To date, our series on SME digitalization has considered opportunities in this segment, the challenges of serving SMEs in emerging markets, and the role of banks and fintechs in SME digitalization. Now we ask what’s driving SME digitalization – and who benefits?

To understand how far SMEs in emerging markets have come, it’s useful to look back before the 2019-2022 pandemic. Up until the middle years of the last decade, micro-businesses and SMEs in Asia-Pacific, Latin America, Africa, and the Middle East suffered from poor access to credit and liquidity to help them fund their operations and fuel expansion. What’s more, smaller firms in these regions were major users of cash for payments, both from their customers and to their suppliers.

These businesses were also heavily reliant traditional business relationships – whether that meant retailers dealing directly with farmers or other producers, or frequent visits from suppliers to replenish such stocks as they needed replacing. While the specifics of sales profiles, procurement, and supplier relationships differed from country to country and region to region, overall they could be characterized as having low engagement with technology, poor access to credit and lending, and a strong preference for cash.

For decades, such patterns acted as a brake on growth. However, this began to change around 2015, when significant investment started flowing to online Business to Business (B2B) commerce platforms targeting SMEs in Asia and Latin America – a topic we cover elsewhere.

A few years later, the pandemic served as a catalyst that drove both emerging market SMEs and their customers into the use of electronic payments, encouraged by distancing requirements and the need to shield certain populations at home.

Cash Declines, Digital Soars – and Online Banking Access Improves

Since 2020, cash use has experienced a precipitate decline across South-East Asia, Latin America, Africa, and the Middle East. In Asia-Pacific, the use of cash declined by 36.6% between 2019 and 2024.[1] Taking the example of Indonesia, the number of businesses accepting only cash has declined by 10% in the last two years alone, while businesses accepting e-wallet payments grew by 8.7% over the same period.

Meanwhile digital commerce has exploded, with digital business in the Middle East and North Africa projected to double from around US$ 155 billion in 2025 to US $302 billion by 2030.[2] Latin America demonstrates a similar pattern: digital commerce in Brazil rose 10% last year, and is projected to continue growing at 15.7% per annum to 2030.[3]

                                                Source: Grand View Research

A similar shift from physical to digital has been seen in banking. In Latin America, online banking penetration has increased from 22.14% in 2019 to over 35% in 2024, with forecasts predicting a further increase to 47.9% and total market value of $13.26 billion by 2030.[4] In short, the last five years have seen the digital revolution erupt in emerging markets – and this has swept up SMEs every bit as much as it has governments, consumers, and larger corporations.

The near-term effects of this revolution in SME banking and finance are already manifest. 33% of SMEs world-wide stopped accepting cash during the pandemic, while 44% accepted contactless payments for the first time;[5] in the last five years, digital wallet payments in Latin America have doubled, while cash as a percentage of all payments in Central and South America dropped on average from 38% to 24%.[6] This same pattern plays out in South-East Asia, where just 10% of Thai businesses now accept only cash, compared to more than 80% now accepting digital wallet payments alongside cash and cards.

Despite these positive developments, it remains the case that 63% of SMEs in the Middle East and Africa report inadequate access to financing options, and just under half (45%) of Latin American SMEs have no access to credit facilities.[7] It’s in these areas – lending and credit – that we expect to see the greatest changes in next five years – and it’s not clear that banks and fintechs will necessarily be the greatest beneficiaries.

Open to Change: Banks in Competition with SME Suppliers

As we explain in more detail elsewhere, SMEs in emerging markets have long been unhappy with the range and quality of banking services, whether that’s the payment options on offer, or the aforementioned challenges with lending criteria and access to credit facilities. This is driving SMEs to expand their relationships with suppliers from other sectors such as technology, logistics, distribution, or Fast-Moving Consumer Goods (FMCG). One example of this move is the decision by Coca-Cola, AB InBev, Pepsi, and other major distributors to help SMEs by offering lending facilities and payment acceptance solutions in Latin America alongside distribution services.

At the same time, SMEs are looking online for distributors that can offer them more rapid order fulfilment and better terms – and distributors are responding by developing online platforms which solve challenges not just related to supply chains and distribution, but financial services as well. Vietnam’s KiotPro, for instance, offers retailers access to products across pharmaceuticals, mother and baby, personal care, and cosmetics – as well as lending facilities and credit based on purchase histories.

As SMEs increasingly engage with a wide range of suppliers for everything from financing to payments, accounts, credit, and insurance – not to mention those suppliers’ traditional role as purveyors and distributors of goods – it is far from clear that banks and fintechs will continue to maintain their leading role as financial services providers to the SME sector in emerging markets. The race to gain market share is on – and while banks and fintechs are currently in pole position, there’s still everything to play for.

KoreFusion optimizes SMB payments strategy across 80 countries. We help banks, brands, and fintechs develop embedded payment and financial services for SMBs. For more information, please contact hello@korefusion.com and we’ll be glad to assist.

[1] Worldpay, April 2025: The Global Payments Report 2025 at: https://worldpay.com/en/global-payments-report

[2] Mordor Intelligence, January 2025: “Middle East And Africa e-Commerce Market Size”: https://www.mordorintelligence.com/industry-reports/middle-east-and-africa-ecommerce-market

[3] Horizon/Grand View Research, “Brazil e-Commerce Market Outlook 2023-2030”: https://www.grandviewresearch.com/horizon/outlook/e-commerce-market/brazil

[4] Horizon/Grand View Research, 2024: “Latin American Banking Market”: https://www.grandviewresearch.com/horizon/outlook/open-banking-market/latin-america/reports

[5] Sources: KoreFusion Analysis IMF, Saudi Government (Ministry of Commerce & Investment, SME General Authority), Citibank, Worldpay Global Payments Report

[6] Sources: KoreFusion Analysis, CEPAL, World Bank, Industry Reports

[7] Source: CEPAL, OECD, INEGI, World Bank