Unlocking the small business opportunity in financial services

Small and medium-sized businesses (SMBs) are the backbone of the U.S. economy yet are often overlooked by the financial industry. While large companies typically get more press, small businesses in the U.S. represent 33.2 million companies, approximately 99.9% of all businesses, and contribute 43.5% of gross domestic product.¹

By focusing more on these businesses, financial institutions have a golden opportunity to expand their market reach. Despite their diversity—from mom-and-pop shops to mid- sized service organizations—SMBs share critical needs in areas like customized service, digital technology, and cost management. Offering tailored solutions to help them meet these needs can transform these relationships from transactional to trusted partnerships.

So how can financial institutions help SMBs stay ahead in a market that is rapidly evolving in terms of technology and customer expectations?

Rising Customer Expectations

In today’s digital-first world, consumers increasingly expect convenience, speed, and choice when they buy. More than 70% of customers say they’d make digital wallets their primary method for shopping and over half say they’ve stopped shopping with a merchant simply because they didn’t accept digital wallets.² These consumers have become accustomed to the advanced payment methods and level of service they get from larger companies.

One thing is clear. Barriers at the checkout level can impact customer satisfaction and loyalty. Without these enhancements to the payment experience, SMBs risk losing their customer base to local or online competitors.

Key payment methods customers expect:

• Contactless Payments: A growing preference for convenience and safety has caused contactless cards, smartwatches, and other contactless payment methods to surge in popularity. RBR Global suggests that more than 80% of consumer credit cards will offer contactless payment technology by 2026.³
• Mobile Wallets: Services like Apple Pay, Google Pay, and PayPal provide a seamless way to complete a card payment transact without physical cards, ideal for both online and in-person purchases. According to a 2023 survey by Forbes Advisor, 53% of people use digital wallets more often than traditional payment methods.⁴
• Buy Now, Pay Later (BNPL): In an environment of rising costs, BNPL gives consumers ready access goods through short-term, interest-free loans which can be helpful for budgeting and managing cash flow. 2023 saw widespread adoption of BNPL across different age groups and income levels.⁵

However, navigating customer preferences for advanced payment methods can come at a cost. For many SMBs, card acceptance cost are their second biggest expense after payroll. Additionally, inflation continues to take its toll on small businesses—48% experienced a significant impact on their cash flow in 2023 and many had to increase prices.⁶ While upgrading payment systems is crucial to maintaining competitiveness and customer satisfaction, SMBs may struggle to manage the costs associated with these upgrades.

How financial institutions can help SMBs

By partnering with a reliable merchant services provider, financial institutions can offer payment processing solutions that are cost-effective and directly address common pain points for SMBs, including:

• Resources: SMBs often lack the capital, infrastructure, and technical expertise needed to implement and optimize new merchant services technologies.
• Support: SMBs working with off-the-shelf fintech solutions often encounter minimal support and lack in-house IT departments to address technical issues, which can strain their operations.
• Scope: Many merchant services solutions focus solely on payment acceptance, leaving SMBs to handle other critical tasks like inventory management, invoicing, and reporting. They need solutions that support their entire operation.
• Security: With new security threats emerging daily, SMBs require payment solutions that adhere to the latest payment data security standards.
• Technology: Investing in advanced hardware for secure and efficient checkouts is a significant challenge for many SMBs.
• Profitability: Acceptance costs for commercial and consumer payments can quickly eat into the already thin margins of SMBs, both in B2C and B2B contexts.
• Diversity, Equality, and Inclusion (DEI): SMBs, deeply rooted in their communities, seek vendors that understand and integrate DEI into their technology and services to enhance access to their offerings.

Tailored Solutions that Drive Growth

Additionally, merchant service providers that cater specifically to the unique payment requirements of SMBs can enable financial institutions to offer tailored solutions that can help drive both top and bottom-line growth, such as:

• Real-time Payments: With 65% of SMBs indicating that payment processing speed significantly impacts their cash flow,⁷ real-time payments can drastically improve cash flow efficiency, reduce cash flow delays, ensure timely invoice payments, and provide liquidity for unexpected expenses.
• Commercial Card Optimization: Many SMBs lack the transaction data and detail management capability to achieve lower interchange rates when they accept government and corporate credit cards. A merchant service provider that offers a point-of-sale (POS) system with systemic transaction optimization features can help businesses qualify their eligible commercial payments for lower interchange rates.
• All-in-one Payment Solutions: An integrated payment solution may serve as a “one-stop-shop” for a range of business and payment-related needs--from payment processing to digital invoicing, inventory management, staff scheduling, and reporting. This can help streamline operations and accelerate cash flow, so businesses can focus on growing their business.
• Convenience for Service Industries: Restaurants that use portable payment technology often see increases in average check amounts, more generous tipping, and quicker table turnover. Similarly, retailers enable customers to make purchases directly from the shop floor, reducing wait times and streamlining the payment process.       

According to a recent study, 52% of SMBs say an all-in-one platform results in easier cash flow management by facilitating faster payments.⁸ For instance, Elavon's talech solution demonstrates the versatility and adaptability that an integrated payment solution can bring to an SMB.

For retail businesses, talech helps retailers manage everything from inventory to customer interactions--enhancing the shopping experience, minimizing wait times, and streamlining transactions. For restaurants, talech's portable payment technology can significantly improve service by facilitating faster transactions and providing options like splitting bills or electronic tipping.

With four primary offerings — talech Mobile, talech Starter, talech Standard and talech Premium — there’s a solution to support virtually any size of SMB, with an easy upgrade path as they grow.

For financial institution, this means:

• Offering clients the latest payments technology
• Making it easy with seamless onboarding and support
• Increasing customer satisfaction and retention

For the financial institution’s business customers, this means:

• Saving time and money
• Secure transactions
• Affordable hardware packages
• Flexible payment options
• Growing revenue and streamlining operations
• Reporting, inventory management, employee scheduling, and more

The advantages to financial institutions and their business customers alike are clear. By adding solutions like talech into their offerings, financial institutions enable SMBs to offer the latest payment options, manage their day-to-day operations, and adapt to the rapidly changing digital marketplace. This in turn enables the financial institutions to deepen their engagement with this critical market segment, so they can boost their overall market share and further establish themselves as proactive, responsive partners in the business community.

1 - https://www.uschamber.com/small-business/state-of-small-business-now
2 - https://www.forbes.com/advisor/banking/digital-wallets-payment-apps/
3 - https://fitsmallbusiness.com/contactless-payment-statistics/
4 - https://www.forbes.com/advisor/banking/digital-wallets-payment-apps/
5 - https://www.pymnts.com/buy-now-pay-later/2023/bnpls-surge-in-2023-impact-adoption-and-regulatory-crossroads/
6 - https://www.xero.com/us/media-releases/half-small-businesses-feel-impact-inflation-cash-flow/
7 - https://www.pymnts.com/real-time-payments/2024/42-percent-of-smbs-would-pay-a-fee-to-receive-instant-ad-hoc-payments/
8 - https://www.pymnts.com/partnerships/2024/godaddy-and-upwork-partner-to-connect-businesses-and-web-designers/

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