Sometime last year, the phrase “post-pandemic” officially entered the mainstream dialogue.
Despite new variants and ongoing infections, people collectively agreed that we had entered life after COVID-19 – and it wasn’t hard to understand why. Consumer spending rebounded, growing 7.9% for the year, completely offsetting losses in 2020 and driving a healthy 5.7% increase in GDP, according to estimates released by the US Bureau of Economic Analysis (BEA).
The demand has been a windfall for small businesses, which were disproportionately impacted during the pandemic, but the recovery has also come with significant changes in consumer behaviour. According to Bank of America, in the last two years, digital sales have increased 300% and now account for half of all transactions. Since the start of the pandemic, 90% of small businesses have completed a digital sale, up from 65% in early 2020, according to a report by Facebook and the Small Business Roundtable.
Embracing digital products and digital banking has provided a crucial lifeline for small businesses to persevere through the early stages of economic recovery (after all, small businesses 40% to 50% of GDP).
In a survey by the Small Business Roundtable, 34% of small businesses have augmented their digital platforms, but this is only the beginning. Small businesses are advancing toward a cashless model and releaselessly investing in digital tools, and thriving small businesses are strategically aligning with key financial partners to establish a robust digital platform.
Embracing new technologies
Most small businesses made their foray into the digital space with Point-of-Sale (PoS) tools, which allow business owners to process all forms of contactless payments and establish online check out.
According to data from Paysafe, 73% of SMBs accept contactless payments, and more than three-quarters of businesses without the technology plan to adopt it in the future. More SMBs also established an online presence during the pandemic. Now, 71% of brick-and-mortar businesses have an e-commerce check-out option, and the number is rapidly growing.
It isn’t surprising that small businesses have focused on PoS technology – it’s the income stream – but data shows that enterprises with a well-rounded digital toolkit actually outperform their peers. A study by Deloitte found that small business revenue increased as digital engagement improved. Digitised SMBs are twice as profitable, three times more likely to see revenue growth, employ two times the number of people and earn 60% more per employee. Overall, digital engagement increases revenue, attracts new customers, drives business efficiency and satisfies customer demand.
Digital banks can serve as a conduit to that digital toolkit. Traditional banks have underinvested in digital services and products, but digital banks provide meaningful financial insights and seamless integration with digital tools to improve business performance. By partnering with a digital financial institution, SMBs can access tools to control finances and drive customer engagement.
Finding a trusted digital partner
Building a technology platform is inherently complex. It’s one reason why as much as 80% of SMBs are not taking full advantage of sophisticated digital tools. It’s also the reason why partnering with the right digital bank is so crucial. Digital banks can handle the complexities of the technology and tailor financial tools to meet individual business needs.
Small businesses are augmenting digital performance to meet new consumer demand, and financial institutions need to do the same for their banking customers. By and large, however, they are not. According to data from Forrester Research, 78% of small businesses want data-driven financial insights, but only 12% are currently receiving such insights from their banking partner. Digital banks are equipped to meet those expectations by advising SMBs on digital strategy, product adoption, emerging industry trends and access to cashflow management tools.
SMBs aren’t only adopting these tools, they’re demanding them. According to a report by Salesforce, following the pandemic, 68% of business owners have elevated their expectations of a brand’s digital capabilities – and that is because financial digitisation has become imperative to success in this post-pandemic world.
Make no mistake, though – it didn’t need to be a pandemic. In a survey conducted by PNAS, most small businesses with more than $10,000 in monthly expenses have only two weeks in cash-on-hand. SMBs are a crisis away from shuttering – but they don’t have to be. Digital banking partnerships drive financial strength and digital literacy, and those are foundational to every business, whether the market is in a bull run or when it runs bear.