Are small businesses weathering the storm?
How banks can help guide small businesses in times of crisis.
![Portrait of Veronica Fernandez](https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/48327/veronica_fernandez.7eda812e2ef5.jpg?ext=webp)
Veronica Frenandez
SVP, Head of Visa Commercial Solutions, North America
Veronica Frenandez
SVP, Head of Visa Commercial Solutions, North America
![Portrait of Veronica Fernandez](https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/48327/veronica_fernandez.7eda812e2ef5.jpg?ext=webp)
Small businesses go through a lot. From the moment they are established through their growth and expansion phases, they are under constant and unrelenting pressure. Imagine then the pressure they are feeling during one of the worst economic cycles ever experienced. Pressure that came with practically no warning – and which is now driving an urgent need for change and for digital transformation.
SBOs look to their banks for trusted advice to help them weather the storm and thrive in future.
Dealing with the unexpected - how Small Business Owners (SBOs) have had to adapt
Fewer than half (43 percent) of US Small Business Owners (SBOs) surveyed in our recent Back to Business Small Business COVID 19 Research¹ said they had experienced a disaster previous to the current pandemic, and only 22 percent said they had a disaster contingency plan in place prior to COVID-19.²
It’s understandable that most SBOs were not prepared for a crisis on the scale of the current global pandemic. With social distancing methods in place and greater use of contactless payment methods across the consumer environment, the pandemic has accelerated consumers’ adoption of digital banking and payment options at a staggering pace. Yet another source of pressure brought forward by the pandemic. During the height of the COVID-19 pandemic, (March-April 2020), 37 percent of retail bank customers said they were using their bank’s mobile app more frequently than ever before.³ And this is key, as we know that small businesses tend to expect the same experiences as retail banking customers more generally. As a result, more small businesses are now looking to implement digital payment methods across their business as well.
As SBOs plan for recovery and address the challenges and opportunities that come with digital technologies, they will look to their banks for trusted advice; not only where the acceleration to digital is concerned but also more broadly to help them weather the storm and thrive in the future. The Back to Business research highlights that 55 percent of respondents who had looked for guidance during the pandemic, had looked to their bank(s) for help, making banks the most popular source of assistance.⁴
Furthermore, the 40 percent who did have a disaster contingency plan in place before the pandemic, say they did because their bank encouraged them to do so.⁵ These figures should be perceived as encouraging, as they clearly highlight a great opportunity for banks to offer their assistance in an advisory capacity but also to deliver the kind of digital payment solutions that can support SBOs and their businesses through the crisis and beyond.
Help and advice is already being delivered in many forms. Some efforts have focused on delivering immediate financial support to get businesses back on their feet following the pandemic. Other initiatives have concentrated on the provision of the latest digital technologies to help SBOs streamline financial transactions and drive operational efficiencies. Initiatives have included cash incentives and promotions to open new business banking checking accounts with a Visa Debit Card or cash back for a card acceptance and new merchant account and processing volumes.
SBOs may require assistance with their immediate financial woes but they must also ensure the long-term sustainability of their business. That’s where banks can step up to deliver advanced solutions tailored to the needs of individual small businesses today. Specifically, they can:
- Help small businesses connect with customers and one another to drive demand
- Help small businesses find the right business products including payment solutions
- Adjust investments to deliver touchless business models and introduce digital tools to make the small business user experience more efficient
- Optimize product strategy (e.g. value proposition, rewards, transaction types, etc.)
- Strengthen API programs to readily introduce and integrate new capabilities.
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Getting SBOs back on their feet through the pandemic
Access to funding and the appropriate payment product is critical to getting SBOs back on their feet. When looking closely at these businesses’ financial challenges, we’re seeing ‘applying for funding’ and ‘accessing capital’ feature quite prominently. What we’re also noticing is that many small businesses are hampered by using payment products that deliver inadequate lines of credit or sub-optimal features and benefits.
Too often, for example, we see them using personal cards for business expenses. VisaNet analysis of an issuer-specific consumer credit card portfolio found that 7-8% of accounts and 10-12% of spend in the consumer credit portfolio was among Tier 1 so-called ‘small business look-alike’ individuals, (those judged as having the highest likelihood of being a small business owner).⁶
So, beyond making sure small businesses have access to funding, banks also need to ensure their small business customers have products in their hands that are fit for purpose and tailored to their specific business needs. These tailored solutions could be in the form of diverse and digital payment methods, or tools which enhance visibility and control over business spend, thereby delivering greater purchasing power. Irrespective of the actual product or solution, small businesses need to be able to leverage a more consultative approach from their bank – they must work together to identify what is fit for purpose.
It is critically important that happens. After all, it’s the innovative thinking and entrepreneurial drive often demonstrated by these businesses that can make all the difference in supporting industry and sustaining commerce vital to seeing us through the COVID-19 pandemic and beyond.
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1 Visa Back to Business Small Business COVID 19 Research, April 2020 2 ibid 3 Bank and Credit Card Provider Investments in Easy-to-Use Digital Tools Pay Off, J.D. Power Finds, J.D. Power press release, 10 June 2020 4 Visa Back to Business Small Business COVID 19 Research, April 2020 5 ibid 6 Visa Consulting and Analytics, Business Practice Capabilities Overview, Summer 2019 Banner image by Videezy.com
Too often we see them using personal cards for business expenses
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