Here are the week’s main news stories in the world of small business and digital payments:
Facebook planning 'GlobalCoin' cryptocurrency
Facebook is finalising plans to launch its own cryptocurrency next year supported by a digital payments system in about a dozen countries. The social media giant wants to start testing its cryptocurrency, referred to internally as GlobalCoin, by the end of this year. Facebook founder Mark Zuckerberg met Bank of England governor Mark Carney last month to discuss the opportunities and risks involved in launching a cryptocurrency. The company has also sought advice on operational and regulatory issues from officials at the US Treasury and is in talks with money transfer firms including Western Union as it looks for ways in which people without a bank account can send and receive money.
SMEs feel digital transformation is crucial
According to research by Yorkshire Bank, 46 per cent of small-business owners in the UK believe technology is even more important to their business than people, with the figure rising to 56 per cent in London. In addition, 71 per cent of companies agreed technology is a key driver of growth. This was most prominent in Birmingham, Leeds and Edinburgh. The figures also indicated that investors are increasingly funding technology transformation, with 36 per cent of tech-led businesses reportedly finding it easy to access funding.
Global Payments and Total System Services merge in $21.5 billion deal
US financial technology company Global Payments is merging with rival Total System Services for $21.5 billion. The deal will see Global Payments acquire scale in an industry that's consolidating and create a software stack with the development capabilities to better compete in omnichannel, e-commerce and digital payments. The two companies will have a combined net revenue of $8.6 billion. As the deal is all-stock, the combined Global Payments will maintain an investment-grade credit rating and balance sheet, meaning it should be able to plough more funds into research and development.
Small-business lending scheme at risk of failure
The head of a leading challenger lender has warned that a government initiative for funding small businesses is “at risk of failure”. In a letter to Philip Hammond, Iwoca CEO Christoph Rieche said the Bank Referral Scheme (BRS) has “failed to make any meaningful impact”. The programme is aimed at addressing low levels of funding available to small businesses, with banks required to refer businesses that have been refused loans to designated alternative finance platforms. Treasury figures show 902 loans have been provided through the scheme between its launch in late 2016 and the middle of 2018, taking the total value lent to £15.59 million.
SMEs driving job growth but lack skills
While SMEs have been a significant driver of employment growth in recent years – mainly through the creation of new firms, including in high-growth sectors such as information and communication technologies – the new OECD SME and Entrepreneurship Outlook claims most SME job creation has been in sectors with below-average productivity levels, with SMEs typically paying employees around 20 per cent less than large firms. In addition, many SMEs struggle disproportionately with developing the skills and resources needed to navigate the increasing complexity in technologies and markets.
Half of UK SMEs wait 72 days for payment
Around 50 per cent of UK SMEs are getting paid around 72 days after they have completed work, according to research from BACS Payment Schemes Limited. The result is that more than one-third of start-ups and SMEs are suffering with cash flow issues, with a total of £26 billion owed to those businesses that desperately need it to stay afloat, according to the research. This is particularly relevant to product manufacturers across retail, fashion, food and electronics.