SMBs want cloud-based financial services: Airwallex

Source: Airwallex report. SMBs say traditional banks are least likely to meet their financial needs.

Airwallex, a global payments and financial platform for modern businesses, has shared the results from a global survey* showing high demand for cloud-based financial services. According to the research, over 80% of small and medium sized businesses (SMBs) are looking to switch away from traditional banks for their payment needs.

The report, jointly produced by consultancy Edgar, Dunn & Company and Airwallex, uncovers the financial services pain points faced by SMBs. These can limit their ability to operate and grow globally.

The data shows that 82% of SMBs globally 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 payments collection and payouts, business bank accounts, foreign exchange, and treasury.

The findings demonstrate a clear 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.

SMBs face a number of inefficiencies when receiving payments from abroad, including lengthy processing and settlement times (45%), an issue felt particularly keenly in Singapore (52%) and Australia (also 52%). Forced currency conversion leading to high transaction fees is the second most commonly cited issue (41%).

SMBs are also experiencing challenges when paying out funds to vendors, suppliers and employees, including delays in processing and disbursing payments (48%) — rising to 58% in Australia. Complexity in managing multiple payout methods and currencies is also a challenge globally for SMBs (47%), rising to 57% in Singapore. To overcome the pain points in cross-border payments, businesses can better manage the process by embedding an end-to-end payment processing system, Airwallex said.

On average, 81% 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, Airwallex explained. For this reason, 77% 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%), whereas 64% 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%). The research highlights that SMBs are in search of streamlined solutions tailored to the specific needs of their industry, which is something that vertical software providers would be well-placed to offer.

SMBs in China (93%) showed the highest appetite to access financial services through their existing software providers. While appetite was lower in Australia (66%), this is because 19% of SMBs in the country are already tapping their software providers for these services, which was the highest of any region within the study. The report also found that in the majority of cases (76%), 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% stating they would do so.

Shannon Scott, SVP, Global Head of Product, Airwallex said: “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’ payments processing will be essential to offering pre-approved funds or making well-informed risk assessments.

“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.”

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Download the Embedded Finance Report: The Opportunity for Software Platforms and Marketplaces.

*The research was commissioned by Airwallex and carried out by consulting firm Edgar, Dunn & Company during Q323. Insights come from two primary sources, a global survey of 1,000 SMBs in the US, UK, China, Australia and Singapore, and interviews with leading software platforms.