The success of the small business sector, comprising 99% of all private US businesses, largely informs the overall health of the economy and job market.
Yet, in an effort to achieve the largest ROI, legacy bank policies tend to favour larger businesses or consumer goods. In 2018, J.D. Power found 37% of small business banking customers felt their banks appreciated their business and only 32% felt their banks understood their business.
In the wake of pandemic-induced quarantines and social distancing, the search for adequate funding and opportunities to minimise costs are at an all-time high.
As banking customer loyalty continues to dip, the fintech evolution has drastically shifted customer banking preferences with more convenient and reliable solutions. It has also given rise to a wealth of options that are no longer limited to local financial institutions.
A recent study conducted by the Swiss Finance Institute found the daily average rate of fintech app downloads has increased from 29.2% to 32.8% during the COVID-19 pandemic.
With the rapid, global acceleration of digitalisation of the finance industries and the emergence of disruptive innovations, regulatory revisions and digital wallets, small businesses now have access to a plethora of improved digital tools that can drive big results.
High fees challenge
One of the main complaints of small businesses against traditional banks is the high fees ranging from those associated with the likes of account maintenance, foreign transactions and money transfers.
Most digital-first and digital-only financial companies are able to do away with the majority of these costs because they are free of looming brick-and-mortar overhead costs. For example, the newer fintech category of neobanks, or challenger banks, offer many of the same services as legacy banks including checking accounts, credit cards, loans and refinancing sans the long lines and archaic stacks of paperwork.
Similarly, online lending firms provide seamless service to customers who are often ignored by legacy banks with quicker approvals, personalised payment options and fewer requirements.
Peer-to-Peer (P2P) payment technologies also took a chunk out of legacy bank profits at the top of the pandemic because they were better positioned to facilitate the surge in contactless transactions as many small businesses transitioned sales of services and goods to online platforms.
P2P platforms have proven to be invaluable investments for merchants looking to reach the banked and unbanked as more people rely on them for various money transfers, direct deposits and financial transactions and bill payment processing.
Other popular e-commerce payment platforms, specifically designed with small businesses in mind, are also beginning to roll out features that mimic traditional bank offerings such as corporate debit cards, small business loans and fraud protection.
Using BNPL to attract incremental consumers
With the lockdown shuttering many brick-and-mortar stores, many entrepreneurs shifted their services to digital platforms which contributed to the exponential explosion of online shopping and the resurgence in popularity of buy now, pay later (BNPL) options.
With consumers feeling the pinch of the economic downturn, instalment payment options have become a staple for consumers who do not have access to credit or do not want to use a credit card. It is also a valuable tool to attract Millennial and Gen Z consumers who prioritise ease and convenience in their shopping experience.
As the BNPL industry is projected to reach an estimated 79.7 billion by 2024 according to the New York Times, more small business owners are tapping into the trend to attract incremental sales at a time when every dollar counts.
The rise of blockchain
In the midst of the pandemic, blockchain technology has blossomed into a mainstream disruptor. As small businesses struggled to attain financing, leading to the creation of the Paycheck Protection Program in March 2020, more owners looked to blockchain for streamlined cryptocurrencies loans.
Small business owners also appreciated that credit worthiness is more readily confirmed without the use of applications. Maybe most importantly, blockchain technologies provide transparent and secure transactions which also helps entrepreneurs with more efficient customer tracking processes.
The future is indeed digital
Disruptive technologies have given rise to digital tools that should be embraced by small businesses to successfully navigate the economy that is becoming increasingly dependent on these new fintech tools.
Furthermore, they can drive revenue and the brand affinity business owners crave if wielded correctly. The ease and speed of many of these fintech platforms will be appreciated by customers long after the pandemic has ended.
As the world becomes increasingly technology dependent, the businesses who are able to demonstrate digital agility will be better equipped for long-term success.
Dropp Launches Payment Services for the Creator Economy Merchants SubscribeStar, Inara and Chillfiltr
Dropp adds three new merchants to its digital payment platform, which offers profitable monetization and viral growth options for content creators
At Dropp, we’re huge fans of what other innovative payment companies have achieved in the market. Major companies have all played essential roles in making online payments possible, changing everything for both merchants and customers.
As with many other industries, COVID-19 has exposed the need for a digital transformation in the legacy banking industry. Customers are demanding convenience and streamlined customer service that are not encumbered by the government-regulated constraints of legacy...