B2B Payments

India’s SMBs Rebound As Demonetization Dust Settles

India saw a busy year in B2B FinTech as the small business (SMB) community continued to demand enhanced financial services. The nation continues to push against cash in favor of digital payments, while both the government and private sector continue to fuel FinTech innovation.

It hasn’t been easy for the nation’s small businesses, however.

About a year ago, reports from CNN declared that India’s SMB community had endured a “terrible year,” according to one small business owner in the country reflecting on India’s surprise demonetization in 2016.

“Ninety percent of our business has been wiped out,” said factory operator Vinod Gupta at the time. “Where there were 15 workers before, now there are three. Soon, we might have to ask them to go home.”

Demonetization dealt a sudden blow to cash-only small businesses, but a new report from American Express and Oxford Economics suggested India’s small businesses are ready to bounce back as they take a “back to basics” approach to growth and success.

“Our research shows that India’s smaller enterprises are primed for success in 2018, by balancing revenue growth with efficiency improvements and leveraging unique attributes of agility, innovation and strong customer relationships,” reflected Saru Kaushal, American Express country business head of global corporate payments, in a statement according to Business Standard last week. “Indian [SMBs] are now placing equal priority [on] embracing responsible business practices to attract more customers.”

As the blowback from demonetization settles, most small businesses in the country plan to focus on agility and innovation to fuel growth.

Interestingly, Oxford Economics conducted its survey late last year around the same time that small businesses in India had told reporters about their terrible year. The research suggested that small businesses planned to rebound in 2018, and set up a likely environment of optimism for 2019.

To realize their growth plans, small businesses in the country said they are making efforts to better understand their customers’ changing demands. More Indian SMBs (as compared to the global average) said they are effective and efficient in managing their day-to-day operations, and fairing better than the global averages when it comes to retaining talent as well. Most Indian SMBs also agreed that they are better than average at applying the latest technologies and implementing innovative tools, both in their products and in their back-office operations.

According to Kaushal, the data reflects the resiliency of Indian small business owners.

“The ‘back to basics’ approach comes at a time when India’s [SMBs] feel confident about the global economy, and predict strong revenue growth,” Kaushal continued. “Indian [SMBs] are focusing on expense management as much as on increasing revenue.”

Looking ahead, small businesses surveyed said they will focus on growing their market share, heightening operational efficiencies and maintaining their existing strengths. However, small business owners in India find it more difficult to access financing than those in other parts of the world, the report showed. Kaushal noted that this is likely to push SMBs toward alternative financing options.

“Our research shows that just 46 percent of Indian [SMBs] say that they are satisfied with the current financing options available to them, highlighting the time-consuming application process, high interest rates and hidden fees as the top ‘pain points,'” stated Kaushal.

American Express’ report found a correlation between the small businesses expecting to grow the fastest those expecting a 10 percent revenue increase over the coming three years and the businesses that are more open to using non-traditional financing.

Earlier this year, India-based B2B payments company PayMate spoke about its acquisition of Zaitech (Z2P) Technologies, pushing the company into the alternative small business lending market and reflecting the broader industry potential for India. The company planned to more than triple its customer base by the end of 2018.

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