Airwallex, the leading global payments and financial platform for modern businesses, announced a new global survey that revealed surging demand for cloud-based financial services with more than 80 per cent of SMBs looking to switch away from traditional banks for their payment needs.
The Airwallex research, Embedded finance report: The opportunity for software platforms and marketplaces, also reveals that 82 per cent of SMBs globally (86 per cent in the UK and US) feel overlooked by banks and would change their current banking provider if their existing software platform or marketplace offered a like-for-like alternative. The services SMBs would be open to accessing include cross-border payment collection and payouts, business bank accounts, foreign exchange, and treasury.
Cross-border payments emerge as a significant pain point, thanks to lengthy processing and settlement times (45 per cent), an issue particularly felt in Singapore (52 per cent) and Australia (52 per cent). Forced currency conversion leading to high transaction fees is the second most commonly cited issue (41 per cent). UK-based SMBs especially fell victim to this problem (45 per cent).
SMBs are also experiencing challenges when paying out funds to vendors, suppliers and employees, including delays in processing and disbursing payments (48 per cent); rising to 58 per cent in Australia.
Complexity in managing multiple payout methods and currencies is also a challenge globally for SMBs (47 per cent), rising to 57 per cent in Singapore. To overcome the numerous pain points in cross-border payments, businesses can better manage the process by embedding an end-to-end payment processing system.
The findings demonstrate an opportunity for software platforms or marketplaces such as e-commerce, customer relationship management (CRM) or expense management platforms to better serve SMB customers, and create new revenue streams by offering embedded financial services – particularly when it comes to global money movement and payments.
Traditional banks “are missing the mark”
On average, 81 per cent of SMBs globally rely on traditional banks to access financial services, but historically these institutions overlook the particular needs of SMBs within certain industries, providing unsuitable, standardised products.
Inefficient payment systems cause cash flow issues which have a particularly damaging effect on SMBs. For this reason, 77 per cent of global SMBs are either undecided or actively considering moving to a new payment solution provider.
Traditional banks are considered least likely to meet the financial services needs of SMBs (44 per cent), whereas 64 per cent of respondents believe software platforms or marketplaces that offer embedded financial services can better serve them. This was consistent across all regions, with the highest appetite in Australia (76 per cent).
Shannon Scott, SVP and global head of product at Airwallex, explained the problem: “Seamless cross-border payments are essential for digital-first SMBs, but our research highlights that these businesses think banks are missing the mark by not offering the right solutions to support their global ambitions.
“Software platforms and marketplaces are well-placed to fill this gap because they have closer relationships with their customers and understand the nuances of their industries.
“For example, if an e-commerce marketplace is interested in providing loans to their sellers, having visibility over their sellers’ payment processing will be essential to offering pre-approved funds or making well-informed risk assessments.”
One-stop-shop solutions prove attractive
SMBs in China (93 per cent) and the US (88 per cent) showed the highest appetite to access financial services through their existing software providers. While appetite was lower in Australia (66 per cent), this is because 19 per cent of SMBs in the country are already tapping up their software providers for these services, which was the highest of any regions within the study.
The report also found that in the majority of cases (76 per cent), SMBs would be prepared to pay more to work with a one-stop-shop provider that can support their financial and other needs as they grow their international business. Chinese SMBs are most willing, with 91 per cent stating they would do so.
Scott concluded: “Industry data consistently highlights the positive impact of embedded financial services on a software as a service (SaaS) company’s valuation and market capitalisation. The opportunities are huge, but untapped, for software providers to better serve customers with tailored offerings while unlocking new revenue streams for themselves.”
