// INDUSTRY INSIGHT //
THE PAYMENT REVOLUTION COMING FOR SMALL BUSINESSES
Central bank digital currencies could finally solve the financial friction that hold back emerging market SMEs. Mustafa Syed, Senior Manager, PwC, explores how financial systems haven’ t kept pace with the digital economy and how central bank digital currencies could offer SMEs opportunities which they didn’ t have before.
n the sprawling markets
I of Lagos, the factories of Mumbai and the trading hubs of São Paulo, millions of small business owners face the same daily frustration: their money moves too slowly and costs too much. A textile manufacturer waits three days for a supplier payment to clear. A restaurant owner pays 5 % in fees to accept digital payments. An exporter watches profit margins evaporate in currency conversion costs.
These aren’ t isolated problems but symptoms of financial systems that haven’ t kept pace with the digital economy. While large corporations have access to sophisticated treasury management and banking relationships, small and medium enterprises remain trapped in a world of high costs, slow settlements and limited access to formal finance.
Central bank digital currencies( CBDCs) are emerging as a potential solution to this persistent divide. As governments worldwide launch pilots and expand trials, the focus has largely centered on monetary policy implications and financial stability concerns. But perhaps the most significant impact of CBDCs will be felt in the daily operations of the small businesses that form the backbone of emerging economies.
The hidden tax on small business
SMEs contribute up to 40 % of GDP in emerging markets, yet their relationship with the financial system remains deeply problematic. The numbers tell the story: cross-border payments can take days to settle and cost 6 – 8 % in fees. Domestic digital payments often carry charges that large businesses can
// negotiate away but small operators must accept. Cash transactions, while immediate, leave no digital trail that could support credit applications or business expansion.
These inefficiencies compound over time. A small retailer paying 3 % on card transactions sees those costs directly impact already thin margins. A manufacturer waiting for international payments faces working capital constraints that limit production capacity. An online seller without access to affordable payment processing may struggle to compete with larger rivals.
The problem extends beyond individual transactions. Small businesses that operate primarily in cash find themselves excluded from formal credit markets, unable to demonstrate transaction histories that banks require for lending decisions. This creates a cycle where limited access to finance constrains growth, which in turn limits the ability to invest in the digital infrastructure that could improve financial access.
THESE AREN’ T ISOLATED PROBLEMS BUT SYMPTOMS OF FINANCIAL SYSTEMS THAT HAVEN’ T KEPT PACE WITH THE DIGITAL ECONOMY.
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