Page 303 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

manage their small companies in much the same manner as they manage their personal finances. As companies
get larger, control becomes an important factor – the entrepreneur requires safeguards to feel comfortable
delegating financial tasks to employees. Financing and credit become very important during growth phases, and
often payment services are typically obtained from banks that are willing to extend credit to small businesses.
Large enterprises often operate their back offices like factories, with emphasis on process efficiency and cost
reduction. These businesses often have multiple banking relationships, and credit and payments are no longer
intertwined.

As small companies begin to mature, they face certain bottlenecks: First, companies need capital for startup,
then assets, then employees, then scale to support investment in assets, people, and processes. For example,
a shop may begin by needing capital to buy goods for inventory. It will eventually need assets, such as a
permanent home for the shop. If it gets large enough, the shop owner will need to hire employees to staff the
store. Eventually, the company will want to scale to multiple locations, require a warehouse to store inventory,
and perhaps a fleet of delivery trucks. These challenges are particularly profound in the developing world,
where there are fewer options for small businesses. At each step in this growth trajectory, many businesses
fail due to lack of capital for investment. Instead of obtaining assets, many informal owners remain without
a physical store location. Others remain without employees, dependent on the time and skills of the owner
and his or her family. The growth trajectory has slightly different characteristics for different industries, but all
businesses require working capital to accumulate assets and scale.

Digital B2B payment tools and services may be able to help business owners overcome the challenges at each
step toward maturity. The rest of this analysis focuses on the potential benefits of digital B2B payment services
for small buyers and sellers.

Figure 2 – Business size and resource demand

We acknowledge that many businesses do not grow – they are large enough as is: Large enough to fund the
lifestyle and aspirations of the entrepreneur. Their goal may be to earn enough to pay for their children’s
education, hire some assistance around the house, and save money to help care for aging parents. The business
is optimized for lifestyle, rather than growth. Yet even these purposefully modest businesses can benefit from
digital tools and associated increases in efficiency.

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