SINGAPORE - Micro firms in Singapore are lagging behind their bigger peers in their use of fintech products and services, despite standing to gain the most from adopting such services.
Online bookkeeping and invoice management software as well as payroll tools are some products and services that can create more process and cost efficiencies. However, only 58 per cent of micro firms - businesses with annual revenues below $1 million - have adopted fintech services in the past year, according to a report launched on Friday (Nov 22).
This is significantly lower than the overall 75 per cent adoption rate among all the 272 micro firms and small- and medium-sized enterprises (SMEs) recently surveyed by the Singapore FinTech Association and Ernst & Young (EY) Corporate Advisors.
The report said the unexpected low adoption rate by the micro firms may be because these firms are still only focused on growing their revenues and have not started streamlining their business processes.
They may also lack the relevant resources and talents to implement new fintech solutions to achieve cost savings. A lack of awareness and familiarity of these new solutions may also be another barrier for these micro firms, the report added.
Overall, the survey found that majority of the respondents, regardless of size and industry, use fintech firms primarily for payments services, such as online payment processing.
Only about 20 per cent of them are using fintech firms for online crowdfunding and online lending.
Both adopters and non-adopters of fintech solutions expressed similar concerns including data protection, quality of service and the reputation of the service providers.
Mr Liew Nam Soon, EY Asean regional managing partner, said there is still untapped potential for fintech firms to continue to bridge the experience gap for SMEs in Singapore.
He noted that fintech firms are partnering banks to enhance the traditional players' product offerings and processes, which can help banks to address the pain points in serving the SMEs while giving underserved SMEs access to better financial services.
The report noted that fintech firms can facilitate the provision of bank products such as current accounts, secured loans and corporate credit cards to small businesses. They are also partnering banks to digitise the underwriting and onboarding process of loans for small businesses. This reduces the time needed for the loans to be approved, providing timely and crucial liquidity to these small businesses.
Mr Liew expects more SMEs to adopt fintech services as they gain familiarity with these "cheaper, faster and better financial solutions".
Singapore FinTech Association president Chia Hock Lai said: "SMEs are an important source of employment and economic growth, and the report shows that fintech solutions can bridge some of the gaps they face, especially in terms of pricing and responsiveness.
"Awareness and trust are key to driving further adoption of fintech services by SMEs."