万国邮政联盟-作为中小微企业支付数字化推动者的职位（英）

POSTSASENABLERS

OFMSMEPAYMENTDIGITALIZATION

PublishedbytheUniversalPostalUnion(UPU)Berne,Switzerland

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AUTHORS:UPU

TITLE:PostsasenablersofMSMEpaymentdigitalization,2023

ISBN:978-92-95116-27-6

DESIGN:SonjaDenovski

CONTACT:ihab.zaghloul@

POSTSASENABLERS

OFMSMEPAYMENTDIGITALIZATION

4PostsasenablersofMSMEpaymentdigitalization

EXECUTIVESUMMARY

Globally,formalandinformalmicro,smallandmediumenterprises(MSMEs)accountforapproximately

90%ofallbusinessesand,onaverage,70%oftotal

employmentand50%ofgrossdomesticproduct(GDP).1MSMEsarethebackboneofdomesticeconomies.

Accordingly,theyaresettoplayanimportantroleintherecoveryplansputtogetherbynationalgovernmentstocombattheimpactoftheCOVID-19pandemic.Moreover,intermsoftheMSMEcontributiontotheUNSustainable

DevelopmentGoals,increasingannualinvestmentinMSMEsby1trillionUSDwouldpaydisproportionatedividendstoallstakeholdersinvolved.

Intheaftermathofthepandemic,asbusinesseswere

forcedtoreimaginetheiroperationalmodelsand

overcomechallengesinoutreachanddeliveryofproductsandservicesacrossmanycontexts,thedisruptionledto

theclosureofentirebusinesses.ThishasbeenespeciallytrueforMSMEs,whichexperiencedrevenueshockowingtosupplychaindisruptionsorseverelyreduceddemand.

Equippedwiththelessonslearnedoverthepasttwo

years,merchantsacrosstheglobearenowincreasingly

consideringevolvingtheirtransactionswithcustomers,tomitigaterisksandshieldthemselvesfromshocks.Once

consideredinaccessibleformerchantsandtheircustomers,“paymentdigitalization”isnowthefocusoffintechsand

financialserviceproviders(FSPs),whichworktocreate

cashlesssystems.Paymentdigitalizationisagateway

forFSPstosecureasignificant,untappedclientbase

amongmerchants,offeringmorecomplexbuttailor-madeproducts,suchascreditandinsurance.

Despitethischangedlandscapeandanuptickinthe

potentialofthedigitalpaymentmarket,inmostemergingeconomies,MSMEsremainlargelyunderservedby

paymentproviders,especiallyMSMEswhichpredominantlyextendbeyondurbanandperi-urbanmarkets.Such

businessesarealsocharacterizedbytheirlimitedaccess

totheinformationandinfrastructurenecessarytouseandadoptdigitalpaymentsolutions.

Whiletherearesignificantadvantagestodigitalizingbusinessprocesses–includingshieldingbusinessesfromtheaforementioneddisruptionsandimproving

operationalefficiency–,thereare,however,crucialinfrastructuralneedsthatmustbeaddressed

beforetheseadvantagescanbeenjoyed.

Inemergingmarkets,theseneedsrangefrombasic

infrastructure(e.g.Internetconnectivity)torobust

financialinfrastructure(e.g.paymentsolutions),whichareusuallyaprecursortoMSMEs’accesstootherfinancial

services,suchascredit.Moreover,anenablingregulatoryenvironmentthatincentivizestheformalizationofMSMEsisalsorequired.

Inadditiontotheseinfrastructuralneeds,digitalskillsarealsocrucialforMSMEstotakeadvantageofthedigital

economy.

Overall,thepaymentslandscapehaschanged

irreversibly.Accordingtothe2021GlobalPaymentsReport,theCOVID-19pandemicacceleratedthe

declineofcash-basedtransactionsbyoverthree

years,reachingandexceedingestimatesprojected

for2023in2020.ThesetrendshavebeensupportedbytheincreaseinpenetrationofsmartphonesandInternetdata,withfutureprojectionspredictingthattheshiftinconsumerbehavioursisheretostay.

1UnitedNations,2021.Micro-,SmallandMedium-sizedEnterprisesDay,27June2021.Availableat:

/en/observances/micro-small-medium-busi-

nesses-day

ExecutiveSummary5

HowcanPostsbeenablersofMSMEpaymentdigitalization?

FSPsandfintechswithagiletechnologiesofferingtangiblepaymentdigitalizationsolutionshave

barelymanagedtoscratchthesurfaceofthe

marketpotentialofMSMEpayments.Theydonothavethemeansortherequiredfootprinttoenablethemtoaccesstheunservedandunderserved

MSMEmarkets,especiallybeyondurbanareas.

PostscanhelpbridgethegapbetweenFSPsandMSMEswhilecreatingarevenueopportunityforthemselves

Inthiscontext,Postscanenterinwithavaluepropositiontohelpbridgethegap,allowingbothFSPstoreacha

potentialmarketandMSMEstoaccesscashlesspayment

systems,whilecreatingarevenueopportunityforthemselves.

Amongthe90%ofPoststhatoffersomeformoffinancialservices,over35%inemergingeconomiesofferdigital

paymentservices,withAfricaleadingtheway(39%)

followedbytheAsia-Pacificregion(25%).2Overall,Postshavesignificantexperienceinofferingretailpayment

solutionsthatrangefromtraditionalremittanceproductstothemorerecentdigitalsolutionsforutilitypayments,person-to-government(P2G)andgovernment-to-person(G2P)payments,andinsomecasesmerchantsolutions

usingarangeoftechnologies.

Theseservicesarealsosupplementedbyphysical

touchpointstoaccessvalue-addedservicessuchas

cash-inandcash-out(CICO),billpayments,andmore.

WhatstrengthscanthePostsleveragetooffersolutionsforMSMEpaymentdigitalization?

Favouredasakeychanneltodeliverthenationalfinancialinclusionmandates,Postsboastaround660,000branches,whicharedeeplyembeddedintocommunitiesacrosstheworld.Moreover,thisoutreachismarkednotonlybyitsgeographicalbreadthbutalsobyitsdepth,as

thePostsreachfar-flungruralareaswhereformalfinancialinstitutionsarenotabletoscaletheiroperations.

Thesebranchesarefurtheraugmentedby5.3millionfieldstaffwhocanofferphysicaltouchpointstoresolveinformationasymmetries,aswellasofferrecoursein

theeventofanadversedigitalconsumerexperience.Withthesestrengths,Postsaretheidealchannelto

enablepaymentdigitalizationsolutionsforMSMEsatameaningfulscale.

Itshouldberecognizedthattheopportunitytotapinto

theMSMEpaymentdigitalizationspaceisgreatlyreliant

ontheregulatoryandpolicyregimesinthenational

contextswithinwhichthePostshavetooperate.That

beingsaid,regulatoryauthoritiesarequicklyrecognizingthevalueofdigitalizingpaymentarchitectureintheir

respectivemarkets,withcompetitioninthepaymentspacebecomingfierceasregulationsopenup.

Postswillhavetodisplayahighlevelofagility

toensuretheyareabletoidentifytheright

marketsegment,partnerwithentitiesthatboosttheirofferingandoffercustomermanagementcapabilities,

whiledeliveringqualityandseamlessservicestoensure

consumerloyaltyandpositionthePostasastrongserviceproviderinthecountry’sdigitalpaymentecosystem.

WefindthatPostsare

alreadyservingMSMEs

usingamass-market

approach,yetthereisaclearneedtosegmentandtargetthisclientbase

2UniversalPostalUnion,2019.Thedigitaleconomyanddigitalpostalactivities–aglobalpanorama.Availableat:

/en/Publications/Digital-services/

The-digital-economy-and-digital-postal-activities-%E2%80%93-a-global-panorama

6PostsasenablersofMSMEpaymentdigitalization

WhatdigitalpaymentsolutionsdoPostscurrentlyoffer?

ThestudyteaminterviewedPostsin29countries,aswellasregionalpostalassociationsinAsiaandAfrica(restrictedunions).Toaugmentthepostal

perspective,theteamconsultednon-postalpayment

providers,FSPsandregulatorsinemergingmarkets.Togatheradditionalinsights,theteamconductedmysteryshoppingandfocusgroupdiscussions(FGDs)withsmallbusinessownersinanumberofcountries.

AmongthePostsinterviewedforthisstudy,nearlytwo

thirdsoffere-walletsolutions,morethanhalfofferfinancialservicesasagents,alittleoverathird

offertraditionalcard-basedpaymentsolutions

(suchasdebitcards),andapproximatelyone-fourthofferpoint-of-sale(POS)solutionstotheircustomers.

Withdigitalmarketplacesgainingmoreimportancesincethepandemic,overathirdofthePostsconsultedbythisstudyoffere-commerceplatformsforlocalproducts

manufacturedorsourcedbyMSMEs,aswellasfor

traditionalphilatelicproducts.Mostofthee-commerceinitiativesbyPostsareatanascentstage.

TheroleofthePostistofacilitatedigitalpaymentsbetweenMSMEs,their

customersandsuppliers

ThefollowinginsightsweregatheredoncurrentpostalpaymentsolutionsforMSMEs:

Paymentproductsareastrategic

componentofpostalfinancialservices

andhavebeenfurtherprioritizedowingtoCOVID-19-induceddemand.

Postshavestrongengagement,especiallywiththeMSMEbusinesssegmentas

theirtrusteddeliverypartners.

Postalofferingsaremostlyfocusedonregistered/formalMSMEs–theinformalMSMEsegmentislargelyunderserved,evenbyPosts.

Postale-commerceofferingscan

becombinedwithdigitalpaymentsolutionstocreateanattractive

valuepropositionforMSMEs.

Postsneedtoenhanceinternalcapacities

andskillsinordertoofferefficient

digitalpaymentsolutionsforMSMEs.

Partnershipmodelsareaneffectiveway

forPoststoofferdigitalpaymentsolutions.

Inshort,theroleofPostsshouldideallybeto

facilitatedigitalpaymentsbetweenMSMEsandtheircustomersandsuppliers.

Asatrustedmemberofthecommunity,PostsservebothasambassadorsandcustomersupporttofosterMSME

digitalization.

ExecutiveSummary7

WhataretheUPU’skeyrecommendations?

TheUPUhasdevelopedthefollowingnon-binding,

actionablerecommendationsforPostsandpolicymakers,whichareexploredindetailinthisstudy.

RECOMMENDATIONSTOPOLICYMAKERS:

Advocateforthepostalnetwork

tobemadeapartofnationaldigitalpolicyandnational

financialinclusionmandates.

Bolsterpostalcapabilitiestoofferpaymentdigitalizationsolutions.

Strengtheninteroperabilityinordertoachievemeaningfulscale.

FacilitateandfosterpartnershipbuildingforPosts.

Fosterregionalcollaboration

toaddresscontextualdifferencesinemergingeconomies.

RECOMMENDATIONSFORPOSTS:

Appointanaccountableleaderasbusinessowner.

Developconcretebusinessplansandfinancialprojectionsbackedbycustomer-centricmarketresearch

tomakeinformeddecisions.

Usepartnershipstoaddressskillsgapsandregulatoryrequirements.

Makethecustomerking.

Empowerpostalstaffthroughcapacity-buildingprogrammes.

Investincommunicationsandbranding.

Beleanandagile.

Tableofcontents

Executivesummary 4

Introduction 12

Methodologicalapproach 13

Studystructure 13

ThecasefordigitalizingMSMEs

15

TheneedforMSMEpaymentdigitalization 15

AfragmentedpaymentecosystemforMSMEs 15

BenefitsforMSMEsasapartofthedigitalpaymentecosystem 20

Encouragingregulatoryoutlookforpaymentdigitalization 20

PostalpaymentservicesforMSMEs

2

1

CurrentpostalpaymentsolutionsforMSMEs 21

InsightsintopostalpaymentsolutionsforMSMEs 22

Opportunities,pathwaysandbusinessmodelstoserveMSMEs

30

Windowofopportunities 30

RecommendedpathwayforPoststobetterserveMSMEs 31

PotentialpostalbusinessmodelstoserveMSMEs 34

Conclusionandrecommendations

35

Recommendationsforpolicymakers 36

RecommendationsforPosts 37

Annexes

40

FIGURES

FigureADifferentchallengesinpaymentdigitalizationinanemergingmarket 17

FigureBCOVID-19inducedOpportunitiesandrisksforMSMEpaymentdigitalization 18

FigureCSWOTanalysisforPoststoenableMSMEpaymentdigitzation 32

ANNEXES

Disclaimers

40

Acknowledgements

40

AboutFITAF

40

AnnexI

Overallmethodologyandlistofregions/countriescovered

forthestudyanddatacollection

41

AnnexII

Methodologyemployedtoproducethe16-countrysample

forprimaryresearch

45

AnnexIII

Focusedgroupdiscussions/interviewsconducted

inIndia,Mexico,SenegalandTunisia

47

AnnexIV

Methodologyandobservationsgatheredthroughmysteryshopping

48

Listof

MNO

Mobilenetworkoperator

MSMEs

Micro,smallandmediumenterprises

MVP

Minimumviableproduct

OECD

OrganizationforEconomic

CooperationandDevelopment

P2G

Persontogovernment

PCIDSS

PaymentCardIndustryDataSecurityStandard

POD

Paymentondelivery

POS

Pointofsale

PSP

Paymentserviceprovider

QIB

QatarIslamicBank

SaaS

Softwareasaservice

TAT

Turnaroundtime

ToT

Trainingoftrainers

UPI

UnifiedPaymentsInterface

USSD

Unstructuredsupplementaryservicedata

abbreviations

AML

Anti-moneylaundering

API

Applicationprogramminginterface

B2B

Businesstobusiness

BC

Bankingcorrespondent

CFT

Combatingthefinancingofterrorism

CICO

Cash-inandcash-out

DFS

Digitalfinancialservices

FGD

Focusgroupdiscussion

FITAF

FinancialInclusionTechnicalAssistanceFacility

FMCG

Fast-movingconsumergoods

FSP

Financialserviceprovider

G2P

Governmenttoperson

GSMA

GlobalSystemforMobile

CommunicationsAssociation

ICT

Informationand

communicationstechnology

KPI

Keyperformanceindicator

KYC

Knowyourcustomer

MFI

Microfinanceinstitution

MMP

Mobilemoneyprovider

MMRI

MobileMoneyRegulatoryIndex

Peri-urban

Denotesanareaimmediately

adjacenttoacityorurbanarea

POS

Pointofsale,whichcanbeforanypaymentmeans(card,app,etc.)toaccesswallet

Real-timesettlement

Themerchantaccount/wallet

getsfunded/deductedinreal

timeforallcompletedpaymentsorCICO

Reconciliationand

settlement

Allcompletedtransactionsare

talliedwitheachrecordasto

whetherthepaymentmade

throughthechannelhasreachedtherecipient

Remittance

Theactionofsendingmoneyinpaymentorasagift

Underwriting

Theprocessthroughwhichanindividualorinstitutiontakesonfinancialriskforafee

Utility

payments

Includesbillpaymentsformobilephones,electricity,water,etc.

Whitelabel

Productsthataredeveloped

byacompanybutcanbeusedbyallastheyarenotowned

orrestrictedbyasponsoredpartner

Workingcapital

Themoneyrequiredtorunbusinessoperations

Glossary

Agent

managers

Individualsresponsiblefor

supervisingtheagentscarryingouttransactions

Card

skimming

Illegalpracticeusedbyidentitythievestocapturecreditcarddata

Cash-in

DepositingmoneyatPOS

Cash-out

WithdrawingmoneyatPOS

Digital

paymentacceptance

Receiptofpaymentsmadebydigitalmeansoronline,withnophysicalexchangeofmoney

involved

Equity

financing

Involvessellingastakeinyourbusinessinreturnforacash

investment

Equity

investing

Equityisusedascapitalraised

byacompany,whichisthen

usedtopurchaseassets,investinprojectsandfundoperations

Financialservicesagent

Peoplewhosellfinancialservicesandconnectbuyersandsellersinfinancialmarkets

Floatincome

Thenetinterestmarginearnedondepositsbydeployingthemviatreasury

Formal/

registeredMSMEs

MSMEsthatareregisteredwith

relevantgovernmentauthoritiesandcoveredundertheprevailingtaxregime

Frontlineagent

Individualresponsiblefor

managingdirectinteractionswithcustomersandprovidingservices

InformalMSMEs

MSMEsthatarenotregisteredwithrelevantgovernment

authoritiesandhencenot

coveredundertheprevailingtaxregime

12PostsasenablersofMSMEpaymentdigitalization

INTRODUCTION

Theneighbourhoodpostofficehasbeenanintegralpartofcommunitiesacrosstheworldsincetimeimmemorial.Inrecentyears,thefunctionandroleplayedbyPostshastransitionedfromsolelyprovidingtraditionalmailand

parcelservicestonowofferingdigitalfinancialservices(DFS)too,althoughthepaceofthisevolutionhasbeenslow.

In2020,owingtoglobalsupplychaindisruptionscausedbytheCOVID-19pandemic,postalcarrierslosttwoto

fouryearsofmailvolumes.TheresultingchangeinpostalrevenuehasmadeitmoreurgentforPoststofindnew

waysofremainingsustainableandgenerateprofit.3

Toovercomethislossofrevenue,Postshavethepossibilityofprovidingfinancialservices,whichcanprovetobe

alucrativeopportunity.Inunservedandunderserved

markets,Posts4havetheparticularadvantageofover

660,0005brick-and-mortartouchpointsand5.3millionstrongfieldstaff,alongwithbeingdeeplyembeddedinlocalcommunities.

Over90%ofPostsalreadyprovidesomeformoffinancialservicestotheirclients,eitherdirectlyorinpartnership

withotherserviceproviders.6Withintheboundsoftheirrespectiveregulations,Postsprovidearangeofdigitaltransactionsandpaymentcapabilitiestotheirclients

–fromtraditionalmoneytransferstodigitalwallets,QR-

enabledpaymentprocessing,POStransactioncapabilities,andbrandeddebitandcreditcards.

Regionally,inlinewiththeirmandateoffinancialandsocialinclusion,Postsarethenaturalpartnerforenablingthe

financialcapabilitiesofMSMEs,whichareusuallyspread

acrossurbanandruralsettingsintheirrespectivemarkets.Thispartnershipalsoextendstoenablingdigitalpaymentcapabilities.

ThemarketgapinfinancialservicesforMSMEs7is

welldocumented.Besidestheestimated5trillionUSDfinancinggap,morethan180millionMSMEsoperateacrosstheemergingmarkets,withpre-pandemic

estimatesshowingthatsuchbusinessestransactover6.5trillionUSDannuallywithmorethan4.5billioncustomersonadailybasis.8

Thereisaclearcaseforusingpaymentsolutionsas

anentrypointforFSPs(includingPosts)tooffermore

complexproducts,suchascredit,savingsandinsurance

thatrequiredocumentationand/orcollateraltounderwriterisks.TransactionalhistoryforMSMEpaymentscan

helpprovideFSPswiththevisibilityneededtomake

informeddecisionsastheybuildadaptedofferingsforthisimportantpopulationsegment.

Postsareuniquelyplacedwithmaximumoutreach.

Currently,theyofferdeliveryservicestoMSMEsandtheircustomers.EnablingdigitalpaymentswillhelpPostsofferend-to-endservice(deliverytopayment)toMSMEs.

Moreover,thePostwillhaveopportunityforadditionalincomethroughfees/servicechargesfordigitalpaymentservices.

TheCOVID-19pandemichaspermanentlychangedthewaybusinessestransactwiththeircustomers.Lockdownsandsocialdistancingpushedthemtorethinktheir

businessmodels,withmanyMSMEsmovingonlineandincorporatingdigitalsolutionstoremainoperational,

overcomesupplychaindisruption,andcontinuesales.

Thisshiftinbehaviourprovidesasignificantopportunitytoofferadapteddigitalsolutions,whichcanconnect

differentactorsinthebusinessvaluechain–startingfromthePOSservingretailcustomers.

3E.Beretzky,L.Hausmann,N.Predojevic,F.Simao,&M.Yee,2021.Makingbanksfrombranchnetworks:Whyfinancialservicesarestillagoodideaforpostal

carriersandretailers,McKinseyandCompany.Availableat:

/industries/travel-logistics-and-infrastructure/our-insights/making-banks-from-

branch-networks-why-financial-services-are-still-a-good-idea-for-postal-carriers-and-retailers

4Throughoutthispaper,theterm“thePost”willrefertoallpostalorganizations(i.e.privatesectorpostallogisticsoperatorsanddesignatedoperators)that

formpartoftheglobalpostalindustry,while“post”referstoletter-orparcel-postsentthroughmailservices.Whenusingtheterm“thePosts”,itwillrefertoallindividualcountries’nationalpostalinstitutions.

5UniversalPostalUnion,[nodate].PostalStatistics.Availableat:

/en/Universal-Postal-Union/Activities/Research-Publications/Postal-Statistics

6UniversalPostalUnion,2016.GlobalPanoramaonPostalFinancialInclusion2016.Availableat:

/en/Publications/Financial-inclusion/Global-Panora-

ma-on-Postal-Financial-Inclusion-2016

7Inthispaper,weuse“MSME”asaninterchangeabletermformicro,smallandmediumenterprises,merchants,andsmallbusinesses.

Dalberg,studycommissionedbyVISA,INC.Availableat:

/wp-content/uploads/2016/11/Small-Merchants-Big-Opportunity.pdf

8T.Carlberg,Y.Lien,M.P.Gomez,A.Nayar,JDougherty,A.Gugelev&E.Boll,2016.SmallMerchants,BigOpportunity.TheForgottenPathtoFinancialInclusion,

Introduction|13

InordertounderstandtheopportunitiesforPoststo

enableMSMEstogrowandthriveinemergingeconomies,andtoidentifythepolicies,productsandprocesses

thatthePostswillhavetoadopttoachievethisvalueproposition,theUPUcommissionedthisstudywiththefollowingspecificobjectives:

Synthesizechallengesandinnovativesolutionstofacilitatedigitalpayment

acceptancebysmallbusinesses;

IdentifycaseswherethePosthasdevelopedspecificactivitiesaimedatofferingfinancialservicestosmallmerchants,shopsandbusinesses;

AssessthecurrentgapsandlimitationsofPosts;

RecommendthebestpathforwardforPoststoenablesmallmerchantstoacceptdigitalpayments.

Methodologicalapproach

Thestudywasconductedacrossfoursegmentscoveringdistinctobjectivesthatshapedthe

formulationofthebusinessmodelsandvaluepropositionforMSMEpaymentdigitalizationtobeproposedtoPoststhroughthisreport.

ThestudyteaminterviewedPostsin29countries,aswellasregionalpostalassociationsinAsia

andAfrica(restrictedunions).

Toaugmentthepostalperspective,theteamconsulted

non-postalpaymentproviders,FSPsandregulatorsinemergingmarkets.

Togatheradditionalinsights,theteamundertookfield

exercisesincludingmysteryshoppingforpostal

paymentproductsandFGDswithMSMEmerchants

inafocusedcohortofeightcountries.

Theseexerciseswerebasedontheconsultantteam’s

abilitytomobilizeon-the-groundresourcesandadapttoCOVID-19-inducedsocialdistancingandlockdownrestrictions.

Theannexestothisstudydocumentthemethodologicalframeworkused,aswellasthefilteringprocessemployedtoproducearepresentativesampleofUPUmember

countries.

Studystructure

ThisreportexploresthegapsinthecurrentecosystemandidentifiesexclusiveopportunitiesforPoststo

bolsterpaymentdigitalizationsolutionsforMSMEs.ItalsoexamineshowtheseinsightscanshapethePosts’competitiveedgeinofferingthesesolutionstoan

otherwiselargelyuntappedandunderservedmarketsegment.

Thisstudydrawsupon

insightsgatheredthroughamixed-methodology

approachofengagingwithPostsin29countries

Theresultswere

augmentedbybroader

stakeholderconsultationswithrestrictedunions,

non-postalFSPs,andregulators

Infivecountries,theteamalsoconductedmysteryshoppingexercises,as

wellasFGDswithsmallbusinessowners

14PostsasenablersofMSMEpaymentdigitalization

MSMEsaredemandingagileanddigitalservicesthathelpprovideaccesstoworkingcapital

andmarketswithin

theboundariesofthenewsocialdistancingnormsandsupplychaindisruptions.

ThecasefordigitalizingMSMEs|15

THECASEFOR

DIGITALIZINGMSMEs

TheneedforMSME

paymentdigitalization

Inthecontextofagrowingglobalworkforce,

approximately600millionjobswillbeneededby2030

toabsorbtheincrease.Inemergingeconomies,70%ofjobsaregeneratedbyMSMEs,whileformalorregisteredMSMEscontributeupto40%ofnationalincome(GDP).Thisnumberissignificantlyhigherwheninformalor

unregisteredMSMEsareincluded.9

Microenterprisesalsooffergainfulemploymenttoa

significantproportionoftheinformalworkforce,especiallyinemergingeconomies.Asaresult,MSMEdevelopmentisakeypriorityformanygovernmentsaroundtheworld.

ImprovingaccessibilitytofinancialinfrastructureforMSMEsisafocusforboththepublicandprivate

sectors.Thereareopportunitiesforcommercialgain

andforaddressingakeydevelopmentneedtogenerateremuneratedemploymentfortheworkforce,thereby

spurringondomesticallydriveneconomicgrowth.

Furthermore,thepandemichasforcedthefinancial

servicescommunitytorethinkthesupply-sideecosystemasMSMEsstruggletosurvive.Increasingly,MSMEs

aredemandingagileanddigitalservicesthathelpprovideaccesstoworkingcapitalandmarkets

withintheboundariesofthenewsocialdistancingnormsandsupplychaindisruptions.Inparticular,theCOVID-19pandemichasreinforcedthetrendofdigital

adoptionforpaymentsandinretailcommerce,acrossallpaymenttypesanddemographics.

Accordingtothe2021GlobalPaymentsReport,the

pandemicacceleratedthedeclineofcashbyoverthreeyears,achievingtheprojectionfor2023in2020.Cash

wasusedfor20.5%ofglobalPOSvolumesin2020,

representinga32.1%reductionincashusagefrom2019.10

Formostoftheabove-mentionedchallengesposed

bythepandemic,digitalpaymentsholdthekeyto

respondingtomanyofthecurrentissuesfacedby

MSMEs.

Alongwitheasingtransactionprocessesandensuringreal-timesettlementofduesandinvoices,digital

paymentsalsoallowbusinessestoaccessnewmarkets–providedadequatelogisticalsupportisavailabletofacilitateproductdelivery.

Inaddition,digitalpaymentsallowbusinessestomaintainadigitalandauditabletrailthatcanhelpthemaccess

creditfromformalinstitutions,whichwouldotherwise

struggletoserveMSMEs’financialneedsowingtothelackofrequisitepaperwork,amongotherissues.

AfragmentedpaymentecosystemforMSMEs

Onthesupplyside,thetypeanddepthofservices

offeredbypaymentserviceproviders(PSPs)dependon

theregulationsandpolicyregimesinplaceindifferent

countries.Inturn,thisinfluencesthepricepointsand

incentivestructures,theavailabilityofdigitalinfrastructure,andthedesignofthesupportingarchitecturetoenable

paymentdigitalization.

Onthedemandside,merchantfees,evolving

end-consumerbehaviours,demandfordigitalpayments