Hyderabad: The UK-based fintech company Tide, which operates its Global Development Center (GDC) in Hyderabad, will serve 64 million and growing Indian small and medium enterprises (SMEs), with a mix of services that will help satisfy their diverse . needs. This includes neo-banking to address banking and financial services, as well as the credit gap facing small businesses. A neobank is a kind of digital bank without branches. Instead of being physically in a specific place, it’s completely digital. SMEs need access to financial products and services, and neobanking is at the forefront of meeting their needs and demands. There are more than millions of small and medium sized businesses in India but only a small portion of them have access to payment instruments, payouts and other important processes.
Neobanks, with their bespoke platforms, and artificial intelligence and machine learning algorithms, endorse the segment ‘new to credit’, thus bridging the credit gap for SMEs and helping them quickly pay off loans with no or minimal paperwork. By 2025, neobanking is expected to cover a large part of the SME lending market. Gurjodhpal Singh, CEO, Tide (India), told Telangana Today: “Tide is currently in the Alpha phase and we are trying to create a product that not only offers business accounts and related banking services, but a comprehensive set of very useful administrative solutions, such as invoicing, expenses and payroll. Not only to support the organized SME sector, Tide will also focus on serving the unregistered and unorganized sector, helping to digitize and bring small businesses into the mainstream. ”
The needs of SMEs worldwide are largely universal, with time spent on banking and administration. “Tide’s agile structure and global unified technology – One Platform Concept – means the financial financial platform can be customized and integrated with local product service partners to meet the specific needs of businesses in each market,” Singh added.
Challenges facing SMEs
In terms of digital maturity, India is ninth in the small and medium business segment in the Asia-Pacific region (according to the Cisco India SMB Digital Maturity Study 2020). ‘The road to the digitization of SMEs is far too complicated to tread for all; there are various challenges ranging from lack of skills and access to talent, to the lack of appropriate technologies needed for a refurbishment, ‘he added. The absence of reliable credit methodology for any small and medium business, and obtaining their first loan is the biggest challenge. The unlocking of their first credit and credit receipt series is interlinked, and in a traditional banking ecosystem, SMEs still struggle with this situation because they have to provide collateral to get credit or end up paying high interest rates to unorganized lenders.
Unit Economics
He further noted that most traditional financial institutions are struggling because unit economy is not benefiting the penetration in the SME segment. Despite the good unit economy for individuals and companies, traditional banks struggle to service SMEs due to lower margins, higher operating and risk / underwriting costs. The fact that costs often exceed revenues leads to SMEs being underserved as a segment.
Source: Telangana Today