Indian SMBs Face Challenges and Opportunities in Global Expansion: Insights from Payoneer Reports

Indian small and medium-sized businesses (SMBs) are increasingly recognized for their innovative capabilities, yet they face significant challenges in attracting local tech talent. According to the Payoneer SMB Ambitions Barometer Report 2024, 61% of Indian SMBs believe that artificial intelligence (AI) will help them gain better global exposure. This belief is a testament to their forward-thinking approach, but the road to leveraging AI effectively is fraught with obstacles. The survey, conducted on 3,779 SMBs across 15 countries, reveals that approximately 45% of Indian SMBs face hurdles when it comes to cross-border payments. These challenges include foreign exchange rates, international trade compliance requirements, and slow transaction times, all of which can impede their ability to compete on a global scale.

Gaurav Shisodia, Vice President of Payoneer India, underscores a critical paradox in the Indian tech sector. Despite being at the forefront of innovation, Indian SMBs struggle to tap into the vast pool of local tech talent. The report indicates that only 49.8% of their workforce is hired locally, while a higher percentage of workers are sourced internationally (20.8%). This trend highlights the need for Indian SMBs to close the gap with global standards and fully utilize the rich talent available within the country. Shisodia believes that a mix of local and global expertise is crucial for the success of Indian SMBs in both domestic and international markets. This blend can help them navigate the complexities of global expansion while maintaining a strong local presence.

The survey also found that globalization is a top priority for Indian SMBs, as they seek to boost resilience, revenue, and customer base. The US, Australia, China, and the UK are identified as the top countries for cross-border transactions for Indian SMBs. A stronger global presence can lead to better exposure and capital flow, which are essential for their growth. Expanding into the domestic market and neighboring countries is another key focus for these businesses. South Asia and East Asia/Pacific are the top regions where Indian SMBs plan to expand over the next five years. However, this expansion is not without its challenges. Language and cultural barriers, economic conditions, limited networks, and high debt-to-income ratios are significant obstacles that Indian SMBs must overcome to succeed globally.

Shisodia suggests that to succeed globally, SMBs should focus on understanding local regulations, establishing reliable payment systems, and developing a flexible strategy. Adapting to changing market conditions and customer preferences in global markets is particularly important. He emphasizes the importance of digital infrastructure and skill development in cutting-edge technologies for Indian SMBs to reach the target of $2 trillion in services exports by 2030. Building robust digital platforms, secure payment systems, efficient logistics solutions, and digital marketing tools tailored for international audiences will help SMBs access global markets more easily. Training in high-demand fields is also crucial to remain competitive in global markets. By combining accessible digital infrastructure with a highly skilled workforce, Indian SMBs can effectively compete on the global stage.

Despite the challenges, there is a positive shift with 73% of Indian SMBs planning to focus more on hiring within India. On average, these businesses aim to bring on 11 new employees, with half of them being local hires. This shift towards local hiring is a step in the right direction, as it can help Indian SMBs leverage their innovation to attract local talent. The right mix of global and local expertise is essential for international growth. Other key findings from the Payoneer SMB Ambitions Barometer Report highlight that 61% of Indian SMBs believe AI will pave their path to better global exposure. Business expansion in the domestic market and neighboring countries remains a key focus, with Indian SMBs looking to expand into South Asia (20%) and East Asia and the Pacific (19%) over the next five years. These percentages are higher than the survey averages of 11% and 12%, respectively.

The report also sheds light on the operational challenges faced by Indian SMBs looking to expand globally. Foreign exchange rates, international trade compliance requirements, language and cultural barriers, economic conditions, limited networks, and high debt-to-income ratios are significant hurdles. Despite these challenges, more than 58% of Indian SMBs have adopted multiple payment options to facilitate cross-border trade. Rising import duties are another top concern, as they have been disproportionately affected by government policies. Only a small proportion of Indian SMBs are engaged in global trade, with the majority operating in the consumer market. However, Indian SMBs remain optimistic about the future, with 83% expecting an increase in revenue and a focus on regional expansion in South and East Asia.

Payoneer, a cross-border business payment services provider, is looking to expand its reach in India through strategic partnerships. India is a priority country for Payoneer, given the rapid growth of the service export market. The company primarily caters to outsourcing and service export businesses and SMBs. By capitalizing on the expansion of the service export market in sectors such as tech, programming, digital marketing, and e-commerce, Payoneer aims to leverage its global marketplace partners like Amazon, Airbnb, and Google. The company is taking a localized and customer-centric approach in India, which has seen impressive customer growth in service exports. This growth includes a 54% increase from 2016 to 2023, with service export businesses on Payoneer’s platform experiencing a rise in volume and revenue.

New Delhi, Ahmedabad, Bengaluru, Mumbai, Hyderabad, Pune, and Surat have the highest concentration of service export businesses on Payoneer’s platform. In the second quarter of 2024, Payoneer reported revenue of USD 240 million, representing a 16% growth year-over-year. The company’s net income for the June quarter was USD 32 million, with approximately 2 million active customers as of June 30, 2024. Payoneer aims to continue its growth in India through its global marketplace partnerships and localized approach. Services exports are a key focus for Payoneer in India and have shown significant growth in recent years. The company’s efforts to provide reliable payment solutions and support for SMBs are crucial for facilitating their global expansion.

Indian SMBs are utilizing technological advancements to expand globally, as detailed in the Payoneer and Oxford Economics report. Despite being ahead in adopting AI, Indian SMBs face difficulties due to import duties and cross-border payment hurdles. The report surveyed 3,779 SMB decision-makers, including 252 from India, to understand their goals and obstacles in the global marketplace. Over 61% of surveyed businesses view technological advancements as crucial for global exposure. The US remains the primary market for cross-border transactions for Indian SMBs, followed by Australia, China, and the UK. Indian SMBs are keen on expanding into regional markets, particularly in South and East Asia, where they see significant growth opportunities.

India is ahead of global peers in AI adoption, with 26% of SMBs implementing it in various areas, compared to the global average of 20%. A significant 78% of Indian businesses see technology as a driver of innovation and plan to invest more in emerging technologies like AI and digitization. Digitization has had a substantial impact on efficiency, customer satisfaction, and profitability for businesses in India. Indian SMBs are focused on automating tasks, digitizing inventory, and improving technology skills within their workforce. These efforts have contributed to the creation of over 6 million jobs between 2021 and 2022, significantly boosting the local economy. However, they still lag behind in hiring local talent compared to global averages.

Cross-border transactions are increasing for Indian SMBs, but they face operational challenges such as foreign exchange rates and international trade compliance. Language and cultural barriers, along with high debt-to-income ratios, are also significant hurdles for global expansion. Despite these challenges, more than 58% of Indian SMBs have adopted multiple payment options to facilitate cross-border trade. Rising import duties are a top concern, as they have been disproportionately affected by government policies. Only a small proportion of Indian SMBs are engaged in global trade, with the majority operating in the consumer market. However, Indian SMBs remain optimistic about the future, with 83% expecting an increase in revenue and a focus on regional expansion in South and East Asia.

To remain competitive, Indian SMBs need a balanced approach between local hiring and global expansion. Developing a stronger infrastructure for cross-border payments and vendor relationships is also crucial. The potential for AI to drive growth and expansion is a key factor for Indian SMBs. The report highlights the importance of utilizing both local and global talent for success. With the right strategies, Indian SMBs have the potential to succeed on a global scale. The full Payoneer report provides further insights and data on the growth and challenges faced by Indian SMBs. As they navigate the complexities of global expansion, Indian SMBs must continue to innovate and adapt to changing market conditions to achieve sustainable growth.

In conclusion, Indian SMBs are at a pivotal juncture in their journey towards global expansion. While they are recognized for their innovative capabilities and forward-thinking approach, significant challenges remain. Attracting local tech talent, navigating cross-border payment hurdles, and overcoming language and cultural barriers are just a few of the obstacles they face. However, with strategic focus on digital infrastructure, skill development, and a balanced approach to local and global hiring, Indian SMBs can unlock their full potential. The insights from the Payoneer SMB Ambitions Barometer Report 2024 provide a roadmap for these businesses to achieve success on the global stage. By leveraging technology, investing in local talent, and building robust international partnerships, Indian SMBs can drive significant growth and contribute to the country’s ambitious target of $2 trillion in services exports by 2030.