Only 9% of SMEs are accessing financial services through SaaS

New research from Airwallex reveals a significant mismatch between the demand and supply in the financial services market for small and medium-sized businesses (SMBs). The report, rich in data and insights, provide a picture for CFOs trying navigating the burgeoning landscape of embedded finance.

It highlights that while 83% of SMBs are eager to access financial services through software-as-a-service (SaaS) platforms and marketplaces, only a scant 9% are currently doing so. This disparity not only reveals a substantial untapped market but also highlights the changing preferences and needs of SMBs in the digital age.

Key Findings: Exploring the untapped market

• Demand vs. Supply Discrepancy: The report’s most striking finding is the significant gap between SMBs’ interest in and actual usage of embedded financial services. This indicates a vast, untapped market waiting to be explored and capitalized upon.
• Shifting Customer Preferences: Another key insight is the changing preferences of SMBs. They are increasingly looking for solutions that offer convenience, ease of adoption, and flexibility, often valuing these aspects over traditional cost considerations. This trend suggests that SMBs are willing to invest more in services that provide a comprehensive, all-in-one financial solution.
• High-Interest Services: The demand is particularly high for services such as foreign exchange, payment processing, multi-currency business accounts, and business credit cards. These services are sought after for their ability to streamline financial operations, offering SMBs a more integrated financial management experience.
• Revenue Enhancement and Customer Retention: For platforms offering these services, there is a significant opportunity to increase revenue per customer. The integration of financial services can lead to up to a fivefold increase in revenue, while also enhancing customer retention and lifetime value. This presents a compelling case for platforms to consider embedding financial services as part of their core offerings.

In-depth analysis:

The report indicates a paradigm shift in how SMBs prefer to access and use financial services. Moving away from traditional banking institutions, there is a growing preference for more integrated, platform-based solutions. This shift presents a unique opportunity for CFOs, particularly in the SaaS and marketplace sectors, to rethink their strategies and offerings.

Strategic advantages and competitive edge

The integration of financial services into existing platforms provides more than just an additional revenue stream. It offers a significant competitive advantage in an increasingly competitive market.

Platforms that can offer a comprehensive suite of financial services stand to gain not only in terms of direct revenue growth but also in enhanced customer loyalty and reduced acquisition costs. This integration also positions these platforms as one-stop financial solutions, making them more attractive to SMBs looking for streamlined financial operations.

Navigating compliance and technological integration

While the opportunity in embedded finance is considerable, it comes with its own set of challenges. CFOs face the daunting task of navigating complex regulatory landscapes, which vary significantly across different regions. Compliance with global financial regulations such as Know Your Customer (KYC), Anti-Money Laundering (AML), and the Payment Card Industry Data Security Standard (PCI DSS) is critical.

Additionally, the technological aspect of integrating financial services into existing platforms can be complex and resource-intensive. The report suggests leveraging partnerships with fintech companies and utilizing Banking as a Service (BaaS) models as potential solutions. These partnerships can facilitate quicker market entry, reduce upfront costs, and offer access to a broader range of products without the regulatory complexities typically associated with direct banking relationships.

Strategic planning for the future

For CFOs, embracing embedded finance is not just following a trend but a strategic imperative. The potential to unlock new revenue streams, combined with the ability to offer more comprehensive services to SMBs, positions embedded finance as a critical element in the strategic planning of companies in the digital space.

CFOs must consider how to effectively integrate these services, how to partner with the right fintech providers, and how to navigate the regulatory environment. This approach will not only help in capitalizing on the current market opportunity but also position companies for long-term success in a rapidly evolving digital economy.

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