Categories: SMBs

FinTechs Help Main Street Find Its Footing

Following the frantic dash among small businesses for a portion of the government's Paycheck Protection Program (PPP) funding, small businesses were faced with some difficult hurdles.

Marred by regulatory confusion, claims of unfair lending and borrowing, and the U.S. Department of Justice's first case of alleged PPP fraud, small businesses quickly came to realize that government relief will not be the silver bullet they need to survive the market downturn.

"I think for some of the businesses that have started to get some of the federal support, it comes with a lot of problems and challenges, and we actually have some business owners who decided they can’t actually use the Paycheck Protection Program because it’s too much risk,” Main Street Alliance Executive Director Amanda Ballantyne recently told PYMNTS.

With 90 percent of SMBs reporting that they have been negatively impacted by the coronavirus, according to PYMNTS research, it's clear that Main Street cannot afford to sit idle. Government aid may be key, but it's not the only support small- to medium-sized business (SMB) owners are seeking in an effort to get back on their feet.

Amid the push to digitize, small businesses are increasingly exploring opportunities within FinTech to strengthen their product offerings, adhere to the demands of shifting customer expectations, and embrace business model flexibility not only endure the current economic downturn, but also to emerge from the volatility more resilient than ever.

"Many companies are quickly pivoting their business models and adjusting services to maintain some of their revenues during the outbreak and prepare themselves for comebacks once the crisis ends," noted the new COVID-19 Business Recovery Report, a collaboration between PYMNTS and American Express.

FinTech Eases The Business Model Shift

The challenges of the PPP initiative from complaints of a lack of transparency and unfair application processes to the growing risk of loan fraud have steered many small businesses toward alternatives to the big banks for capital.

Yet small business owners are quickly finding that there's more to enduring the volatility than external funding. Increasingly, with social distancing and work-from-home orders forcing SMBs to migrate onto digital platforms, FinTech solutions are an attractive investment to Main Street entrepreneurs hoping to preserve revenues and remain competitive.

Fitness centers, for instance, are turning to digital payments players to facilitate new models of virtual classes, while restaurants are flocking to contactless payments in lieu of cash to continue curbside service and delivery, as the COVID-19 Business Recovery Report highlights.

"The COVID-19 pandemic has changed consumers' payment and commerce behaviors significantly," American Express Director of U.S. Partner Acquisition Allison Keane told PYMNTS. As such, small businesses must quickly adapt to those changing payment needs to keep the cash flowing.

At the same time, technology firms like Shopity and Facebook have rolled out their own services to help SMBs migrate to online platforms and adopt the eCommerce business model.

Even the B2B arena is facing pressure to switch gears and collaborate with FinTechs. In a recent interview with PYMNTS, Liquidity Service Chief Executive Officer Bill Angrick highlighted the opportunity for SMBs with stagnant and unused assets like equipment or unsold inventory to sell those items on a B2B eCommerce platform, a strategy that could open up new revenue streams while SMBs' original business models fall flat.

“With every downturn, there are opportunities,” said Angrick. “As a small business or an entrepreneur, you have to focus on what you can do, and not what you can’t do.”

The Road To Recovery

It's impossible to say just what the market will look like in a post-pandemic world, and each industry will face its own set of opportunities and challenges. The consensus on Main Street, however, is that the old ways of doing business may be gone for good.

According to PYMNTS research, the majority of SMBs believe business will never be the same: Nearly two-thirds of survey respondents said they expect to continue to see higher online sales volumes in a post-pandemic market, with small business owners reporting that they expect the digital transformations to stick as the market recovers.

Consumer payment habits are perhaps changing permanently, too and for some small businesses, the unexpected pressure to dive into unfamiliar business models may ultimately open up lucrative doors never considered before.

As Ballantyne told PYMNTS, the pressure is immense and desperation is high, but through business model flexibility and FinTech adoption, Main Street is building a transformational foundation for the future of the small business community.

“Anytime you have a crisis is a time when big structural change can happen out of necessity,” Ballantyne noted. “And very small business owners have had these types of challenges in getting good credit and growing their businesses. I think this is an opportunity to build systems that not only support our economy but also encourage entrepreneurs.”

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The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.