The financial landscape across Europe is more diverse than it’s ever been, with fintechs and neobanks challenging traditional banks with innovative products and services that have attracted more attention from small and medium-sized enterprises (SMEs).
Mariia Menahem, CEO of cross-border payment provider Clarity Global, believes that SMEs continue to view banks as a “safe bet”, and fintechs, whilst not as reputable as their established counterparts, offer more “flexibility and adaptability, especially for smaller or newer businesses”.
She also explored some of the incoming European regulations set to shape the financial sector, and why a certain new regulation will enable SMEs to help SMEs “innovate faster without fear of noncompliance”.
Payment Expert: Firstly Mariia, could you outline some of Clarity Global’s core objectives within the fintech and wider financial space for those uninitiated?
Mariia Menahem: Clarity Global is a B2B financial services provider that facilitates cross-border payments. Broadly speaking, our core objective is to create tailored financial solutions for SMEs that operate globally.
Several services fall under this umbrella: multi-currency payment solutions, foreign exchange at competitive rates. Efficiency is everything for SMEs and, by extension, for us. We’re bridging traditional and digital finance in the cross-border payment space within and beyond fintech.
PE: With more access to various alternative payment methods than ever before, what should small businesses take into account before integrating a payment service to their offering?
MM: Small businesses should be incredibly specific about their needs and their customers’ needs. In other words, know thyself.
Don’t integrate more payment methods than your customers will actually use. Don’t waste money on sophisticated-looking or over-engineered services that will go mostly unused. The market is specialised and broad. Consider all your options and choose wisely.
PE: Do you believe the proliferation of fintechs across Europe is fueling small businesses to side with them as opposed to traditional banks and if so, why?
MM: It’s fair to say that SMEs are at least partially drawn to fintechs because they are increasingly spoilt for choice. If SMEs felt they couldn’t compare multiple fintech providers that could potentially serve their needs, they might feel less inclined to make the switch.
Why bother switching from a traditional bank if there’s only a couple of alternatives which might not necessarily be better? That said, it’s as much about the quality of those alternatives as it is the sheer number.
PE: Despite this, what are some of the lingering concerns small businesses may have in reserve when it comes to opting to partner with fintech as opposed to a traditional bank?
MM: In short, traditional banks feel like a safe bet. We’re talking about institutions that have, at least in some cases, been around since the 19th century. That comes with a built-in perception of stability, longevity, and safety.
Fintechs can also fall into the trap of touting their cutting-edge technology so enthusiastically that it comes across as inscrutable and even risky to use. SMEs on tight budgets understandably don’t like to gamble, and sometimes choosing a fintech over a traditional bank can come across as a big one.
Banks are indeed good for storing and transferring money — no doubt. But Electronic Money Institutions (EMIs) and fintechs offer much more flexibility and adaptability, especially for smaller or newer businesses.
PE: With many payment regulations set to be introduced this year, why might it be more important than ever for small businesses to comply with these incoming regulations, and do they have the right support and knowledge from payment service providers to prepare for this?
MM: New payment regulations this year make compliance crucial for small businesses. Understanding these rules helps them avoid penalties, fraud, and reputational damage.
Small businesses should actively use the resources. This means reviewing different materials, tools, and guidance from payment service providers. By understanding the regulations and getting support, they can comply and protect their businesses.
PE: The EU AI Act is also a major European regulation that has been implemented. How much of an impact do you anticipate this legislation to have on small businesses across the continent?
MM: For now, my answer is, ‘We’ll see.’ We are still in the early days of this regulation, and its effects are only just beginning to be felt. The legislation itself, however, has definitely taken SMEs into consideration.
It includes a mandate for member states to adopt a minimum of one national regulatory sandbox to support innovation. SMEs have priority access to these sandboxes to use controlled experimentation environments to demonstrate compliance. The Act also limits compliance costs around assessment fees and sandbox access ensures a lower upper bound for fines.
My prediction is that SMEs that take advantage of these considerations will have a greater opportunity to innovate faster without fear of noncompliance.
PE: Lastly Mariia, and thank you for your time, where and what does the next innovation in payments come from?
MM: I don’t think we’re going to see some incredible new innovation happen so much as we’re going to see existing payment services and processes made ever more secure, rapid, and personalised through AI and machine learning.
Fraud in particular is undergoing an AI revolution that shows no signs of slowing. That’s great news for fintech cybersecurity. Maybe the next innovation in payments is nothing more or less than an unprecedented level of security.
