Why Is Digitisation of Trade Important for SMEs?

Small and medium businesses (SMEs) are the backbone of every economy. They are also the first point of contact for customers, suppliers, financiers, and other stakeholders. SMEs must embrace new technologies to compete with larger companies and grow their business. The digitization of trade is one such technology; it enables SME suppliers and buyers to connect online, streamline processes and transact directly. This article explains why the digitization of trade is so important for SMEs and how this technology can help your business to grow.

Trade transactions often involve data from numerous parties, including buyers, sellers, financiers, insurers, freighters, port authorities, customs officials, and many others. Trade data may be exchanged across various parties with various currencies, resulting in difficulties, delays, and uncertainty. Digital technologies can drastically enhance global trade. Although the finance sector remains primarily paper-based, technology may assist financial institutions in reducing costs, improving operational efficiency, and reducing risk. This will be accomplished through pre-integrated digitalization capabilities provided by an ecosystem of fintech and marketplaces, the best place to start is with SMEs.

What is the Digitization of Trade?

Trade digitization replaces paper-based transactions with digital communications and data exchange between stakeholders. This benefits businesses and their customers and can be used for various commercial activities.

The digitization of trade is not new, but it is becoming increasingly important for SMEs due to two (2) significant factors:

• A Changing Business Landscape - With economic growth shifting towards the Asia-Pacific region, it's estimated that 90% of global trade will be conducted within the Asia-Pacific region by 2030. To be competitive globally, businesses must digitize their operations to gain a competitive advantage.
• Growing Awareness of the Benefits of Digitisation - Digital technologies have become more user-friendly and accessible to businesses of all sizes. This has led to a rise in the adoption of digitization in various commercial activities, including procurement, sales, and supply chain management.

Why is it important for SMEs?

Due to various factors, SMEs have traditionally been less involved in digital trade than large enterprises. Some of these include:

• Lack of Expertise - SMEs may not have the expertise to digitize their operations. This may consist of difficulty choosing the right technology for the business or procuring and managing technology.
• Lack of Resources - SMEs may lack the investment needed to digitize their operations. This may include implementing the right technology, hiring data scientists, or investing in data analytics.
• Lack of Understanding - SMEs may not fully appreciate the benefits of digitizing trade. This may include reaching new markets, increasing sales, or creating new revenue streams.

A globally secure authentication platform was urgently required to fight fraud. However, enforcing this idea has been more complicated than voicing it. A solution that enables lenders to identify and flag fraudulent transactions before they occur is currently the most crucial tool for the industry. This would increase lenders' confidence to enter new markets and distribute cash, resulting in more liquidity. Fraud risk in geographic regions is causing big corporations to pull out of markets. This has significant consequences. In many cases, the areas that need liquidity the most are those experiencing a mass exodus of banking support. Small- and medium-sized enterprises (SMEs) are abundant in these areas.

Three (3) benefits of digitization of trade for SMEs

The digitization of trade can bring numerous benefits to SMEs, including:

• Reduced Costs - With direct online trading between buyers and suppliers, fewer intermediaries are involved. This can reduce the costs of trading for SMEs significantly because there is no need to incur the extra charges associated with the logistics of paper-based trading.
• Automated Transactions - Digitization of trade can improve efficiencies by enabling businesses to automate their transactions. This includes smart contracts, which are self-executing when certain conditions are met. These can improve the execution speed and accuracy of transactions and reduce risks associated with manual data entry.
• Improved Visibility - With digitization, the supplier base and the trading environment is better visibility. This means greater transparency and control over the procurement process, leading to improved decision-making.

Three (3) ways digitization of trade can help SMEs grow

SMEs that embrace the digitization of trade stand to benefit from an array of growth opportunities. These include:

• Access to New Markets - With the digitization of trade, businesses can access new markets farther away from their headquarters. This includes finding new suppliers and new customers, which can help increase revenue.
• Faster Time to Market - The digitization of trade can help speed up the time it takes to bring products to market. This includes sourcing materials, processing payments quickly, and rapidly accessing suppliers.
• Reduction in Risk - The digitization of trade reduces the risk of fraud, errors, and delays in payment. This can lead to savings on operational costs and mitigate related stress and anxiety.

Conclusion

The digitization of trade is one of the best ways for SMEs to compete with larger companies and grow their business.

Trade digitization benefits SMEs in many ways,

• Including reduced costs
• Faster time to market
• And reduced risk.

All businesses should embrace trade digitization to stay competitive in a global economy.

A standardized approach will help solve this issue, as connecting to many services with their own rules can slow down the process. A single channel would streamline operations, resulting in an application programming interface (API) that would make it easier for customers.

The market is moving in the right direction with the recent announcement by #Contour to connect systems and share data – securely is a good example. ?