Fintech can play a critical role in saving Europe’s SMEs from an inflation crisis

Inflation is at rates not seen since in many countries since the 70s. It’s likely to get worse and much of the globe will experience a significant recession over the next 18 months. The situation in Europe is particularly grim with rising energy prices pushing a lot of people and businesses to the brink. It may be hard to remember - but these problems had their origin at the end of 2021 with the supply chain crisis. It underlines the importance and fragility of the infrastructure underpinning our economies. This is why it’s crazy that the SMEs and individuals that make up the supply chain are so poorly served by traditional financial institutions. 

Many, SMEs and hauliers, even before the supply chain crisis started, were living precariously - often from invoice to invoice. In Europe, the average payment time for an invoice to these types of companies is two months - this has increased by 10% in 2022, according to our own data. Due to the nature of their work, most individuals and businesses are locked out of accessing credit. It does not take an MBA student to see how an inflationary spiral will hit these operations even harder, sending many into bankruptcy and deepening Europe’s supply chain problems. This will of course lead to even more inflation as the flow of goods slows and transportation becomes even more expensive. 

The sad fact is that SMEs and sole traders in the logistics and supply chain industry are not alone. Many small businesses from across different verticals find that they are ignored by the financial industry and can be bullied by larger companies into accepting late payments as a matter of course or unfair contractual terms. 

However, there is hope. The fintech industry is uniquely placed to help. We just need to remember the basic principle on which the sector was founded and initiatives like Open Banking were created  - disrupting finance to increase access and improve services. Financial inclusion is one of the most potent tools for individual and business growth. 

There is therefore a clear moral and practical incentive for fintechs to create and adapt their services to Europe’s SMEs in neglected sectors like logistics. A relatively straightforward service like factoring, bolstered by digitalisation and the latest AI and automation techniques to make it fully accessible to any customer, can be transformed into a lifeline. Not only does it give SMEs a buffer to keep operating, it helps insulate them against inflation and even give them the capital on hand to expand their businesses. Financial certainty is incredibly empowering. The substantial growth 4Trans has experienced by offering this service to supply chain SMEs and hauliers underlines just how huge demand is. We get the satisfaction of both building a fast growing startup and helping SMEs to survive and thrive. 

This is just one simple example. There’s plenty of scope to offer all kinds of different financial tools and services, especially in the space of insurance services, leasing and loans to name just a few. In fact, many of the products currently targeted directly to consumers or other startups would work wonders if they were tailored to SMEs in sectors like logistics. The key is remembering that simplicity and speed are critical elements to this audience.They do not have the time or in most cases, technical experience to become power users on complicated platforms. Time for these businesses really is money.