Small- to medium-sized enterprises (SMEs) help economies across the world go ’round.
But despite their significant contributions to global commerce, local SMEs have long been underserved by traditional financial institutions when it comes to their own cross-border payments and international expansion goals.
“Most of the companies in the world are actually SMEs,” Pegah Soltani, head of payments products at enterprise crypto solutions provider Ripple, told PYMNTS. “They ensure competition and drive innovation … but at the same time, they remain very underserved.”
When incumbent financial players look at SMEs, the perceived value of serving these businesses has often been outweighed by the relative costs involved. As a result, small businesses have struggled to compete with larger companies that benefit from established global payment rails and correspondent banking relationships.
But as Soltani explained, SMEs constitute over $17 trillion of cross-border payments annually, and, spurred by the digital economy providing new go-to-market opportunities, they are growing much faster than other segments.
“SMEs really feel the pain of correspondent banking much more acutely versus larger companies,” she said. “They have a lot fewer resources. And because they’re smaller, they have worse service and worse pricing relative to the bigger competitors.”
As the digital economy continues to evolve, small businesses must have access to efficient and cost-effective cross-border payment solutions.
That’s why Soltani emphasized the ability of cryptocurrency tools to offer an attractive solution to inefficient cross-border payments.
The most established multinational jumbo conglomerates know that international transacting is inherently complex, no matter your scale.
Part of the reason is that we live in a world without a global banking system, and fragmentation tends to breed inefficiencies and create problem areas within well-trodden processes.
“Frictions range from settlement times to pricing, to transparency,” Soltani said. “By using blockchain solutions, you not only remove intermediaries but can also reduce delays and provide upfront visibility into fees. There are a lot of operational benefits because the technology is transparent, traceable, auditable, and you have clear records at every stage.”
But can cross-border crypto payments provide SMEs with the tools they need to thrive in the global marketplace?
Soltani said blockchain-powered payments are among the most promising options to level the playing field.
“By cutting out the middleman, blockchain-powered solutions increase speed and reduce costs,” she said.
With Ripple Payments in particular, she added, settlement happens in seconds with “near-zero” failure rates, enabling SMEs to conduct transactions in seconds rather than days or sometimes weeks.
“With cross-border crypto solutions, SMEs gain instant settlement, which reduces the need to forecast or park capital over weekends,” Soltani said. “So, you’re not waiting around for a wire to arrive in three to five days. You don’t need intensive resource requirements or manual overhead, and you’re not paying up to 6% of your margin in costs.”
Beyond that, cross-border crypto solutions offer always-on availability 24/7, 365, regardless of weekend cutoff times or holidays, and their fees are up to 90% less than status quo systems.
Underlying both efficiency and cost-effectiveness is transparency.
“In traditional banking or correspondent banking, companies have to forecast how much money they need, when they need it, where they need it,” she said. “They need to plan for weekends, holidays, and if they get any of that wrong, it’s costly, and it results in a really bad customer experience for their customer, ultimately translating to lost revenue.”
In contrast, the blockchain technology underlying cross-border crypto payments ensures a transparent, traceable and immutable payment trail for SMEs that is often lacking in traditional payment systems.
“In today’s payment world, the standards are really different around the world,” she said. “So, if you’re using SWIFT or TIPS in Europe or [FedNow] in the U.S., you follow a different protocol, and the richness of that data is limited,” she said. “The result is a bunch of closed networks that don’t really talk to each other, so there’s a lot of manual intervention and ultimately a poor payments experience.”
“With ISO 20022, these problems will be solved,” she added. “At Ripple, we’ve been aligned with ISO 20022 from day one. We’ve always recognized that this is the direction of payments, and it’ll be better for everyone.”
Soltani separately explained that Ripple is committed to the “highest standards in safety, privacy and security,” as evidenced by its SOC 2 certification.
Still, even if expanding internationally can be made easier — it is never cheap. There are many upfront capital costs that cross-border businesses require. Forty percent of SMEs have unmet financing needs, resulting in a gap of over $5 trillion.
This financing gap hampers the growth and potential of these businesses, hindering their ability to expand and thrive, and managing these risks and complexities demands expertise and a strong treasury team, which many SMEs lack.
“The benefits that crypto and blockchain solutions provide ultimately reduce the working capital need for SMEs,” Soltani said. “A lot of times for these companies, the working capital pain points come from a timing mismatch between when you’re receiving money and when you have to pay it out. And for small companies, just a few days makes a huge difference.”
And with over 20 million transactions and $30 billion in volume already processed, Ripple is proving that blockchain technology can transform the payment landscape and growth opportunities for SMEs worldwide.
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