How Can UAE SMEs Benefit from Mobile Wallets?
Small and medium-sized enterprises are often celebrated as the driving force behind a flourishing economy. Despite their lean workforce and limited annual turnover, they undeniably foster innovation, create numerous job opportunities, and make significant contributions to local growth. Prominent forecasts also predict that the UAE is expected to have over 1 million SMEs by 2030. Regardless of their substantial contributions, many of these enterprises encounter a persistent challenge of access to instant funds. This lack of readily available working capital hinders their ability to seize opportunities, navigate emergencies, and compete efficiently in the dynamic Middle Eastern market.
It is indeed imperative to address the barriers preventing SMEs from obtaining instant access to funds to manage their daily operations. A strategic reassessment of our approach can prove to be vital to strengthen these emerging engines of the economy.
The Fundamental Challenge
The issue of lack of access to instant working capital largely stems from the complexities inherent in conventional electronic payment channels and the obstacles encountered in processing payments through these systems. Payment gateways, settlement procedures, and involvement of aggregators recurrently cause delays ranging from two to thirty-five days. For instance, funds from a retail point-of-sale transaction might not be available to the business owner for several days, especially when issuing and acquiring banks are different, or multiple intermediaries are involved. E-commerce platforms, for example, acutely exemplify these challenges.
As a result, SMEs frequently experience a shortage of working capital, which forces them to incur additional costs and, in some cases, resort to borrowing to cover operational expenses. This reliance on debt not only strains their financial resources but also impacts their profitability, capacity to manage day-to-day operations and make timely business decisions.
Mobile Money is a Catalyst for SME Growth
In context, mobile money solutions present a promising approach and a roadmap to addressing persistent challenges by the SMEs. These platforms provide instant access to working capital, allowing businesses to receive funds the moment a payment is made, enabling them to swiftly address a wide range of financial commitments. By providing for fast and transparent transactions, mobile money reduces operational costs and minimizes the delays often experienced in commonly used methods & payment gateways.
Once they receive instant e-money, SMEs can swiftly manage their finances, pay bills and employee salaries, generate transaction reports, and process B2B payments effortlessly, all through a smartphone. Another significant benefit of using a mobile money solution is its ability to eliminate the need for physical proximity. Transactions can occur instantly and remotely, allowing the parties involved to be in different locations.
Small and medium-sized enterprises can greatly benefit from these cost-effective and user-friendly apps that enable instant transactions and gives them access to their funds. These tools allow businesses to leverage their existing digital capabilities without the need for complex technical skills or huge investments in any form of digital infrastructure.
An Enabling Ecosystem
The financial landscape is undergoing a significant transformation, with mobile money solutions emerging as powerful tools for democratizing access and spontaneity. Recent research studies consistently indicate that the UAE mobile wallet market is projected to experience remarkable growth, with an anticipated CAGR of 12.30 percent by 2028-29.
The Central Bank of the UAE is also accentuating the need for interoperability in the payment system paving the way for a significant reduction in costs. It focuses on facilitating instant payments and eliminating the processing time associated with the realization of funds, particularly for small business owners. With future ready payment solutions such as AANI, an instant payment platform and Jaywan, UAE's first national domestic card scheme, the country aims to reduce the transaction TAT by keeping the money locally within its financial ecosystem, thereby mitigating the lead time to a considerable extent.
While significant efforts are being made to create a supportive environment for SMEs, it is crucial to develop solutions that align with their specific needs, foster their trust, and drive adoption. This approach will enable us to fully realize the potential of mobile money solutions. By emphasizing these priorities, we can create a future where financial tools are readily accessible, instantly available, and empowering for everyone.
In conclusion, by addressing the systemic challenges that impede SMEs' access to instant funds, we can significantly enhance the effectiveness and growth of this vital economic segment. Mobile money solutions offer a compelling pathway to overcome these hurdles, providing SMEs with the financial flexibility and agility they need to thrive. As the UAE continues to foster a conducive business environment, embracing innovative financial technologies and implementing supportive policies will be instrumental in empowering SMEs to contribute even more significantly to the nation's economic growth and diversification.
About the Author
Eric Karobia Chief Executive Officer at Whizmo.
