How governments in Asia Pacific can accelerate digitalisation for SMBs 

Asia Pacific is a hotbed of innovation, especially among young entrepreneurs brimming with new products, concepts, and ideas. Even established small and medium-sized businesses want to innovate by adopting technologies like artificial intelligence (AI), automation, and digital payments into their operations.

But adopting new technologies and digital tools can be difficult for many SMBs. Investments in hardware and software can strain smaller budgets, while some companies may lack the skills or know-how to implement new technologies effectively.

With SMBs forming 95 percent of all businesses in Asia Pacific and employing over half of local workforces, helping them to digitalise can massively uplift local economies. We believe governments, through public-private partnerships, are best placed to do so. By creating the right conditions for digital transformation, SMBs can enjoy increased competitiveness, better operational efficiency and resilience, drive job creation and economic prosperity.

Together with the global consultancy Kearney, we studied how governments around the world have stepped up to support SMBs in their digitalisation journey, often in collaboration with the private sector. 


Overcoming challenges

The adoption of digital payments is a key enabler of SMB digitalisation. During the pandemic, having an online presence helped businesses be more resilient and even unlock a new source of growth.

A key hardware and software tool for any business is the point of sale (PoS) system, which handles digital payments and keeps track of inventories. When Vietnamese farmers and agricultural SMBs wanted to grow their businesses and modernise their sales capabilities, the country’s Ministry of Industry and Trade partnered with Visa to find an easy and effective solution that would rapidly allow new merchant onboarding and use mobile devices as PoS terminals without the need for additional hardware. 

The benefits of PoS system are not limited to payments processing and inventory management. Our report also noted that a PoS system can be an important enabler for SMBs to access financing. Digital payments data obtained from PoS transactions can be used by fintech companies to analyse companies’ credit risk when applying for loans. 

We are heartened to see governments in Asia recognising the importance of digital payments and digital technologies, such as the PoS, in catalysing economic activity and helping SMBs gain access to them. Malaysia, for example, established a fund to help small entrepreneurs and businesses acquire PoS systems, which led to the doubling of the number of terminals from 2014 to 2018. 

Other incentives in the region include Australia’s Technology Investment Boost programme, which allows small businesses to claim a 20% tax deduction for expenses on digital technology up to a certain amount.


No SMB left behind

While SMBs have largely recognised that the path to commercial sustainability is digitalisation, it is important to not let others be left behind. As digital payments displace cash, the reach of the informal economy, where many SMBs still operate, will continue to shrink. 

Governments’ own adoption of digital payments in procurement and disbursements has been shown to encourage SMBs to join the formal sector as it broadens their access to bigger commercial opportunities. India’s Government e-Marketplace (GeM) rapidly increased the number of suppliers to the government from only 3,000 suppliers before its launch to almost 4 million in FY21-22, facilitating the integration of many SMBs into the government digital procurement system.

We believe there is tremendous room for governments and leaders in the payments ecosystem to work together to develop policies that support the conditions to accelerate SMB digitalisation. 

The stakes are high in advancing digitalisation for SMBs given their central role in Asia’s economies. Micro, small and medium businesses in Asia account for an average 97% of all enterprises and 69% of the national labour force. We believe the examples cited above are only scratching the surface of what public and private sector collaboration can do to drive the digitalisation of the SMB sector and we are excited to explore what more we can achieve going forward. 

Discover more SMB insights by accessing Visa’s research paper:

Unlocking Growth Opportunities for SMBs with Digital Payments