Bringing UAE’s SMBs Into the Digital Economy

Small and midsized businesses (SMBs) have faced the brunt of the COVID-19 pandemic. Although governments have made efforts to provide relief, more needs to be done to accelerate digital financial inclusion for corporates and small businesses in the United Arab Emirates.

Visa Senior Vice President Otto Williams said the payments company wants to accelerate the recovery of businesses post-COVID by digitally enabling 50 million SMBs across Central and Eastern Europe, the Middle East and Africa (CEEMEA) region — and a three-way partnership with PayMate, an Indian B2B digital payments company, and Citi will help achieve that goal.

Related news: Visa, Citi, PayMate Partner to Automate Payables in the UAE

The partnership, which will change how businesses in the UAE manage their accounts payable (AP) and accounts receivable (AR), is an extension of an existing collaboration between Visa and PayMate, whose B2B payments platform is used by more than 105,000 Indian businesses in the CEMEA region.

Williams said that Citi coming into the mix strengthens the alliance, given the commercial benefits it brings to the table for the corporates paying those SMBs. One of them is Citi’s ability to ensure that corporates across the UAE allow their cards to be charged for payments and have funds disbursed securely to the hundreds of suppliers they’re serving.

This is a key advantage, as the (business payments) card space hasn’t seen a lot of innovation, explained Vivek Vaidyanathan, the head of treasury and trade solutions at Citi UAE. He acknowledged, however, that innovation has accelerated in the past couple of years with the emergence of instant payments and alternative payment methods and an increase in the percentage of UAE clients who are adopting commercial cards.

He said Citi aims to give clients the ability to choose their payment method, driven by not just the standard features of security, transparency and the immediacy of payments, but also by the ability to help clients optimize their working capital and better manage their supplier relationships.

According to Vivek, the most important obstacle from a card payment point of view has been increasing the B2B acceptance base and “bringing in a partner like PayMate effectively turbocharges that entire process.”

Overcoming Supplier Obstacles

As Vivek noted, big corporations in the UAE are becoming more sensitive to the cash flow and working capital challenges that small businesses and suppliers face, which have led them to rethink flows and new payment methods.

“Supply chain resilience is a critical factor for the CFOs and the treasurers, and they are absolutely taking that into account as they structure their entire payment mechanisms or payment methods,” he explained.

The UAE government is also committed to supporting the SMBs, and there is a push to move the economy away from cash and bring in these newer forms of payments, he said.

“And that’s really the sweet spot where a solution like this comes in, and it can help the SMBs without putting our institutional clients in a bad position,” Vivek said.

FinTechs Spearhead the Problem-Solving

Williams said FinTechs are the ones enabling a lot of these experiences, and Visa has partnered with over 130 of them across CEMEA. In the MENA region, eCommerce is booming and is projected to hit more than $48.6 billion in 2022, up from $15.9 billion in 2019.

In the six-member Gulf Cooperation Council (GCC) region alone, eCommerce has grown by 30%; Visa has over 130,000 merchants that accept Visa contactless payments in Saudi Arabia.

A strategic partnership with Saudi STC Pay firm enabled more than a million Visa credentials to its consumer business in just four months, Williams said, referring to the impact FinTech players are having on the ecosystem.

A small seller using WhatsApp to sell goods can send a payment link to a customer via the platform or SMS, he said. “That seller has no website, but now they can accept a digital payment, and these are all FinTechs driving these experiences and solutions.”

Williams also recognized the key role that mobile network operators (MNOs) have played to actively drive the acceleration to digital financial inclusion in the region. Visa has been working closely with these service providers because it has the consumer base, the mobile devices and the connectivity, which gives them vast accessibility over that ecosystem.

CFOs and Treasurers Play a Pivotal Role

Vivek concluded that there is both a technology fix and a mindset shift to affect a change in corporates’ appetite for investing in healthy supply chains. And it all depends on how evolved the CFO or the treasurer’s office is in terms of some of these elements.

But at the crux of it all, and what Citi is focused on, is giving these professionals “the ease and the choice” to make payments, he said, by bringing in the right FinTech partners to ensure that the perfect method is chosen when sending payments.

For CFOs and treasurers who want to settle payments according to their own terms, Vivek said it goes back to the element of bringing in a solution that ensures the payment gets through to the supplier.

For example, if there’s an opportunity to leverage an early payment discount, it’s important to do so while ensuring that they don’t run out of funds. “So it’s a very sweet spot to be in some of these elements,” he said.