Digitizing SME B2B Payments
Small and Medium Enterprises (SMEs) make up the vast majority of businesses in Pakistan, employing 72% of the nonagricultural workforce1 and contributing 40% to the GDP.2 However, SME growth remains stifled owing mainly to their informality and reliance on cashbased transactions, which creates challenges including access to financial solutions, inefficiencies in tracking expenses, and increased risks of fraud. Digitizing SME payments—especially business-to-business (B2B) transactions—can address these barriers, with over USD 121 billion worth of SME B2B activity primed for digital transformation.3 Commercial cards offer a high-potential solution for the digitization of B2B payments. In addition to reducing risks and inefficiencies in cash flow management, commercial credit cards offer a free window of credit along with value-added services, such as advanced expense management tools. Issuers also benefit through monetization of new B2B flows, increased revenue, and data on new clientele. Despite their potential upside, adoption of commercial cards in Pakistan remains low. SMEs are often not aware of the availability of commercial cards or the benefits they can gain from them, and application and compliance processes for commercial cards are prohibitive and cumbersome. On the other hand, issuers view SMEs as high-risk clients due to their lack of collateral and credit histories. Restructuring the current commercial card issuance criteria, raising awareness amongst SMEs and issuers on the benefits of commercial card adoption, and improving ecosystem readiness for card acceptance can help boost adoption.
This report is produced by Visa.