Small Businesses Embrace FinTech Innovations to Close Digital Transformation Gaps

Small and medium-sized businesses (SMBs) often face challenges in keeping up with digital transformation, particularly in back-office and payment functions, compared to their larger counterparts, according to PYMNTS. However, new solutions are emerging, specifically tailored to address these gaps. The recent partnership between payment-as-a-service provider UNIPaaS and American Express, announced on September 3rd, highlights the growing focus on solutions built for SMBs. This partnership aims to simplify invoice payments, catering to the unique needs of smaller businesses.

Unlike large enterprises with the resources to build custom payment systems or advanced treasury management, SMBs typically operate with limited budgets and infrastructure. As a result, their payment needs revolve around key priorities such as affordability, simplicity, flexibility, and reliability. Many small businesses still rely on manual invoicing and reconciliation processes, which are time-consuming and prone to errors. By adopting digital tools, SMBs have the opportunity to increase efficiency, reduce costs, and gain faster access to working capital, which can drive business growth and reshape the landscape of global commerce.

A PYMNTS Intelligence report, conducted in collaboration with American Express, delves into one of the most persistent challenges facing SMBs: delayed payments. The research reveals that ineffective cash flow management, cited by 60% of SMBs, remains a major obstacle. In fact, only 5% of small businesses have fully automated their accounts receivable (AR) and accounts payable (AP) processes, despite automation’s ability to offer crucial insights and growth opportunities. Manual payment processes are both time-consuming and susceptible to human error, slowing down operations and contributing to financial uncertainty.

“Businesses are worried about the investment in terms of time and resources,” says Brett Sussman, Vice President of Marketing, Business Blueprint, and Small Business Banking at American Express. He adds that SMBs are often hesitant to adopt digital tools due to the perceived complexity and cost of integration, even though automation can significantly streamline their operations.

At the same time, innovations such as embedded lending are reshaping how SMBs manage cash flow and access credit. Embedded lending enables businesses to borrow directly within the platforms they already use, such as eCommerce sites, accounting software, or payment processing systems. This integration eliminates the need for separate loan applications, reducing friction and making the borrowing process more seamless.

Jennifer Marriner, EVP of Global Acceptance Solutions at Mastercard, points out that SMBs are particularly drawn to embedded finance because it offers a straightforward way to access financial services through platforms they are already familiar with, such as inventory management or accounting systems. This ease of access improves their financial health, helping SMBs to manage cash flow and invest in future growth.

The rise of digital payment options like virtual card payments, real-time digital solutions, and embedded finance is transforming the SMB sector. However, many businesses still operate with legacy systems or basic accounting software, making seamless integration with new payment platforms essential. The potential of these new tools to improve cash flow management and operational efficiency is immense, but businesses must navigate the complexities of transitioning to digital processes.

A broader push toward digitizing SMB transactions could result in significant improvements in efficiency, cash flow, and transparency. For small businesses, which represent a massive volume of daily transactions across various sectors, the move toward better payment systems is key to survival and growth. With the ongoing evolution of financial technologies, SMBs now have more opportunities to close the digital transformation gap and thrive in an increasingly competitive market.