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UK-based Tide strives to turn the tide and convince MSMEs in India to go digital

MSMEs are reluctant to adopt digital tools for fear of coming under the tax radar. But the benefits of going digital could far outweigh what these enterprises perceive as an inconvenience—this is the message that Tide, a UK-based financial services platform, is trying to spread across the ecosystem.

UK-based Tide strives to turn the tide and convince MSMEs in India to go digital

Wednesday April 12, 2023 , 7 min Read

Masood Pasha (name changed) has been running a textile business for several years at Delhi’s Sadar Bazaar, the city’s oldest wholesale market. Despite being in the business for over three decades, he is reluctant to move with the times and adopt technology that could help streamline his business.   

He is hesitant as he doesn’t want the increased tax scrutiny that comes with digitisation. What he doesn’t understand is the host of benefits that technology tools can bring in managing payments, billing, and inventory, as well as easier access to credit—offsetting what he perceives as an inconvenience. 

Pasha is not alone. Though a huge digital transformation wave is sweeping across the country and many Indian startups are bringing in innovative solutions to tide over the issues of inefficiencies, several MSMEs (micro, small and medium enterprises) are still wary of adopting new technologies—citing the fear of increased tax paying as every record would be available for examination. 

MSMEs contribute 30% to India’s GDP. However, despite their significance in the Indian economy and the government’s thrust to ensure innovation in the sector, disorganised and inefficient operations continue to remain huge impediments to the growth of MSMEs. 

This is where UK-based financial services platform Tide hopes to make a difference. 

Sensing an opportunity to serve the market of 63 million MSMEs, Tide—which recently ventured into the Indian market—hopes to help small businesses tide over their hesitation to go digital by educating business owners about the exact benefits of digital adoption and helping them reorganise their business operations with its suite of products and services. 

What’s stopping MSMEs

Why are MSMEs lagging in the digital adoption game, barring ad-hoc, bits-and-pieces measures?

Kumar Shekhar, Deputy Country Manager, Tide India, believes the biggest impediments to the growth of MSMEs and their ambition to expand is their reluctance to divulge the actual numbers pertaining to their business and their fear of leaving a paper trail.

He attributes this to lack of awareness of the benefits of digital adoption with respect to financial matters among small business owners. 

Amit Kumar, Founder of MSMEx, a micro advisory platform, says, for ages, MSMEs have functioned in a disorderly manner without any established processes. These entities are hesitant to structure their businesses, primarily due to the concern that they will be required to part with a significant portion of their hard-earned profits in the form of taxes. As a result, compliance is often overlooked, he says.

“Resistance to pay tax—a major problem for MSMEs—is rooted in an outdated mindset."

Unlike startups, many MSMEs do not have a vision to innovate or build a certain valuation around their business. Though they are the growth engines of the economy, they don’t completely understand their potential to bring about change. Hence, they lag behind in digital adoption, says Kumar. 

However, new-generation entrepreneurs, who are entering the traditionally run businesses, are looking at the bigger picture and so we can expect some positive change going forward, he adds. 

These forward-thinking business leaders are recognising the value of streamlining processes to free up time for building their enterprise, rather than being bogged down by laborious tasks.

This is the opportunity that Tide is looking to tap into. 

Tide’s plan for India

Tide, which has a market share of 9% in the SME market in the UK, has set itself an ambitious target for India. It wants to onboard 5 lakh MSMEs from Tier I, II and III cities into its platform by 2024. 

Currently, 50,000 MSMEs from across India (primarily from Uttar Pradesh, Maharashtra and Karnataka) are present on Tide India’s platform and its mobile app has had over 2 lakh downloads since its launch in December last year. 

In the next five years, the company plans to invest more than Rs 1,000 crore in India and create over 1,000 jobs across the country for a wide variety of roles. The company currently employs 225 people. 

However, Shekhar is quick to point out that this is not a “number game” and the focus is on creating “actual difference” in the Indian MSME ecosystem by raising awareness about the benefits of digital financial adoption.

A suite of solutions for MSMEs

Tide plans to introduce a host of solutions tailored to the needs of small and medium businesses across India under one umbrella. These include a business savings/current account in partnership with a bank, QR code for payments, bank transfers, invoicing, GST, pay by link, and credit services. 

Tide India has already launched business accounts for MSMEs on prepaid payment instruments (PPIs) in partnership with Transcorp, an RBI-licensed PPI issuer, and a RuPay-powered prepaid expense card to allow small business owners track their spending and business expenses. 

“As of now, if an MSME needs support in invoicing, it may opt for BillDesk. For accounting it may go to a khata book, for payment related PayU, and so on. At Tide, we will offer everything under one roof, consolidating all necessary functionalities under a single product by partnering with industry veterans,” explains Shekhar. 

“This streamlines processes for MSMEs, eliminating the need to use multiple products to manage disparate services,” he adds. 

business loans

Reaching out to MSMEs and creating awareness

While Tide has the products in place, what’s required is convincing MSMEs to join the digital bandwagon. How does Tide plan to onboard MSMEs that are hesitant to come under the tax radar? 

Awareness and mentorship are crucial to handhold business owners and help them along their digital transformation journey, believes Tide India.

Kumar says the benefits of going digital far outweighs the money saved from tax avoidance. And this is what Tide is trying to inculcate among MSMEs through a ‘feet on the street’ approach. 

Tide India is working to increase awareness of their products among MSMEs across the length and breadth of the country through field executives and active participation in MSME events. The company also aims to educate business owners about its comprehensive suite of services through partnerships with relevant MSME bodies. 

For instance, Tide has entered into an MoU with WE Hub, Telangana’s state-led incubator for women entrepreneurs, to help women entrepreneurs overcome administrative challenges, manage their finances, and grow their businesses. 

Tide India is also creating awareness about government schemes that enable ease of doing business—such as the Prime Minister’s Employment Generation Programme, Barcode Registration Subsidy, and Raw Material Assistance Scheme. 

Recently, Tide conducted a mentorship programme for women entrepreneurs in Hyderabad, wherein the Union Budget 2023-24 was discussed and decoded. The provisions of the Budget were highlighted to help women entrepreneurs manage their business and save time and money. The session also discussed the complexities of the taxation system. 

Nalini Anumakonda, Founder of Trulio The Food Company from Hyderabad, says the mentorship provided by Tide India has helped her understand the intricacies of the Budget and establish a roadmap for her business’s expansion.

Looking ahead

Digitisation of small and medium businesses could add $158 billion to $216 billion to India’s GDP by 2024, according to the Cisco India SMB Digital Maturity Study 2020.

However, at the moment, less than 1% of MSMEs in the country have opted for end-to-end digital adoption, according to Kumar of MSMEx. Merely encouraging them to go digital is not sufficient; comprehensive mentoring and foundational support are imperative to achieve greater levels of digitisation, he says. 

Can Tide’s efforts act as more than a nudge in this direction?

Edited by Swetha Kannan