Localizing FinTech To Tackle SMBs’ Biggest Cash Headaches

FinTechs that decide to service the small and medium-sized business (SMB) community have a balancing act to perform. While many young and smaller firms face similar challenges and pain points, no two businesses are alike — which becomes especially true when a FinTech solution provider is operating in multiple jurisdictions around the globe.

That’s where the importance of thinking global and acting local comes in for SUMA SaaS Holdings. While the company lists the U.K. as its home base, through acquisitions the firm has launched operations in Chile, Argentina and Mexico as a provider of back-office financial automation technology for SMBs in Latin America.

In a recent interview with PYMNTS, SUMA CEO Matt Cole explained that some of the biggest points of friction for small businesses managing financials are the same, no matter where a business is based. Issues like manual and paper-based workflows thwarted Cole’s own operations as the owner of a small investment company, which he ran from his kitchen table. His frustrations were not unique: “Large companies have entire financial areas built to finance their operations and be sure they’re matching cash flows,” Cole told PYMNTS. “But with smaller operations, it’s being done over the same kitchen table where I was struggling with my small business five years ago.”

Localized Pain Points

One of the most daunting hurdles for small business owners relates to regulatory compliance, as tax authorities drive the business ecosystem toward digitization.

“Regulations are very local,” said Cole. Mexico, for example, where SUMA operates via Bind ERP following an acquisition announced last week, has its own regulations that impact small businesses with regard to electronic invoicing, payroll taxes and corporate income taxes, with some rules changing depending on the state. “Every other Latin American country has its own special flavor,” Cole added.

Any FinTech provider must understand the individual regulatory requirements that small businesses must adhere to in order to operate successfully and compliantly — but it must also understand the nuances of individual markets, such as the maturity of payments digitization from one market to the next.

According to Cole, the advancement of B2B payments digitization depends on which country, and sometimes even which region, in which a small business operates. In Chile, for instance, where SUMA operates via Nubox, a relatively advanced electronic payments ecosystem and high penetration of credit cards means B2B transactions tend to be digital, whether through direct bank transfers or card. Understanding these payment nuances is a part of SUMA’s roadmap, which will eventually include collaborations with payment technology companies that can integrate functionality within its platform, Cole said.

Understanding local regulatory requirements is also key, due to the fact that many small businesses in one market tend to stay in that market, according to Cole. Yet as more SMBs explore the opportunity for cross-border exports, their financial service providers will have to also address the more universal struggles SMBs face.

Global Challenges

Interestingly, the hyper-local hurdles that small businesses face are among the kinds of pains that small businesses universally experience. “The intersection of global pay points with very local compliance requirements was the inspiration for SUMA,” Cole noted. He pointed to several key areas of friction that SMBs struggle with, no matter where they’re located. That includes cash management, which can be especially difficult when a business is operating on Excel spreadsheets or pen and paper. Even for firms that have embraced digitization, however, the struggle of interconnecting a growing number of disparate systems means entrepreneurs often lack a single source of truth and transparency in current financials. Plus, as they struggle to obtain a clear picture of finances, small businesses often have difficulty accessing financing.

While ERP (enterprise resource planning) systems are traditionally considered a tool for larger enterprises, the tool — as a consolidated, multifaceted solution — can tackle many of these challenges. And while there are some universal obstacles among the small business community, Cole highlighted the need for business owners to access out-of-the-box solutions that are also flexible enough to scale along with a company, which includes expanding functionality to address the more complex requirements of a growing firm.

With the coronavirus crisis accelerating business digitization, Cole said he’s actually seen small businesses embracing the opportunity to flex with the market, whether it’s through launching a new company that is based entirely online, or adjusting an existing business model to meet today’s unique requirements. As such, SMBs need flexible technologies that can aid in that evolution and provide solutions for the kinds of friction points every small business experiences, while also addressing local requirements.

“Small business owners are incredibly resilient and agile,” said Cole, noting that in some markets like Chile, there has actually been a surge in new small businesses  created amid the pandemic. “That’s what we see in terms of the rebirth of the SMB ecosystem. In these difficult times, we also find opportunities where larger companies are not as agile, and small businesses can use their size to their advantage.”