Demand for embedded finance soars among SMBs as traditional banks fall short

• Airwallex report reveals 83 per cent of global small and medium-sized businesses (SMBs) want software platforms, such as marketplaces and eCommerce solutions, to tackle their unmet global payments needs
• 76 per cent of SMBs would even be prepared to pay more to work with a one-stop-shop vendor that can support financial and other needs as they grow their international business

SINGAPORE & LONDON–(BUSINESS WIRE)–Today Airwallex, a 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 report, jointly produced by consultancy Edgar, Dunn & Company and Airwallex, uncovers the financial services pain points faced by SMBs which can limit their ability to operate and grow globally.

The data shows 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 payments collection and payouts, business bank accounts, foreign exchange, and treasury.

The findings demonstrate a clear opportunity for software platforms or marketplaces such as eCommerce, 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.

Cross-border payments pain stifling growth

SMBs face a number of inefficiencies when receiving payments from abroad, including 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) and is particularly felt by UK-based SMBs (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.

Confidence in software platforms to streamline financial services

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, standardized 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). 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 will pay more for a one-stop-shop provider

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.

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 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 capitalization. The opportunities are huge, but untapped, for software providers to better serve customers with tailored offerings while unlocking new revenue streams for themselves.”

The full research, “Embedded finance report: The opportunity for software platforms and marketplaces,” and its findings can be read here.

NOTES TO MEDIA

Methodology:

The research was commissioned by Airwallex and carried out by consulting firm Edgar, Dunn & Company during Q3 2023. 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.

For further information

If you have any questions or would like to request further information, please contact press@airwallex.com.

About Airwallex

Airwallex is a leading global financial platform for modern businesses, offering trusted solutions to manage everything from payments, treasury, and spend management to embedded finance. With our proprietary infrastructure, Airwallex takes the friction out of global payments and financial operations, empowering businesses of all sizes to unlock new opportunities and grow beyond borders. Proudly founded in Melbourne, Airwallex supports over 100,000 businesses globally and is trusted by brands such as Brex, Rippling, Navan, Qantas, SHEIN and many more. For more information, visit http://www.airwallex.com.

Airwallex (UK) Limited (Company No. 10103420) is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 (firm reference number 900876).

Contacts

press@airwallex.com