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SMEs in Europe ready to invest in real-time payment capabilities

Small and medium-sized enterprises are losing business because of the time it takes to receive payments, with many considering API-based services to address the problem

Over two-thirds (68%) of European small and medium-sized enterprises (SMEs) are planning to invest in real-time payment capabilities over the next year, according to research.

Some 60% of the 2,000 SMEs surveyed said it takes a day or more for them to receive payments, with only 21% receiving payments within an hour.

The research of businesses across the UK, Belgium, France and the Netherlands, carried out by banking-as-a-service (BaaS) supplier Vodeno, revealed that international growth is being made more difficult for 23% of them due to the time it takes them to receive payments.

As a result, 57% are planning to change their payments provider in the next year.

Banking as a service uses application programming interfaces (APIs) to enable non-banking businesses such as retailers and e-commerce companies to offer financial products to their customer. These services give the businesses the capability to provide certain financial services without having to be regulated.

According to a recent report from Bain & Company and Bain Capital, about $7tn worth of transactions will be processed by non-financial services businesses through embedded finance in the US by 2026.

It found that payments and lending would continue to be the largest embedded financial services.

It also said there would be a market worth $51bn by 2026 for software suppliers that enable embedded finance, often referred to as BaaS suppliers.

Nikhil Sengupta, director of Vodeno, said: “Speed, ease and cost of payments is of utmost importance to SMEs, and our research underlines how high costs and lengthy delays in receiving payments are seriously hindering their day-to-day operations and growth plans.

“Instant payment processing is now on the radar for most of Europe’s SMEs, but the question is whether they can find the right partner to deliver this, efficiently and without exorbitant fees.”

Earlier this year, financial IT software supplier Finastra interviewed 50 senior business executives at large businesses and surveyed 1,600 more. It found that 85% were already implementing banking-as-a-service capabilities or planning to do so in the next 18 months.

Financial service providers are using APIs to offer their business customers the ability to provide their own financial services. In October 2021, HSBC made its banking services available to corporate customers on their own technology platforms through an agreement with Oracle NetSuite. This means they can use APIs to embed HSBC banking services, such as international payments and expense management, on their own tech platforms.

App-based challenger bank Starling launched its banking as a service in the UK in 2018. It then expanded the service into continental Europe. Starling APIs can be implemented with a few lines of code, giving businesses access to major payment systems such as Faster Payments, Sepa and Bacs.

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