Hold 2021 easy for small and medium-sized companies
Regardless of the shape of Brexit, it will make the life of small and medium-sized enterprises (SMEs) more complicated. However, in the context of a recession caused by an ongoing global pandemic, the path is incredibly uncertain – especially for companies trading overseas. Open banking provides clues to a path for SMBs, but some important opportunities have been missed so far. With a unique understanding of Open Banking, Currensea offers SMEs simplicity and transparency in their international transactions and helps them find the clearest path by 2021.
SMEs in 2020
SMEs are at the heart of the UK economy in many ways. In 2019 there were 5.9 million SMEs in the country, employing 16.6 million people and with estimated sales of £ 2.2 trillion.
Up to 4.72 million of these SMEs trade internationally, and a quarter of them have had to slow or stop overseas trade due to the restrictions of the pandemic. In fact, SME exports have fallen by around 10 percent – that alone has cost the UK up to £ 20 billion.
The pandemic isn't the only complicating factor for SMEs, however. Brexit has been hanging over business owners for over four years and its final deadline is fast approaching. Regardless, Europe remains the UK's largest trading partner and accounts for 75 percent of international trade by SMEs. It is unlikely that this will change overnight.
By January 1, 2021, all UK businesses will be required to operate under new customs and border directives – and the lack of visibility into exactly how this will affect businesses has hesitated many decision-makers to invest in preparation.
Rough seas ahead
Thanks to a report commissioned by Currensea and in partnership with the Vitreous World research agency, we can see how this is affecting UK businesses. Despite the lack of clarity about political changes, 45 percent of SMEs say that they will continue their international trade as usual after Brexit.
The remaining 55 percent, however, represent the uncertain majority. They are the ones faced with a difficult decision: either stop trading internationally at the expense of business and seek other safer ways to trade, or take a risk and go ahead blindly.
Richard Greening, Global Technical Director at Business Process Outsourcer, said larger companies are generally prepared for Brexit. whereas SMEs struggle because they cannot predict the post-Brexit operating environment and do not have the financial resources of larger companies. Therefore, if they made the wrong investment and got a hit, they would suffer.
Although greening only relates to Brexit, the sentiment for COVID remains the same. Regardless of the shape of Brexit, its impact will only affect small businesses operating in an economy that has been damaged by a lockdown that has no clear ending.
However, tools are available to SMEs to help them pave the way. One of them is open banking.
What is Open Banking?
For all the complexities associated with leaving the European Union, open banking is a global trend that ironically found itself in the UK as a competition and market regulator directive shortly after the adoption of European legislation known as the Second Payment Services Directive, has been implemented or PSD2.
Open banking opened up the monolithic banking industry to innovation, forcing banks to open up to third-party APIs (APIs are just intermediary software that defines and facilitates communication between two or more applications). With Open Banking, third-party providers can use these APIs to access bank account data securely and in a standardized manner.
What is exciting for SMBs right now is that Open Banking gives them direct access to the innovations that can bring much-needed simplicity in the months ahead.
A current example of Open Banking in action is the account aggregation cited by Monzo: this allows participants to transfer money between their Monzo account and different banks without having to enter their secondary bank credentials.
However, many of the skills that disruptor banks like Monzo and Revolut advocate only scratch the surface of the potential transformation that could be achieved through innovative open banking. For example, when it comes to international payments for SMEs, these fintechs continue to charge companies for individual international transactions.
Perhaps this is why two years after the introduction of Open Banking, few companies are benefiting from the myriad of simplification options it can offer.
Penetrating the complexity
Regardless of the specifics of all the complications of Brexit and the COVID crisis, it boils down to one problem: the pandemic has hit every company hard; Unemployment is high and these small and medium-sized businesses are a large part of an already damaged economy.
We should look for a way to simplify the flow of business a little – not just for established companies, but for anyone with an entrepreneurial flair who want to trade overseas. And there are solutions out here that are specifically designed for SMEs.
One way overseas businesses can seek is Currensea. Currensea is available thanks to a comprehensive understanding of the unused functions of Open Banking and makes the international payment process as simple and transparent as possible.
Keep it simple
It doesn't matter what your business is and what you buy – whether you renew your Amazon Web Service subscription or order five thousand pieces of clothing in bulk to design and resell as goods. When you make this purchase with your Currensea card you will know two things:
- You will receive the best possible exchange rate between banks around the clock
- You get the lowest possible payment fee: zero percent
Ultimately, SMEs buy and sell abroad at the best possible price – so why undercut with expensive payment fees and sub-optimal exchange rates?
In the year of complexity, simplicity is not only required of SMEs, it is also required. Thanks to a clever use of Open Banking, Currensea connects seamlessly with your existing business account, removing all barriers between you and the best possible overseas transactions in 2021.
Visit Currensea to get your own Currensea Card or to learn more about how much you can save on your usual overseas transactions.
How Brexit will affect your company – Import No. 1