'Unmet demand' among SMBs for embedded finance – Airwallex

There is untapped demand among smaller firms for embedded financial services to replace traditional banking, according to Airwallex research

Demand for embedded financial services is soaring among small-to-medium-sized businesses (SMBs), according to new research, with perceptions of banks’ ability to meet SMBs’ needs apparently faltering.

Payments platform Airwallex interviewed leading software companies and surveyed 1,000 SMBs located in the US, UK, China, Australia and Singapore. The research appears to show how businesses are evolving in the way they expect financial services to be delivered, and raise a surprising fact about the compromises SMBs would be prepared to accept in order to receive greater convenience in payments and banking.

The headline finding is that nearly two-thirds (64%) of respondents think software platforms and marketplaces that offer embedded services are better placed to serve their needs, contrasted with just 44% for traditional banks. This was consistent across all the regions that Airwallex surveyed, but the highest appetite for embedded services was in Australia, where 76% of respondents said such platforms were able to meet their needs.

The survey also throws up some unexpected conclusions about what small firms will do in order to get access to convenient financial services. Over 80% of global SMBs want software platforms and marketplaces to tackle their unmet payment needs, and over three-quarters of firms (76%) are willing to pay a premium for a ‘one-stop’ solution – such as working capital embedded into their accountancy software.

In addition, 82% of respondents – rising to 86% in the UK and US – feel overlooked by traditional banks, which have generally struggled to keep pace with innovation in the digital banking sector.

‘Huge opportunity’ for software firms to target users

The research appears to show that businesses – including those with less resources – are prepared to embrace embedded financial services as the future of transacting and banking, despite a perception that the B2B space lags behind the consumer space and takes longer to adopt new technologies.

Shannon Scott, SVP and Global Head of Product at Airwallex, elaborates: “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 ecommerce 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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