There are two key technological trends enabling this: the first is mobile digital payment options and the second is digital local currencies. The confluence of these two phenomena is creating a path for SMEs to adapt and grow – as well as their local economies, communities, and beyond.
Mobile digital payments
Diversifying payment means diversifying business. And it’s not just about adding various payment methods that may or may not be around in a few years, it’s about opening new channels that can also reduce costs and help make businesses more sustainable, especially in light of recent tax hikes emptying SMEs’ wallets.
The expanding variety of digitalised payment options is enabling SMEs to grow in new ways and broaden their customer-bases in an increasingly cashless world.
Of course, some would say that reports of the demise of good old cash and coin are premature, but in the UK, 74 per cent of people already make digital mobile purchases, and the numbers are only climbing.
Growing up in a connected world, millennials have an inherent trust in all things digital, inclining them towards the ease and convenience of “tap to pay” via mobile devices or digital money transfer.
That’s why cash is giving way to credit and debit card usage, and why Apple Pay, Venmo, PayPal, and NFC-enabled devices are already gaining traction in the UK.
So it comes as no surprise that e-payment methods are about to overtake cash, with over half of purchases today made digitally. SMEs can’t afford to ignore the fact that cash use is expected to fall to 27 per cent over the next ten years, and enabling mobile digital payments will help them stay ahead of the pack.
Some events of the past year, including Brexit, have been interpreted by many as a move away from the principles of globalisation towards localisation – the idea of prioritising local economies over the global one.
On the municipal level, cities are recognising the need to ensure a successful local economy to help strengthen their community and let it flourish. For example, many now see that global commercial chains that supplant local businesses but offer convenience and cheaper prices are potentially damaging to local economies, as they create fewer jobs than local businesses and siphon money from the local economy.
As a result, local currencies that must be used within cities are gaining popularity as a means of supporting local businesses and helping communities prosper. By accepting community-specific local currencies, SMEs open themselves to more local customers, encourage local shopping, and keep money circulating within the city, encouraging growth from within.
The UK is at the forefront of this trend, enjoying a number of local currencies in cities like Liverpool and Brixton that are fortifying their communities, and bolstering the UK economy as a whole.
But in a new “cashless economy,” developing new local cash currencies seems counterintuitive – and that is where digitised and local currencies meet, creating a hole larger than the sum of its parts.
Blockchain technology, which has use growing at a rapid pace in sectors from banking to cyber security to online music and beyond, has now made it possible to create local currencies that are cashless and digital. The benefits of local currencies can now be reaped in a cashless, digital way– paving the way to sustainable growth and local prosperity.
Here are some unique advantages that cashless local currencies offer SMEs:
The convergence of local and digital currencies creates a level of transparency that wasn’t always accessible for SMEs. Through enhanced data and analytics, owners can gain more control of what’s going on with their businesses to help them flourish.
Level playing field
Too often, SMEs are unable to easily access or manage the latest technologies to help propel their businesses forward. This is especially detrimental when going up against bigger, more tech-savvy companies.
With local, digital currencies, local entrepreneurs can tap into payment methods that only require a mobile phone, as opposed to hard to operate POS systems and analytics platforms. Cutting out middleman fees from credit card companies can also go a long way to levelling the playing field, helping SMEs can gain an innovative edge over larger competitors.
Support of local communities
Encouraging spending within the community tightens the social fabric that makes and cities more than just a place to live, but rather, places where you get to know your local shopkeeper or coffee server (yes, we intentionally didn’t use the word barista), green grocer, hardware merchant, chemist, clothing designer, etc.
Eventually, municipalities will even be able to receive payments like taxes via local digital currencies, and offer rewards for community-minded deeds like recycling and volunteering to further engender a strong sense of cooperation in the city, creating a real community, with money actually bringing people closer together.
Competing in today’s world is certainly about diversifying payment methods, but it’s really about diversifying one’s business as a whole.
Growing trends like the rise of digital payment options and local, digital currencies can help SMEs enhance local relationships, stay relevant, and grow their businesses in a sustainable manner, benefitting not only themselves, but also their cities, and ultimately, the entire economy.
Amos Meiri is CEO of Colu