Unpacking Cross-Border Trade and Supply Payments for Singapore SMEs

Unpacking Cross-Border Trade and Supply Payments for Singapore SMEs

by Johanan Devanesan

February 16, 2024

In an increasingly globalised marketplace, small and medium-sized enterprises (SMEs) in Singapore are recognising the imperative need to expand beyond domestic confines, aspiring to capture international markets and forge global supply chains. This ambition, however, hinges on the capability to execute seamless cross-border transactions — a theme extensively explored in Mastercard’s Borderless Payments Report 2023.

The report, which amalgamates insights from over 11,000 respondents across diverse global markets including Singapore, underscores the pivotal role that robust cross-border payment solutions play in the internationalisation strategies of SMEs. It provides a compelling narrative on the challenges and opportunities that lie in the path of Singapore’s SMEs as they navigate the complexities of global trade.

The Global Orientation of SME Operations

A significant takeaway from the report is the global outlook embraced by SMEs, a perspective that has gained momentum in the wake of the pandemic. With two-thirds of the surveyed enterprises identifying the crisis as a catalyst for exploring new international supplier relationships, it’s clear that globalisation is no longer a choice but a necessity for business resilience.

This trend is substantiated by data indicating that well over half (61%) of SMEs have augmented their sourcing from international suppliers over the preceding year. However, this shift towards global integration is not without its challenges.

Unpacking Cross-Border Trade and Supply Payments for Singapore SMEs

63% of Singapore SMEs are using international suppliers and services more than 12 months ago. Source: Mastercard Borderless Payments Report 2023

The reliability of cross-border payments emerges as a critical concern, with a notable proportion of SMEs experiencing failed or delayed transactions, thereby putting crucial supplier relationships at risk. This underscores an unequivocal demand for transparency in financial transactions, with businesses keen on having clear insights into payment timelines and transaction verification.

Digitalisation of Payment Methods

The report elucidates a marked shift towards digital and online payment methods among SMEs, reflecting a broader digital transformation in business operations. Digital platforms, particularly mobile apps and websites, have become the preferred channels for executing cross-border payments, a trend that is reflective of the digitalisation of commerce at large.

This digital shift is not merely a matter of convenience but has emerged as a lifeline for many businesses, especially highlighted during the stringent conditions imposed by the COVID-19 pandemic. Nearly 70% of SMEs attribute their survival through the pandemic to the ability to conduct online payments, emphasising the role of digital finance in ensuring business continuity and resilience.

Source: Mastercard Borderless Payments Report 2023

Security and Efficiency the Predominant Concerns

Despite the advantages offered by digital payment solutions, concerns around security and efficiency loom large. The fear of fraud is a significant barrier, with nearly four in ten SMEs prioritising data security to mitigate these risks.

Additionally, there is a growing expectation for more efficient transaction processes, with a substantial segment of SMEs desiring that cross-border funds be delivered within 24 hours — significantly faster than the current two to five days turnaround time. These concerns highlight the critical need for payment solutions that not only expedite transactions but also ensure the highest standards of security and transparency.

Singapore SMEs Cross-Border Business Landscape

Focusing on Singapore, the report reveals an ambitious outlook among local SMEs towards international expansion, with 79% of businesses planning to enhance their international footprint. This ambition is paralleled by a significant increase in the use of international suppliers, underscoring the critical role of cross-border payments in facilitating global trade.

Unpacking Cross-Border Trade and Supply Payments for Singapore SMEs

Over two-thirds of Singaporean SMEs are planning to source from overseas to narrow down future risk. Source: Mastercard Borderless Payments Report 2023

However, the path is fraught with challenges, with 36% of Singapore SMEs reporting issues with cross-border transactions, leading to late or failed payments. These issues have tangible consequences, including delayed payments to suppliers, restricted access to essential supplies, and reputational damage, highlighting the imperative need for reliable and efficient payment solutions.

The insights from the report offer a call to banks and other payment providers, presenting a unique opportunity to become indispensable allies to SMEs by offering secure, seamless, and transparent cross-border payment solutions. These solutions are not just facilitators of international trade but are fundamental to enhancing business efficiency, driving revenue growth, and improving cash flow.

Moreover, the consumer perspective, as highlighted in the report, adds an additional layer of complexity, with 40% of Singaporeans anticipating an increase in cross-border payments. The demand for low fees, simplicity, and speed in payment processes reflects a broader expectation for payment solutions that are not only efficient but also user-friendly and secure.

Source: Mastercard Borderless Payments Report 2023

Making Sense of Future Challenges

As Singapore SMEs set their sights on global markets, the challenges of cross-border transactions remain a significant hurdle. The report’s findings underscore the need for a holistic approach to addressing these challenges, focusing on enhancing the efficiency, security, and transparency of payment processes.

Payment providers have a pivotal role to play in this ecosystem, offering solutions that are tailored to the unique needs of SMEs and aligned with global best practices. By doing so, they can facilitate a more seamless integration of Singaporean SMEs into the global market, enabling them to compete effectively on the international stage.

The Mastercard Borderless Payments Report 2023 serves as a critical lens through which the aspirations and challenges of Singapore’s SMEs in the realm of international trade are viewed. As these enterprises strive to expand their global footprint, the role of fintech in facilitating efficient, secure, and transparent cross-border transactions cannot be overstated.

The report not only highlights the prevailing challenges but also charts a plausible course for the future, where payment providers can play a transformative role in enabling SMEs to realise their global ambitions. In an era where digitalisation and globalisation are inextricably linked, the evolution of cross-border payment solutions will undoubtedly be a key determinant in the success of SMEs in the international arena.


Featured image credit: Edited from Freepik

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This post originally appeared on TechToday.