How HSBC Singapore guides SMEs through unfamiliar digital territories

The pandemic has forced small firms to leave ‘traditional’ mindsets behind.

Small and medium-sized enterprises have proved to be one of the biggest casualties of the pandemic. Declining revenues became the norm as industries were shut down and people opted to stay at their homes. The need to adapt to new demands grew inevitable but some were unprepared to navigate unfamiliar digital platforms. SMEs are now faced with the herculean task of abandoning “traditional” mindsets — particularly in terms of operations and banking — lest they further reduce their chances of survival.

For its part, HSBC Singapore has been helping small firms navigate the uncharted waters of digitisation. Aside from platforms and financial aids, the bank has been connecting SME clients to its global network and pushing them to expand their businesses outside their territories. Singapore Business Review spoke to Li Lian Ng, the bank’s head of business banking, to learn more about these solutions and to find out how receptive SMEs have been to these efforts.

How have you been helping Singapore’s SMEs stay competitive amidst the pandemic?

We started off with getting in touch with our customers virtually to see how we could support their businesses. We were able to do that because HSBC's SME model is such that all our customers have a relationship manager (RM) looking after them individually. We understand that during this period, SMEs were facing declining revenue as businesses were shut, and this is not just in Singapore. At some point in time, the way goods were moving was also impacted, so the bank came up with a few initiatives from a trade perspective. We helped them to extend the repayment period of their loans which gave them additional liquidity.

The Singapore government has also been very proactive in coming up with liquidity measures. They have extended loans where the government took 90% of the credit risk, which has in a way broadened and expanded banks' ability to lend. HSBC has been a part of this scheme where we have also reached out to customers to see whether or not they needed the additional liquidity during this period. These loans are what we call temporary bridging loans and working capital loans of between S$6m: S$5m for the temporary bridging loan and S$1m for the working capital loans.

If you ask me, I would say it's probably more about survival, staying in business and staying afloat. On top of that, we have also added resources during the lockdown period where we supported the move of our customers to digitize and to be able to do their day-to-day banking online.

It was mentioned that smart digital change was not a priority and a familiar territory for SMEs pre-COVID. What were their priorities back then, and how have they been receptive to the digital shift?

I will say that before the pandemic most SMEs were, in terms of resources, never as luxurious as multinational companies. Business owners will typically be very focused on growing their top line revenue and finding new markets. Moving towards digital was never really a priority because they always had the option to carry out their banking transactions in a very traditional manner. But with this pandemic and people being forced to work from home, I think that sort of forced SMEs to have a mindset shift, that they do really have to go digital and change the way they do their business. Otherwise, ever simple tasks like making payments to suppliers or receiving money from customers will no longer be possible.

In a way, SMEs were also forced to look at the operational efficiency of their business. When companies are faced with declining revenue and the pressure to keep costs low, it will force them to look at how they do their day to day administrative matters. Digitisation will help them lower costs and make them more efficient.

How important is it for SMEs to digitise their finances and leave traditional mindsets behind, as mentioned? What are the possible outcomes for not doing so?

Number one, I think, is about managing your costs downwards. During pre-COVID times, the Singapore government has always been proactively encouraging SMEs to improve their efficiency through adopting technology. In that sense, by going digital, they will be able to improve efficiency, reduce human errors, and reduce costs by freeing up staff to engage in more value-added activities that would allow the company to grow. Studies have also shown that digital transformation can improve efficiency by as much as 20% and that it will translate into direct cost savings.

At the same time I just want to highlight that cash is fundamental to the survival of all businesses, particularly at this time of sluggish revenues. One method for them to digitise their payments is through PayNow Corporate which was something that the government was pushing and banks like HSBC have been investing in. It allows payments to be made digitally via a QR code without the need to obtain bank details from the beneficiaries. It reduces human contact to get the virus under control, and is a secure and instantaneous way to receive money. Lastly, when it comes to finance we also talk about credit. Going digital supports the ability to seek credit from banks so customers can apply for loans, to issue letters of credit, guarantees, or even upload invoices for receivables financing from banks.

The failure to digitise will have the inverse impact: costs will go up, businesses will be unable to manage cash properly, and eventually will render an SME uncompetitive.

How do you connect SMEs with your international partners to help them evolve and digitise? Can you give examples of innovations or solutions that have resulted from these partnerships?

Number one, at HSBC we pride ourselves with having a RM for every SME. Number two is through our global network where we could connect SMEs to our offices, especially in the ASEAN region.

One of the things we came to realise — or even SMEs have come to appreciate — is that during this pandemic, businesses have always been encouraged to grow out of Singapore. Even with simple things such as opening a bank account within ASEAN, we have a presence. We can help customers set up bank accounts in countries in which they have businesses. At the same time, we also have a receivables platform which allows seamless international payments and collections to countries outside of Singapore.

How do you see the rest of the year working out for SMEs, financially speaking? Do you think a recovery may soon be in sight?

I must say it has been a very challenging time for them. At this time of the year, I would say it is very much dependent on the sectors that they are in. For these companies, the support that they get from banks, suppliers and the government will be the key, or they could reposition their businesses.

On the other hand, we do see growth in companies that are benefiting from the pandemic, or those that are now positioning themselves for subsequent growth. They are positioning themselves to be ready when markets open up. They have also taken the last few months to look at their businesses to see which are more profitable, where they could focus their resources on, and cut less profitable business. It's really about getting ready for repositioning and stronger growth.

What we can ask from all of our customers is to be as prepared as possible, and the banks will be here to support them when they are ready.

With regards to that, how do you see 2021 working out? Do you think most will eventually recover in the next three to five years?

Businesses are still cautious going into 2021. But three to five years down the road, ASEAN will definitely grow depending on how each country will cope with the pandemic. If they can manage well, then we continue to see optimism in this part of the world.