian SMEs into the global fold: low-value cross-border payment

By Kiran Shetty

SMEs are the backbone of the Indian economy, especially in times of adversity and global economic shocks. According to the draft National Policy for Micro, Small and Medium Enterprises in India, 28% of the country’s GDP and 40% of exports come from these enterprises.[1]. In India’s quest to become a $5 trillion economy by 2025, SMEs are expected to play an important role and increase their share in exports to 60%. As these smaller companies expand their presence globally, it is essential that the global financial ecosystem meets their needs and requirements for low-value transactions, which currently presents a number of challenges. For SMEs to overcome these challenges, it is imperative to have access to a low-value payment system that is fast, predictable and transparent.

Challenges SMEs face in low-value cross-border payments

Traditionally, low-value cross-border payments have encountered various challenges. Among these is the significant problem of high processing fees and exchange rate volatility, which particularly affects SMEs that regularly make small payments to their suppliers and customers. In emerging markets like India, this is an even bigger problem for SMEs due to the use of intermediary currencies to process transactions. As digital payment options accelerate among small merchants and kirana store owners across India, it is important that banks have fast, transparent and cost-effective options to meet the challenges of low value payments. .

With speed and predictability comes the security aspect. As payments are increasingly processed digitally, the risks of exposure to cybersecurity risks such as online fraud, information theft, and malware or virus attacks are also increasing. In the context of cross-border payments, whether high or low value, cybersecurity is a major issue.

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Finally, cross-border transactions are paper-heavy, requiring longer processing times than domestic transactions, and low predictability can make it difficult for SMEs to track their payments. This leads SMEs to have little visibility on their cash flow.

Urgent need for a solution with infinite possibilities

SMEs stand to benefit the most from simplifying low-value cross-border payments, helping them to focus on growing the business and meeting customer needs. Therefore, it is essential to provide banks with a transformative service that enables SMEs and consumers to send low-value cross-border payments directly from their bank accounts, simultaneously addressing SME issues while making such transactions.

Services such as SWIFT Go allow SMEs to make payments faster because pre-validation of payments reduces delays and the potential risk of errors. These solutions must have features such as pre-validation to eliminate errors such as incorrect account information, verifying key information in real time, allowing banks to verify crucial details including beneficiary account information or payment instruction data, among others.

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Banks also need greater visibility into payment processing time, fees to be charged and exchange rates, allowing their customers to better manage their cash flow and track payments in real time. . A single payment format that increases end-to-end transaction processing, combined with competitive processing fees through globally secure networks, is the future of low-value cross-border payments for SMBs.

As India seeks to position itself as a global innovation and manufacturing hub, transparent low-value remittances, especially for SMEs, are the need of the hour. With small businesses playing a catalytic role in economic development, access to solutions that enable low-value payments must be a priority.

(The author is CEO and Regional Head, India and South Asia, SWIFT. Opinions are personal.)


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