One in every 2 businesses agree that limited resources and lack of knowledge are the two major roadblocks to their digital transformation aspirations, reveals a study.
RazorpayX, business banking platform of Razorpay, commissioned an IDC Infobrief titled ‘SME Banking is Broken: Will India’s Promising Neobanks Fix it?’. The infobrief launched on Tuesday (January 11) delves into understanding challenges faced in managing financial operations, slow adoption of digital solutions and its impact on MSMEs.
The IDC Infobrief, Commissioned by RazorpayX attempts to answer some pertinent questions around digital adoption by SMEs and what is stopping them from modernizing their finance function. Furthermore, the study highlights the urgent need for SMEs to digitally transform their finance function, as the offerings of traditional banking organisations do not align with their evolving needs.
Reiterating why business finance is the core of any enterprise, the study has focused on 6 key functions that businesses typically spend most of their time on - this includes Banking, Payroll, Vendor Management, Business Reporting, Expense Management and Access to Working Capital.
The findings of the IDC Infobrief are based on the responses garnered from quantitative surveys of 20–25 minutes in length and in-depth research.
● 1 in every 2 businesses agree that limited resources and lack of knowledge are the two major roadblocks to their digital transformation aspirations
● The annual average loss from legacy systems dependence is Rs 67 lakh (per SME, annually) which equals 1,689 hours worth of man hours per SME, per year
● Over 45 percent SMEs fear there is a high chance of manual errors because of the dependence on traditional processes
● Over 56 percent SMEs reported that they wasted time from deploying resources for repetitive tasks
● 44 percent SMEs complained spending significant time (an average of 1446 hours) on financial operations and repetitive tasks
Having acknowledged the above mentioned challenges, SMEs also realise they need a simple seamless business banking solution that will allow them to focus on core business activities instead of being caught in complicated processes & repetitive tasks.
Some key requirements from SMEs
● 66 percent SMEs insist on need for easier access and faster means for loan approvals and verifications
● 75 percent SMEs wish for reduction in time spent on data entry when it comes to payroll
● 60 percent SMEs want a unified view of financial transactions to check and improve visibility of overall business health and identify hiccups early on
● 55 percent SMEs prefer automated approval processes for better time management
Shashank Kumar, Co-founder and CTO, Razorpay said, “While the banking problems faced by small businesses are many, it's good to know that some SMEs are slowly becoming aware of how neobanks can solve their broken banking experience. This IDC Infobrief commissioned by RazorpayX, our neobanking platform, attempts to bring to light the challenges faced by SMEs, the enormous time & money lost, due to dependence on traditional banking processes.”
He added, “Due to lack of awareness, small businesses aren't able to take full advantage of the seamless, integrated banking experience that neobanks can offer in managing their business financing and banking needs. The infobrief found out that 1 in 2 businesses agreed that lack of knowledge dragged down their digital transformation aspirations, which eventually affected their business growth. We hope the insights of this report will reach out to more and more SMEs and help them understand the crucial need and valuable impact neobanks can create on their business, if they give it a chance."
Michael Yeo, Associate Research Director, IDC Asia/Pacific said, “Neobanking is at an inflection point in India and has reshaped consumer expectations of what their bank can do for them. However, visibility on what they can do for businesses is yet to be discovered. SMEs in India are in dire need for solutions that can automate their end-to-end financial operations, enabling them to take intelligent and informed decisions on their financial operations. Neobanks in India are now developing technology-first solutions specifically designed for SME needs in a dynamic and ever-changing environment that has the potential to disrupt the incumbent business banking in the long run.”