UK SMEs chasing £50bn in late payments, fintech opportunity ripe

UK small and medium-sized enterprises (SMEs) are reportedly chasing a combined £50 billion in late payments, City AM reports.

In research by digital banking for businesses platform Tide, it was revealed SMEs are on average chasing five outstanding invoices at any one time which is eating into an hour and a half of each of their days.

The pain point of late payments is one which is fast-pervading the UK SME market

With the average amount owed on an invoice totaling to £8,500, this just £500 shy of what a 2018 Bacs report found which estimated cost of recovering overdue money for UK SMEs is now £9,000.

The pain point of late payments is one which is fast-pervading the UK SME market, providing a huge opportunity for fintechs to jump in and solve the problem.

Emerging competitors trying to tap the space include Scottish AI (artificial intelligence)-powered start-up Previse and London insurtech start-up Hokodo. Previse focuses on helping buyers pay all their suppliers, often SMEs, instantly, whilst Hokodo offers invoice insurance to European SMEs against the risk of late payment or default.

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“The whole concept of slow payments is a huge global issue,” Previse co-founder and CEO Paul Christensen tells Forbes in a previous interview. “It is a huge global opportunity that no-one has cracked yet. Given the problem is so big, why has no-one cracked it yet? Everyone has tried to solve the problem using process, and changing process at large organisations is really hard.”

Hokodo’s co-CEO and co-founder Louis Carbonnier told Prolific London last year: “Every year across Europe, hundreds of thousands of companies are driven into insolvency because of late or non-payment of invoices.”

He continues: “Trade credit insurance exists to mitigate this issue, yet SMEs have effectively been blocked from the market by an old-fashioned broker model, which doesn’t suit their needs. Hokodo is on a mission to rectify the situation.”

In a similar report to Tide’s, accounting software provider FreeAgent found from a sample of 1,000 small and medium businesses (SMBs), 93% said chasing late payers was an issue. FreeAgent also surfaced a stringently unforgiving attitude to late payers among the SMB circles, revealing more than half them equivocated a late payment is a corporate crime as serious as fraud or malpractice – potentially even a prison sentence.

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