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India’s Tech Startups Target Unexpected Market: SMEs

India’s small businesses are not often considered a lucrative consumer base. The community is plagued by outdated technology, experts say, and are not reliable payers. The climate has forced venture capitalists to shy away from SMEs.

But the nation’s technology startups recognize the potential for big gains in the small business sector, reports say – it’s just a matter of approaching SME customers in the right away.

Young technology firms are working to establish an advance payment model with SME customers to ensure on-time payment, but are also working to build a strong relationship of trust with the small business community.

Software product think-tank iSPIRT, for example, sees the potential in the market and is currently innovating SaaS products to change SMEs’ buying and paying behaviors. India’s SME market is worth about $370 million, according to experts. And while venture capitalists aren’t interested in SMEs, tech startups like iSPIRT, as well as main players like Microsoft and Intuit are all focusing on India’s small business sector.

Small businesses continue to depend on outdated payment technologies and often make cash-only payments as India’s credit card penetration is low and automatic recurring payments are prohibited by the Reserve Bank of India. These challenges are forcing technology startups to rethink their strategy of securing small businesses as customers, and ensuring that SMEs pay up when they need to.

Now, experts say, technology firms are working on pre-authorized payments from SME bank accounts, and are developing in-house sales teams to work with small businesses and develop a relationship. Only then, reports say, can it become a scalable business model for tech startups to focus implementing their innovations within small businesses.

While domestic investors may shy away from Indian SMEs, technology startups in the nation have attracted significant attention throughout the globe. PayPal, for example, launched its latest Start Tank operations in India last December. The venture is part of PayPal’s support of technology startups and offers “innovation space” and resources for innovators to develop new products and services. PayPal’s Start Tank in Bengaluru was the second startup facilitator in the nation.

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