Small Businesses, Big Demand: The Case for SMB-Focused Real-Time Payments

Real-time payments are gaining traction everywhere, with businesses and consumers alike clamoring for these services from their financial institutions (FIs). Perhaps nowhere, however, are instant payments’ benefits more evident than in the small to mid-sized business (SMB) segment. Real-time capabilities help smaller firms overcome payment delays and realize stronger cash flow — urgent priorities for the smallest businesses as economic uncertainty persists. Banks realize this, yet many still cater primarily to large enterprises in these offerings. Recent studies indicate that one-third of SMBs would switch FIs for real-time payments, putting banks on notice. Moreover, by addressing small businesses’ real-time payment needs, FIs can unlock new revenue streams and strengthen relationships with a sizable customer base. With experts pointing out a leadership opportunity for banks that rise to meet SMBs’ unmet needs, the time for FIs to make that their goal is now.

The Real-Time Enterprise Banking Bias

SMBs’ Need for Speed

Small Businesses, Big Opportunities

Why FIs Should Offer SMB-Tailored Instant Payments

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The Real-Time Enterprise Banking Bias

Though they comprise more than 9 out of 10 U.S. businesses, SMBs represent an underserved banking segment, many of whose needs — including that for real-time payments — are currently unmet.

Meeting SMBs’ banking needs presents a notable opportunity for FIs.

A recent Deloitte survey found that while micro- and small businesses represent more than 99% of companies in the United States, they remain underserved by most banks. Current banking solutions often fail to meet these firms’ distinct payment needs and expectations — especially for personalized and data-driven insights to optimize financial decision-making. In fact, the study identifies a key leadership opportunity for banks to champion small businesses’ unique needs.

33%

of SMBs say they would switch FIs for real-time payment capabilities.

Offering real-time rails to these firms could go a long way toward achieving this end. According to PYMNTS Intelligence research, 8 in 10 FIs enable large enterprises to send and receive instant payments. By contrast, less than 75% of FIs offer these capabilities to middle-market businesses, and less than two-thirds offer them to small businesses. This gap is both noteworthy and puzzling, as real-time payments provide precisely the kinds of personalized data and financial insights SMBs are demanding.

Lack of real-time payment access increases SMB attrition risk.

A recent Datos Insights study confirms that real-time payments are a pivotal offering for gaining SMB client loyalty. The study reports that a lack of faster payment options is driving 61% of small businesses to FinTechs for their banking needs, with 33% of SMBs saying they would switch banks specifically for real-time payment options. SMB churn raises banks’ costs related to customer replacement and capital deployment. Better real-time payment capabilities could help banks retain these clients by directly addressing their primary service concerns.
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SMBs’ Need for Speed

Small businesses face severe cash flow challenges over frequent payment delays. Instant payment access, though still limited for this segment, is critical for smaller firms.

77%

of SMBs operate with barely sufficient cash reserves.

Payment delays strain SMB cash flow.

Despite its lack of wide availability to this segment, instant payment access is crucial for smaller firms by accelerating cash flow. Three in four SMBs experience late receivables, and 77% operate with barely sufficient cash flow.

According to the Federal Reserve, 80% of small firms face payment-related difficulties. The top challenge, after fees associated with payment processing, involves customers who pay slowly, impacting 39% of SMBs. Additionally, 20% report that payment processes consume too much time, and 18% highlight delays in fund settlement or availability. Slow payments frequently affect businesses receiving payments via third parties, scheduled installments or post-delivery arrangements, underscoring SMBs’ acute need for improved, real-time payment solutions from their financial institutions.

FIs acknowledge instant payments’ greater benefits for SMBs.

According to PYMNTS Intelligence data, FIs widely agree that instant payments benefit SMBs more than enterprise customers due to their promotion of faster cash flow. FI respondents were 2.3 times more likely to state that mid-sized firms, for example, benefit more from real-time funds availability than do larger firms. The abiding preference for serving enterprises, then, highlights a significant gap between current instant payment offerings and the acknowledged needs of smaller clients.

Ad hoc payments illustrate instant methods’ potential for SMBs.

Other recent PYMNTS Intelligence research spotlights how SMBs are benefiting from instant payments by tapping these methods for nonrecurring or so-called ad hoc payments. Ad hoc payments make up a growing share of SMBs’ receivables, representing 57% of the total for SMBs and 79% for the smallest firms — i.e., those generating less than $100,000 in annual revenue. Delays in ad hoc payments significantly disrupt cash flow, with 25% of small SMBs reporting poor timing as their greatest challenge with these payments. Instant payment methods can streamline ad hoc transactions, reducing the risks from delayed settlements. This is vital for small businesses whose financial stability depends on timely receipt of these increasingly essential funds.
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Small Businesses, Big Opportunities

With most SMBs willing to pay fees for instant access to funds, FIs can capture this revenue by prioritizing real-time solutions for SMB clients.

SMBs value real-time payments enough to pay for them.

SMBs typically resist fees but show evident willingness to pay to receive real-time payments. PYMNTS Intelligence data indicates that 57% overall prefer fixed fees, while 54% favor percentage-based charges. Preferences vary by SMB size: Larger SMBs choose fixed fees, while smaller firms lean toward percentage fees. This difference likely reflects the typical size of their ad hoc payments. The overall willingness, however, points to a clear revenue opportunity for FIs offering instant payment options. Significantly, 88% of the smallest SMBs — those with annual revenues of less than $100,000 — would be willing to pay a percentage fee to receive instant payments.

88%

of the smallest SMBs would be willing to pay a percentage fee to receive instant payments.

Mid-market firms have seen a dramatic jump in instant payment adoption.

Citizens Bank noted a sharp increase in instant payment usage among mid-sized firms last year as companies shifted rapidly away from cash and checks. Use of real-time rails, including the RTP® network and the FedNow® Service, jumped from 62% to 77% year over year in 2024. In addition, 94% of mid-market executives plan a complete transition to digital payments within five years, citing improved cash flow forecasting and greater financial visibility. Currently, only 44% of mid-market transactions are digital, meaning that substantial growth opportunities remain for FIs that quickly deliver robust real-time solutions.

SMBs using instant payments report healthier finances.

SMBs also appreciate real-time payments for their 24/7 availability and potential to enhance balance-sheet health. Payment providers can more effectively attract SMB clients by recognizing sector-specific advantages beyond speed. For example, SMBs in the hospitality sector that use instant payments as their primary method for sending funds report significantly stronger balance sheets, at 82% versus 66% of those using non-instant methods. Banks adopting this strategy could offer a more comprehensive value proposition directly addressing SMBs’ operational needs and financial health.
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Why FIs Should Offer SMB-Tailored Instant Payments

While nearly every FI offers instant payment options to large enterprises, arguably the greatest benefits remain to be realized by offering them to more SMB clients. FIs can increase revenues and retention by aligning their real-time payment offerings with SMBs’ urgent needs. Prioritizing SMB-focused payment solutions will significantly reduce churn and enhance client satisfaction with this segment. PYMNTS Intelligence recommends the following actionable roadmap for FIs to take regarding their real-time payment offerings to business clients:

Address the market disparity between enterprise and SMB real-time banking services. Expand instant payment capabilities beyond enterprise-level clients to embrace both small and mid-market firms.

Highlight cash flow benefits. Market real-time payments as a solution to SMBs’ operational challenges.

Focus on digital adoption. Leverage trends toward increased digital payment use among smaller businesses.

Implement clear fee structures. Offer transparent pricing models to encourage SMB adoption.

Offering real-time payments tailored for SMBs can position banks as reliable partners, enhance loyalty with these customers and unlock new revenue opportunities. As real-time payments are perceived as a growing necessity, FIs that omit these features for smaller businesses could find themselves losing customers. Moreover, first movers in the space stand to gain significant market share with this underserved population. FIs that make bold moves now — by offering real-time payments to their small-business clients — will be tomorrow’s leaders in business banking.

“Instant payments are growing and expanding. We see more use cases on the network every single day. … We have reached a tipping point and we are going into 2025 absolutely confident that we are going to start to see an even greater explosion of real-time payments on the network than we saw in 2024.”

Jim Colassano
Senior Vice President, RTP Business Product Management, The Clearing House