More than 80 per cent of small and medium-sized businesses (SMEs) globally are seeking to switch away from traditional banks that manage their payments services which could be seen as “limiting their ability to operate and grow globally”, according to a new survey by Airwallex and consultancy Edgar, Dunn and Company.
The global survey, which also covered the local market, found that Australian SMEs are moving away from traditional banks, including the big four, at twice the rate of the global average.
Nearly one out of five (19 per cent) of local small businesses are accessing financial services through on-demand software platforms, often provided by fintech companies. This compares to fewer than one in 10 (9 per cent) of SME firms globally doing the same.
Further, 71 per cent of Australian SMEs stated that they were ready to switch their banking solution provider for a like-for-like alternative from their software provider – among which include services for cross-border payments collection and payouts, business bank accounts, foreign exchange, and treasury.
A particular bane for Australian SMEs was the lengthy processing and settlement times for payments provided through traditional players.
More than half (52 per cent) of Australian respondents said they faced a number of inefficiencies, including lengthy processing and settlement times, when receiving payments from abroad.
Further, 58 per cent of local small businesses also expressed their dissatisfaction with delays in paying out funds to vendors, suppliers and employees, including hold-ups in processing and disbursing payments. This was 13 percentage points higher than the international average of 45 per cent.
Forced currency conversion leading to high transaction fees was also cited by 41 per cent of respondents globally as a key concern.
Australian businesses, now well accustomed to dealing with fintechs, also appear more confident in financial software platforms than their global counterparts.
More than three-quarters (76 per cent) of surveyed Australian SMEs said that software platforms that offer integrated financial products are well equipped to service their needs, compared to two-thirds (64 per cent) of respondents globally.
Nearly two in three Australian small businesses (66 per cent) expressed an interest in accessing financial services through their existing software providers. While this appetite for change was found to be lower than for counterparts in China ( at 93 per cent) and the US (at 88 per cent), the survey said this was due to the relatively high number of SMEs (around 19 per cent) in Australia already leveraging software providers for these services – the highest of any regions within the study.
“That means Aussie [small and medium businesses] trust financial services like lending, payment processing or insurance that are embedded into nonfinancial businesses’ websites, without needing to be redirected to traditional financial institutions,” Airwallex said.
On average, globally, the report also found that in the majority of cases (76 per cent), SMEs 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.
“The research highlights that [SMEs] 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,” Airwallex wrote in its report.
“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 [SME] customers, and create new revenue streams by offering embedded financial services – particularly when it comes to global money movement and payments.”
Commenting on the results of the survey, Luke Latham, ANZ managing director at Airwallex, slammed the dominance of the big banks, which he said has led to a business banking system “that rips off small businesses and their customers”.
“Our research is clear – Aussie small businesses have had enough and are rejecting the big banks. One in five have already moved away, and the remainder are well on their way.
“The complacency of the big banks to build a model fit for their customers needs and the steep rise of alternative banking providers, means they’re scrambling to adapt their legacy systems to compete.”
Fintechs, Latham added, “are lightyears ahead of them in providing transparent, nimble and cost-effective banking solutions”.
“Banking may have been one of the more insulated industries against disruption from the digital age, no more. Innovative finance players, both home-grown and international, are entering the Australian market every month.”
