Digitized financial tools are crucial for MSMEs

Embracing the digital era, the Philippines is prepared for a future that revolves prominently around digital technologies, particularly within the sphere of financial transactions. This readiness is underpinned by the remarkable growth observed in the utilization and acceptance of digital payment methods over the past five years, a transformation keenly monitored and facilitated by the Bangko Sentral ng Pilipinas (BSP).

Building on this momentum, the BSP has taken decisive steps to escalate the transition towards a digital-forward landscape, notably through the mandatory adoption of the Philippine QR Code, which allows customers of participating banks and non-bank electronic money issuers (EMI) a quick and safe method to pay, transfer to and receive funds from other bank and e-money accounts in the Philippines.

Albeit the QR Ph system was just being mandated for full adoption last July 1, 2023, it has already shown promises for both merchants and consumers. As of April 2022, there were about 473,000 merchant locations participating in the QR PH person-to-merchant (P2M) payment system, and as of June 2022, there are 17 financial institutions already participating in QR Ph P2M.

Micro, small and medium enterprise (MSME) entrepreneurs in the Philippines are the biggest beneficiaries of this effort. Establishing a robust foundation of financial literacy and inclusion is essential for their growth and success, and a central system that provides them the capacity to accept payments from other banks and e-money accounts through one channel bolsters their chances of achieving financial wellness in a dynamic and ever-evolving world of business.

In the lens of entrepreneurship, financial literacy and inclusion contribute greatly to financial wellness, encompassing factors such as sustainable cash flow, profitability, debt management, savings and investments. With financial wellness, they become better equipped to withstand economic uncertainties, invest in growth opportunities and contribute to job creation.

The majority of Filipinos have sufficient knowledge of the availability of the modules, programs and automated financial tools out there and the benefits they can provide themselves or their business. However, there remains a certain psychological barrier that keeps them from using such resources, hindering them from achieving financial wellness.

Overcoming barriers

Many entrepreneurs and business owners exhibit hesitance when it comes to embracing these tools, whether it’s rooted in fear of technology, concerns over security and privacy or reliance on traditional methods. Strikingly, the new barrier between entrepreneurs and digital financial tools is their exhaustion with various different financial tools that they simultaneously have to use to keep running their business efficiently.

Having thrown too many solutions at once, MSMEs are forced to go back to traditional formats that they think are ideal and convenient for them but not efficient for the business.

The question of how MSMEs can optimize their business’ financial operation often comes up in conversations, and the most effective answer to this is to focus on comprehensive tools that offer holistic solutions rather than adopting a piecemeal approach.

It is crucial to discern which facets of your business consume your time, profit and resources and evaluate if they can be replaced or optimized. Fortunately, technology-driven tools exist to streamline operations, freeing entrepreneurs to concentrate on growth and expansion.

Not utilizing digitized financial tools can put MSMEs at a disadvantage by hindering their efficiency, limiting market reach and impeding their ability to make informed financial decisions with the lack of knowledge on where their business health is at, which are things that impact entrepreneurs’ competitiveness.

Financial wellness

User-friendly digital financial tools open up significant opportunities for MSMEs. Entrepreneurs can seamlessly incorporate them into their daily routines, enhancing efficiency, accuracy and time management. Automating tasks such as collecting, managing and sending money streamlines operations and reduces the risk of errors or delays. Real-time financial data also empowers entrepreneurs to mitigate risks effectively, positioning them for long-term success.

Having a digitized financial tool that allows access to various features and data to easily analyze their business health through one platform is one of the best routes that MSMEs can take to simplify their business and focus on their growth. The simplicity of these tools encourages regular use, enabling a deeper understanding of financial health and informed decision-making.

In my role as the co-founder and chief operating officer at a fintech startup, I’ve had the privilege of witnessing firsthand the transformative impact these tools can have on business operations. Notably, The Fourth Wall, a research analysis firm, shared their experience of significantly enhancing client service by effectively resolving their financial disbursement challenges. Echoing this sentiment, Lab@Home, a medical test booking company, highlighted the efficiency and transparency our tools provide, fundamentally revolutionizing their invoicing process. This illustrates the tangible benefits that can be derived when embracing digital solutions within the realm of financial management.

Entrepreneurs’ behavior in adopting resources, particularly tech-enabled financial tools, is crucial to achieving financial stability. With the adoption of QR Ph growing positively, more and more MSMEs will soon, if not yet, demand digitized financial services that provide them with comprehensive yet simple capabilities so they can unlock their full potential and pave the way for scalable growth.

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Artie Lopez is NextPay co-founder and chief operating officer.