Singapore MSMBs most impacted by challenges when expanding overseas

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Singapore micro, small and medium-sized businesses (MSMBs) have global ambitions, but COVID-19 and international payments are major stumbling blocks when operating, venturing or expanding abroad, revealed new research released by Wise Business.

The study, which polled more than 4,800 MSMBs across the world, found that Singapore has the highest percentage of MSMBs (80%) who have been discouraged or prevented from expanding internationally.

Payments emerged as a top challenge for these businesses 一63% cite the cost and complexity of managing international payments as a major deterrent to either venturing or further expanding overseas, followed by lack of capital or resources (44%), import tariffs (36%), and culture or language considerations (32%).

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But, more worryingly, challenges with international payments are compounded for those already overseas. Singapore is home to the highest proportion (70%) of MSMBs operating abroad (classed as ‘micro-multinationals), but a whopping 88% of them say it’s harder to run a global business today as compared to five years ago, particularly due to the challenges of international payments and banking (61%).

Other factors include tariffs/taxes (40%) and complexity of managing international supply chains (25%). The global pandemic has only further stymied expansion dreams, with 60% of Singapore micro-multinationals having had to either cancel or delay their global expansion plans due to COVID-19 — the highest among the countries surveyed.

Traditional banking blocking Singapore MSMBs’ ambitions

More than one-third (36%) of the over 500 Singapore MSMBs surveyed report ambitions to expand internationally in the next 5 years, particularly in neighbouring countries, including Malaysia, Australia, China, Indonesia and the United States.

Yet, the struggles of international banking, which includes managing multiple currencies, foreign exchange rates and opening up foreign bank accounts, prevents businesses from reaching their full potential.

The majority of local micro-multinationals are still relying on old, outdated systems for sending or receiving cross-border payments — 83% use old-school methods like bank transfers or card payments, followed by PayPal (47%) as the next most popular method. Interestingly, while the cost of international payments is a top consideration for 86% of local micro-multinationals, only 2 in 10 (22%) think banks offer value for money — and it’s mostly familiarity with their traditional provider that’s keeping them from leveraging better options.

Indeed, micro-multinationals here are more likely to stick to their banks out of convenience than in other markets like Japan and Australia, as 38% believe it’s easier to use the same provider to manage both domestic and international payments.

Technology under-utilised in addressing complexities of international banking

Technology has played an important role in helping MSMBs navigate the pandemic. Over eight in ten (85%) of Singapore micro-multinationals say technology has helped them get through COVID-19, specifically through enabling the offering of products/services digitally (39%) and reaching new customers (33%).

What’s more, the pandemic has also shown the potential of digital banking systems in helping MSMBs better operate abroad. Indeed, 15% of local micro-multinationals that use digital providers for international payments accelerated their expansion plans during COVID-19, compared to 6% of those that do not use digital payments.

Yet, MSMBs have not embraced technology to manage international payments — barely half of local micro-multinationals (53%) use digital providers. Equally noteworthy is that 24% of Singapore micro-multinationals are unaware of, or don’t know enough, about digital payment options.

With cost (86%), transparency (83%), convenience (82%) and speed (81%) emerging as important factors for Singapore micro-multinationals when managing international payments, there’s a large potential for tech and digital options to help these businesses ease their expansion path.

Abhishek Choudhari, Wise’s APAC Product Director, said: “We’ve consistently seen how

micro, small and medium-sized businesses flourish when they look abroad, especially as we enter a new age of digitisation and internationalisation.

“Technology has helped MSMBs reach new audiences, yet many see their global ambitions held back by an international banking system that is slow and negates cost efficiencies brought about by going digital. Today’s findings tell us that international banking is their number one headache, and it’s clear why: fees are hidden and prohibitive, services too slow and painful.”