How Small and Medium Sized Businesses can Go Big in Trade

Jay Singer

Group Head, U.S. Commercial Products at Mastercard

Views 98

How Small and Medium Sized Businesses can Go Big in Trade

16.03.2018 07:15 am

Small and Medium enterprises (SMEs) are the backbone of the world’s economy, yet they remain largely ignored by the industry and governments when it comes to developing new technology solutions or policies for global trade.

Small Business

SMEs account for 90 percent of the world’s businessesand are expected to contribute 600 million jobs by 2030.  Despite their contribution to the global economy, these businesses have trouble entering and competing cross-border trade. Mastercard recently spoke to several business leaders about how SMEs can compete better in global trade. The highlights from these conversations and interviews were used to publish a white paper called Crossing The Digital Border, which reveals four ways that private companies, government agencies, NGOs and others can together crack the code on cross-border trade.

Social Networking for a Business Reason

Businesses have an urgent need for consistent and reliable sources of information on trade policies and infrastructure, regulations, logistics, financing and payments. A social networking platform or LinkedIn-type service for businesses that provides important information and best practices could be a valuable resource for businesses.

The Inter-American Developmental Bank (IDB) is supporting a social network for businesses called ConnectAmericas in the Latin America Caribbean region. With 140,000 registered entrepreneurs from 120 countries, the platform is a large database on tariffs and trade rules, free export-related online courses and information on available financing options from commercial banks, international investors and from the IDB.

Digitizing All Aspects of Global Trade

Goods stuck at the border can have a huge financial and operational impact on SMEs and can dampen their global ambitions. The challenge is to ensure border agencies have advance information and data in order to release the shipment upon arrival at the border. On the SME end, digitizing invoices, settlement, payment and reconciliation can enable businesses to improve the speed, ease and security of exchange of goods, data and payments. Countries could help the process by developing and promoting an open eco-system and share policy information and financial process best practices among regions.

In 2016, the EU Multi-Stakeholder Forum approved an open-source e-procurement platform that digitizes government procurement processes including e-invoicing. The platform enables businesses/suppliers to manually encode their invoices via a web form.

New Payment Innovations 

The short-term future of cross-border trade depends on more grounded payments innovations such as tools that get businesses better access to financial services such as credit. Banks are less inclined to offer a line of credit of lower value as the paperwork and cost involved is the same as a big loan but with lower returns. A business credit card for cross-border, low-value payments could bring more efficiency to banks and benefit SMEs.

In addition to access to credit, some of the other concerns are high transaction fees and the speed at which payments are processed and settled. Blockchain technology could be effective in addressing these challenges of cross-border payments.

Building Free Trade Zones

A free-trade zone provides an easy entry into new markets as they have less regulation, lower tariffs, better customs processes and expanded intellectual property rights.

In November 2017, a new Digital Free Trade Zone (DFTZ) was established by Malaysia Digital Economy Corporation (MDEC)—the country’s lead eCommerce agency—and China’s Alibaba Group. Billed as the first of its kind outside China, partners believe eCommerce could double Malaysian SME exports and create 60,000 jobs by 2025.

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