Why I want to focus on SMEs as DECTA’s CEO

Throughout my career, the significance of small and medium-sized enterprises (SMEs) to the UK economy has become ever more evident to me. They are critical engines of job creation, innovation, and economic resilience. The government’s recognition of this, exemplified by its declaration of the “Year of the SME,” aims to foster an environment where these businesses can thrive. They really are the backbone of the UK economy, contributing £4.5 trillion in annual turnover and supporting 27 million jobs—61% of total UK employment.

It is strange then that SMEs are more likely to struggle for survival than they are to enjoy growth and prosperity. They have faced continuous challenges over the past decade, exacerbated by post-Brexit uncertainties, the global pandemic, ongoing economic downturns and a disinterested government.

The fintech industry is now in prime position to step up and provide the support SMEs desperately need, particularly in the payments sector. I recently became CEO of DECTA and it would be remiss of me not to prioritise SMEs – in this blog I’ll reflect on why.

The growing challenges faced by SMEs

Over the last decade, the growth of small businesses in the UK has slowed significantly. The Enterprise Research Centre’s report, "The State of Small Business Britain," highlighted that small business growth has decreased by 40 percent over this period. This decline is not just a statistic; it represents thousands of businesses grappling with survival and many disappearing entirely. The global pandemic further exacerbated these issues, with nearly half of SMEs experiencing a decline in turnover and 30% forced to reduce their workforce.

In addition to these challenges, SMEs are also facing rising costs, limited access to finance, and the growing problem of bank account closures. A recent Treasury Committee inquiry revealed that more than 140,000 business accounts were closed by major banks over the past year, often with little to no notice. These closures, combined with the pressures of increased costs, have left many SMEs in a precarious position, with some being forced out of business due to lack of access to essential financial services.

The Role of Fintech in Addressing SME Challenges

The fintech industry holds tremendous potential to address many of the challenges faced by SMEs, particularly in the payments sector. Unlike traditional financial institutions (FIs), fintech companies have the agility and innovative capacity to create tailored solutions that meet the unique needs of SMEs. The fintech sector also faces its own set of challenges, including regulatory burdens, cost pressures, and risk management issues.

Innovation within the fintech space needs to be practical and accessible in order to succeed. They need to be designed with the specific needs of SMEs in mind, ensuring that they are easy to implement and provide clear value. The challenge for fintech companies is to balance innovation with the real-world needs of SMEs, avoiding the temptation to focus on technology for technology’s sake.

Two examples of current innovations within the fintech that can support SMEs are embedded finance and open banking. These technologies have the potential to transform how SMEs manage their finances, offering greater flexibility and control. Embedded finance allows businesses to integrate financial services directly into their operations, simplifying processes such as payments, lending, and insurance. Meanwhile, open banking gives SMEs greater access to their financial data, enabling them to make more informed decisions and improve their financial health.

The payments side

While payment providers play a crucial role in the financial ecosystem for SMEs, doing so in the current economic climate is no easy task. Payment providers face numerous challenges, including regulatory compliance, cost pressures, and managing risk in a way that does not stifle their ability to serve small businesses.

Despite these challenges, the fintech industry has shown time and again that it can rise to the occasion. When traditional financial services failed to meet the needs of SMEs, fintech companies stepped in with alternative solutions. The rise of online-only banks, peer-to-peer lending platforms, and other fintech innovations have provided SMEs with much-needed options. Yet, there is still more to be done.

For the payments sector to truly support SMEs, it must focus on providing solutions that are both innovative and accessible. This means creating products that are easy to use, affordable, and genuinely add value to SMEs. It also means working closely with SMEs to understand their needs and challenges, ensuring that the solutions provided are fit for purpose.

The future of SME support lies in collaboration between fintech companies, SMEs, and policymakers. Fintechs have the potential to drive significant change, but they cannot do it alone. Policymakers must create an environment that encourages innovation while also ensuring that the needs of SMEs are met. This includes reducing regulatory burdens where possible and providing support for SMEs to adopt new technologies.

Moreover, fintech companies must continue to innovate, but they must do so with a clear focus on solving real problems. This requires a deep understanding of the SME landscape and a commitment to creating solutions that are both practical and impactful. The goal should not just be to create the latest technology but to enable SMEs to thrive in a challenging economic environment.

What’s the solution? 

By leveraging the power of fintech innovation, we aim to equip these vital businesses with the tools they need to thrive in today's challenging economic landscape. This means balancing innovation with practicality, ensuring that solutions are accessible, and working closely with SMEs to understand and address their unique challenges.

With the right support, SMEs can overcome the difficulties they face and continue to play their vital role in the UK economy. The fintech industry has a key role to play in this, and by working together with SMEs and policymakers, it can help create a brighter future for all.