Airwallex Survey 2023: Singapore SMEs brace for recession, but global expansion remains a priority

New data from global fintech Airwallex reveals 7 in 10 Singapore SMEs are bracing for a potential recession within the next two years. The independent research considered the challenges Singapore SMEs in Singapore expect to face amid the current economic uncertainty and how they would navigate these challenges and leverage technology to support their future growth.

Rising costs are among top concerns with nearly two-thirds looking to reduce business spending and optimise operations through technology and digital transformation

Rising costs from suppliers (35%) account for the highest rise in business costs, followed by employee costs (30%) and logistical disruption costs (23%). 

In order to stay competitive in the midst of economic challenges, SMEs are turning to business optimization and adoption of technology to improve their efficiency, reduce costs and grow revenue. Common digital solutions that SMEs are adopting include cloud computing, e-commerce platforms, marketing analytics tools, and digital payments to reduce their overheads and expand their customer base. These solutions allow SMEs to reduce costs associated with physical infrastructure and improve their online presence, enabling them to reach new customers and compete with larger businesses. 

Improving efficiency (42%), growing revenue (40%), and market share (33%) were the top three priorities for SMEs surveyed.

Amid a challenging economic environment, businesses in Singapore retain a strong appetite for growth and expansion

The survey found that nearly two-thirds (64%) of SMEs plan to expand their business overseas in the next 12 months. Southeast Asia remains a top expansion region, with almost one in two SMEs (43%) looking to expand across the region. The top five favoured markets for expansion include Malaysia, the Netherlands, Indonesia, Vietnam, and the Philippines.

Technology has made it easier for SMEs to access new markets, collaborate and communicate with local experts and suppliers located in different parts of the world, breaking down geographical barriers and facilitating international trade. By working with a local expert, businesses can gain insights into the specific requirements of the local market, including industry-specific regulations and local customs.

SMEs can also leverage on government support and assistance in their international expansion efforts. Examples of initiatives by the Singapore government include the Global Company Partnership program, which provides financial support and funding for market set-up, business development, and market access. The government also offers trade missions, networking opportunities, and established trade agreements and partnerships to provide SMEs with preferential access to overseas markets. 

Additionally, the Productivity Solutions Grant (PSG) by Enterprise Singapore covers a wide range of productivity solutions and helps SMEs to overcome financial barriers and stay competitive through increased efficiency, productivity, and growth. 

Trust in fintech and digital platforms and willingness to adopt are high

While SMEs continue to maintain a high level of confidence in traditional banking providers, the survey found that 93% of businesses in Singapore hold a high level of trust in fintech and digital platforms to support their business activities.  

Fintechs such as Airwallex can provide Singaporean SMEs with the financial tools and resources they need to manage their finances more efficiently, reduce costs and increase profitability across borders. Here are some specific examples and ways in which a fintech can help support the business activities and international expansion of SMEs:

1. Virtual accounts enable SMEs to hold and manage funds in multiple currencies without the need for physical bank accounts in each country. The benefits of these accounts include access to details for invoicing across borders as well as cross-border payments with reduced fees and transaction times compared to traditional bank transfers. 

2. Accounting and Bookkeeping: Fintech can also provide SMEs with digital accounting and bookkeeping services. By using online accounting tools, SMEs can track their finances more efficiently, reduce errors, and make more informed decisions based on real-time financial data. 

For example, through the Xero integration in Airwallex, local and cross-border transactions processed through Airwallex can be automatically synced with Xero, reducing the need for manual data entry and minimizing errors. 

3. Improved Cash Flow Management: Fintech dashboards provide real-time visibility into payment processing and real-time payment data across multiple entities in a single account. This helps SMEs to better forecast their cash flow and manage their working capital more effectively.

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