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SME Featured APAC

Small businesses in APAC bullish on growth this 2021: report

Singapore – Despite a tough year for small and medium-sized businesses in the year of the pandemic, SMEs in APAC are showing higher confidence that enterprise will slowly come back on its feet this 2021, new report by CPA Australia showed. 

A survey record low of 46.2 percent of small businesses in the region grew in 2020, down from 65.8 percent in 2019. Further reflecting the challenging environment, 31.3 percent of businesses shrank last year, more than double the 14.5 percent that shrank in 2019.

This year, the survey shows that small business confidence is beginning to return, with 60.8 percent expecting to grow this year, which is noticeably higher than the 46.2 percent that grew last year.

However, for most businesses, it won’t be an immediate return to their pre-COVID-19 level. Only 14.5 percent have already returned to their pre-pandemic levels, while 58.4 percent expect to return to their pre-pandemic levels over the next two years. 

According to the study, optimism is most apparent in India, where a significant 86.7 percent of small businesses expect to grow this year, up solidly from 2020. Meanwhile, Hong Kong’s small businesses is the least optimistic, where only 21.2 percent expect to grow, with 49 percent expect to shrink or shut down this year. 

The optimism is chalked up to the expected job creation by small businesses. About 36.1 percent of the region’s small businesses expect to add employees this year.

The poor growth that resulted in 2020 was reflected in higher job losses in the sector, where businesses resorted to retrenchments and downsizing amid the halted operations brought by the lockdowns and closure of borders. In 2020, 14.7 percent of small businesses reduced employee numbers, compared with 6.7 percent in 2019. However, job losses were lower than expected because many governments in the region introduced wage subsidy schemes, like Australia’s JobKeeper, Singapore’s Jobs Support Scheme, and Hong Kong’s Employment Support Scheme.

The report said that innovation along with job creation is what will spur the recovery of businesses. The study saw that younger businesses and businesses from developing markets are more likely to be innovative. This year, the percentage of businesses that are expected to innovate is down slightly from expectations for last year – 23 percent will innovate in 2021 compared to 25.8 percent in 2020. In India, the large jump in the percentage of businesses that will innovate reflects well on its small business sector and government policies encouraging innovation.

What the report found that will stimulate growth the most are five things: selling online, innovating, improving business strategy, investing in technology, and improving customer satisfaction.

Due to limited physical activity and in-person engagements, the period of the pandemic saw small businesses increasing their adoption of technology and finally digitizing their operations. In 2020, 57.9 percent of businesses received more than 10 percent of revenue from online sales, up from 51 percent in 2019. 

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SME Featured Southeast Asia

Access to external finance a difficulty among Filipino small businesses: survey

Manila, Philippines – Despite the majority of Filipino small businesses successfully deploying digital finance gateways, access to external finance, on the other hand, may hamper their business growth, new survey from professional accounting body CPA Australia shows.

According to the report., cash flow difficulties are having a negative effect on some Filipino small businesses as 64% of respondents sought external funds last year; with 43% seeking funds for business growth, and 32% for survival.

However, only 13% of respondents found accessing external finance easy or very easy, the lowest of the markets surveyed. This may explain why respondents mainly sought funds from friends or family (21%) or personal resources (21%), compared to 15% from a bank. Only 16% of Filipino small businesses expect accessing external finance to be easy or very easy in 2021, which is lower than the survey average of 28%.

Part of this issue can be attributed to COVID-19 restrictions, with more than half (58%) of Filipino respondents reported being negatively impacted by COVID-19. However, 46% say they have already recovered or expect to recover in 2021, while 62% of small businesses grew in 2020. 

Filipino small businesses made greater use of digital technologies in 2020 as the pandemic accelerated the use of e-commerce. Around 27% of Filipino small businesses reported that they began or increased their focus on online sales in response to COVID-19.

Meanwhile, 61% of respondents received more than 10% of sales from digital or online payment technologies such as GCash, DragonPay, and PesoPay, up from 47% in 2019. About 62% of small businesses received more than 1% of their revenue from online sales, up from 50% in 2019.

According to Mark Chau, regional general manager of business development international at CPA Australia, dynamism among Filipino small businesses should help drive an economic rebound this year as restrictions are gradually eased and global economic activity returns to normal.

“The survey shows that small businesses in the Philippines are eager to innovate and engage with customers through social media. A vibrant and youthful workforce together with growing domestic demand supported the sector in 2020,” Chaus stated.

About 73% of Filipino small businesses expect to grow in 2021, with 52% intending to increase employees. 22% anticipate that revenue from overseas markets will grow strongly, while 31% say they will introduce a new product, process or service to the local or overseas markets, the second highest of the markets surveyed.

“Difficulties in accessing external finance may hinder business plans to hire more employees, invest in technology or expand to new markets. Small businesses in the Philippines should consider seeking professional advice to maximize their success in obtaining external finance,” Chau added.

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SME Featured Southeast Asia

Digital adoption on the rise among MY small businesses: survey

Kuala Lumpur, Malaysia – As a result of the disruption caused by the global pandemic, more small businesses in Malaysia have utilized digital technologies in their operations and services, new survey from professional accounting organization CPA Australia shows.

According to the survey, 40% of businesses have begun increasing their focus on online sales in the past 12 months, as well as social media amplification, with over 60% using it to promote their business and 55% using it to communicate with customers.

While most Malaysian small businesses offer customers new digital and mobile payment options, 61.5% still receive 50% or more of their sales in cash, above the APAC survey average of 46.4%.

“The strong connection between technology usage and business growth and the quick returns many Malaysian businesses experience when investing in technology is no doubt helping to drive this uptake. Forty-two per cent reported positive returns from their technology investment last year,” said Jimmy Lai, president of CPA Australia, Malaysia Division.

Despite efforts among the small businesses scene in the country, most find difficulty in financing conditions. Nearly 50% expecting they will face problems accessing finance. These difficulties, plus an uncertain outlook are also expected to impact the solvency of many businesses, with 32% anticipating it will be difficult to repay debts in 2021.

“Small businesses may be offering limited digital and mobile payment options due to a lack of understanding about what’s available or scepticism towards these solutions. This echoes findings from CPA Australia’s 2020 Report on Business FinTech Usage Survey, that showed 31% of businesses with fewer than 50 employees identified a lack of fintech understanding among the board or senior management as a challenge to fintech adoption,” Lai said.

He also added that more can be done to assure business that digital and mobile payment options can provide better customer reach, which should contribute to recovery this year.

COVID-19 is likely to continue creating challenges for Malaysia’s small businesses. Developments such as the spike in infections at the start of the year are balanced by the vaccine roll-out and easing of restrictions. This suggests a more positive picture for 2021, which is supported by the survey results. About 70% of respondents expect their revenue to grow this year, up from 56% last year. Exporting will make an important contribution to growth, with 45% expecting revenue from overseas to grow this year.

“With many small businesses having a strong focus on innovation, e-commerce, good staff and improving business strategy, we are likely to see them recover quickly from COVID-19, especially in the second half of the year. Such a focus also sets them up for long-term growth,” Lai stated.

He added, “However, uncertainty in the economic outlook will remain an impediment to small business recovery. The government should therefore continue to play its enhanced role in supporting this fundamental sector of Malaysia’s economy in the near term.”

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SME Featured East Asia

Hong Kong SMBs’ confidence rate on record low: survey

Hong Kong – Due to the prolonged economic impacts brought by the COVID-19 pandemic, the confidence rate among small and medium businesses (SMBs) is at an all-time low, according to a new survey from professional accounting body CPA Australia.

Only 16% of surveyed Hong Kong small businesses reported growth last year, and only 21% expect their business to grow this year. Furthermore, the survey also stated that the weak outlook is reflected in the cautious approach of Hong Kong small businesses’ increasing their headcounts. Only 12% of respondents expect to increase staff in 2021, compared to the APAC survey average of 36%.

In addition, Hong Kong small businesses are also less inclined to innovate, with only 8.5% of respondents stating they will introduce new products or services in 2021, compared to the average of 23% in the APAC.

“For two consecutive years, expectations of business growth among Hong Kong small businesses have been the lowest of the surveyed markets. 53% of respondents identified COVID-19 as having had a major negative impact on their business operations in 2020, and 65% of them expect to need one year or more to recover,” said Janssen Chan, 2021 divisional president for Greater China at CPA Australia.

When asked what major actions businesses took in response to COVID-19, small businesses in Hong Kong were most likely to have sought government support and subsidies (33%), reduced capital expenditure (32%), and reduced staff numbers and costs (22%).

The response is also reported in other findings that beginning or increasing the focus on online sales was one of the key actions taken by small businesses in many of the markets surveyed.

“The relief measures announced by the SAR Government supported small businesses to combat the worst of the pandemic. According to the survey, 44% of the respondents sought external funds for business survival. Using government grants as the main source of external finance jumped from 9% in 2019 to a record high of 33% last year,” Chan added.

Chan also noted that the government’s initiative to issue electronic consumption vouchers, as announced in the Hong Kong Budget, is one great opportunity for SMBs in taking advantage of e-commerce and digital payment options. He also recommended reopening applications to the Distance Business Programme to continue driving digitalization and technology adoption of small businesses.

The Distance Business Programme is an initiative by the Hong Kong government to support enterprises in adopting IT solutions to continue their business and services during the epidemic.

“While business innovation may involve additional expenditure in the short term, small businesses in Hong Kong should be more proactive in reassessing their resource allocation and consider innovating through the adoption of technology. This could enhance their long-term competitiveness and help them keep pace with their peers in other Asia-Pacific economies,” Chan added.

The survey recommended Hong Kong businesses to consider certain measures such as managing cash flow and debt closely paying attention to the cost of external financing, leveraging government support schemes to increase the adoption of technology, as well as to identify, invest in and adopt new technologies to keep innovating. 

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Main Feature SME Southeast Asia

Digital wallets, chatbots, open banking APIs are top 3 fintech among Singapore businesses

Singapore – Over the past 12 months, more than half of businesses in Singapore or 67% of them have used fintech in running their operations, and within this percentage, the top three forms of fintech used emerged to be mobile payments or digital wallets, robo-advisory or chatbots, and open banking APIs, according to a report by CPA Australia.

FIntech
FIntech

Mobile payments recorded the most adoption with 47% of businesses, followed by chatbots with 34%, while 30% said they have used open banking APIs.

Singapore has been widely known for being a top technology hub, and as the coronavirus started threatening safety, the government has further encouraged the use of fintech. In April, the Monetary Authority of Singapore (MAS) urged individuals and businesses to use digital finance services and e-payments to help contain physical contact.

Amid social distancing directives, more businesses have expressed desires to adopt fintech, with 73% expecting to use at least one fintech product or service in the next 12 months, with a third of them citing COVID-19 as a reason for further usage, to operate anew amid disruptions in operations.

The most boost in adoption is seen to come from the need to increase efficiency in doing business, with nearly 6 in 10 respondents, or 59.1%, identifying it as an important factor. Meanwhile, more than 4 in 10, or 43.6%, of businesses expect to use fintech to help them better understand and improve customer experience. 

The top three most used fintech are still the same ones seen to drive the adoption for the coming months. About 42.7% of businesses believe that they will use mobile payments the most, followed by robo-advisory and chatbots with 23.6% , and open banking APIs with 19.1%.

Fintech

While the report revealed that a positive adoption of fintech is on the horizon, it also found certain factors that hinder businesses to jump in.

The top concern showed to be cybersecurity with 34% identifying it as a barrier, while a lack of fintech understanding and knowledge within the board and senior management was also a concern with 30%. Meanwhile, 26% simply did not consider fintech to be necessary for business.

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Main Feature Technology Southeast Asia

About 75% of Malaysian businesses are warming up to fintech, finds study

Kuala Lumpur, Malaysia – Around 75 percent of Malaysian businesses have utilized at least one fintech product or service over the past 12 months, according to a study by global professional accounting organization CPA Australia.

Among the forms of fintech, mobile payments and digital wallets were the most widely adopted in Malaysia in the past 12 months, with 63 percent of businesses surveyed indicating such usage. 

Furthermore, the study revealed the various reasons which attracted business owners to fintech. About 56 percent cited that the main reason was the increase in business efficiency, with more than five in 10 respondents identifying it as an important benefit. Meanwhile, 40 percent said that fintech allowed them to adapt to the challenges posed by the COVID-19 pandemic, while over a third, or about 34 percent saw the use of fintech as a way of reducing costs

“The increased popularity of mobile payments and digital wallets goes hand in glove with the Government’s efforts to increase the use of e-wallets amongst the B40 and M40 through cash transfer programs, as part of its transition to a high value-added, high-income economy”, said Bryan Chung, chairman of the digital transformation committee at CPA Australia Malaysia division.

However, despite the growing trend of Malaysian businesses adopting fintech, one in four surveyed said that they do not expect to use fintech in the next 12 months, with the majority of such are companies with 50 or fewer employees.

Cybersecurity and data privacy were cited as the top concerns. 

“Small businesses may not have a sound understanding of the benefits of fintech to their organizations. More needs to be done to improve small businesses’ understanding of what fintech solutions might be good for their businesses,” said Chung.

Chung adds, “Greater consideration also needs to be given to increasing technology expertise at the board and senior management level to ensure better understanding of risks and benefits of fintech. Including fintech in the terms of reference of a board-level committee should help the highest levels of companies to stay informed of new trends in this type of technology.”