Today’s small-to-mid-sized business (SMB) is evolving alongside the wider changes sweeping across finance, society and the workforce. While it’s still possible to run a successful business using traditional methods of capital access, customer acquisition, cost management and a myriad of other considerations, digital apps and services give business owners the greatest advantage. More and more, consumers are adopting open banking tools to spend, save and manage. SMBs are increasingly embracing digital platforms, apps and services in order to create the experiences that today’s consumers expect, and to thrive in a fast-paced competitive environment. 

The supply chain and pandemic-related inflationary pressures of the last two years have caused a host of issues for business owners. According to Mastercard’s new Rise of Open Banking Small Business study, rising costs and new methods of customer acquisition, talent acquisition and capital access are all front-of-mind for the SMB. 

This has led to an encouraging trend: SMB owners have been quick to adopt digital tools to fund, manage and promote their businesses. Nine in 10 owners consider themselves heavy fintech users for both personal and business needs. Some other key findings from the research:

  • Eighty percent started using digital channels for loans in the past two years.
  • Eighty-four percent say technology makes them feel more confident when applying for a business loan. 
  • Sixty-four percent have received a business loan through digital channels. 

These digital adoption numbers are higher than consumer numbers. SMB owners are forward-thinking. They’re quicker to adopt better solutions, and they’re accustomed to adapting to market conditions. 

Digital Transformation is Meeting Small Business Challenges Head-On

The pandemic of 2020 changed how businesses operate, accelerating a trend toward digitization that was already gaining steam. Banking, finance, investing, saving and spending have all gone more digital, enhancing the convenience and functionality of mobile and online apps and services. Doing business from home and “on the go” is becoming the norm, and open banking is the foundation for the next-gen innovative financial tools that both consumers and businesses use every day. Small business owners are taking advantage of this transition, leveraging heavy use of fintech innovations to raise their financial IQ.

While business owners are learning as they adapt and adjust to uncertain and ever-changing norms, the Rise of Open Banking study shows that there are a few concerns at the top of their minds on a daily basis.

  • Inflation. Keeping up with rising costs is the number one stressor for SMBs. With price hikes at 40-year highs, businesses are having to find creative solutions to maintain sustainable profit margins. Forty-seven percent of owners cited rising costs as their number one problem. Consumer-facing industries like restaurants and retail face even more pressure, with over 50% of owners saying that inflation is their top issue.
  • New Customer Acquisition. Thirty-nine percent of SMB owners said that reaching new customers was their biggest pain point. Professional services businesses were more urgent about new customers, with 49% of owners saying it’s a continual concern for them. 
  • Hiring Skilled Employees. Pandemic-related restrictions and social trends like “The Great Resignation” changed the employment landscape quickly and drastically. Thirty-five percent of employers are having trouble navigating the new dynamics of a workforce that has a strong preference to work-from-home. Doctors (42%) and farmers (44%) struggle even more to find the hires they need, as do many businesses that require employees to be in-store or in-office. 
  • Managing Operations. Twenty-seven percent of owners said that efficient tools and systems to manage their businesses and business finances were a top issue.

Open Banking Innovations add Speed, Efficiency and Personalization to Banking and Financial Services

A full 85% of business owners are looking for faster, easier access to capital, creating a clear opportunity to partner with them for customized, agile funding solutions. The number one financial tool that SMBs rely on is business credit cards, but 81% are more interested in a loan that’s tailored to their business’s specific needs. Sixty-two percent of small businesses rely on loans as a lifeline. 

Payments are at the heart of SMB digital use cases. To streamline the customer journey, owners rely on open banking, embracing digital wallets, cryptocurrency and other new fintech tools. 

Connecting accounts to manage business finances provides the opportunity to give personalized insights. It also adds convenience for SMB owners looking for a streamlined way to tackle critical business tasks like banking, invoicing, paying bills and managing cash flow.

SMB Open Banking Adoption is Strong

Owners are using open banking innovations to improve their financial fitness. They are creating more seamless operations within their businesses by using intelligent open banking tools that manage the complexities of daily data flow for them. Linking accounts, making payments, getting paid, banking and accounting are just a few of the crucial tasks that are becoming quicker, smarter and more secure through digitization. 

Owners are linking their financial accounts to take advantage of new apps and services. Eighty-eight percent are using open banking data to better manage their operations. Eighty-five percent are looking for the customized recommendations that can come from the analytics and machine learning that can be applied to owner-permissioned data. 

Feeding intelligent, rich data into financial management tools is giving businesses the edge they need to grow and adapt, in this era of rapid change. They’re improving their financial health and decision making, while automating tasks and saving precious time. 

Paying and getting paid is quicker and more efficient. 

The evolution of banking and financial services is here, and SMB owners are embracing it. This is the first in a Rise of Open Banking series of blogs, where we’ll take a deep dive into some of the solutions powered by open banking for the SMB that is going digital.

If you want to read ahead, click here to download the full report.