SMBs

Wells Fargo On What It Will Take To Revive The SMB Economy

Small- and medium-sized businesses have been hit hard by the pandemic, but most are scrambling into digital pivots to blunt the impact of physical stores’ shutdowns, Colleen Taylor, executive vice president and head of merchant services at Wells Fargo, told Karen Webster during a recent conversation.

“[We’ve] seen a little bit of everything in the small business community – the ability to do curbside delivery, the ability to actually provide services or products via eCommerce,” she said. “We have actually had our merchants reach out to say, ‘How do I get into this eCommerce game?’ And those are the merchants that I think will be better-positioned.”

Some are not only surviving the pandemic, but are actually thriving. For instance, Taylor said one of her bank’s clients runs regional bike shops that have seen business boom to such an extent that “they can’t keep the bikes or the equipment on the shelves.”

And while scraping by rather than thriving is still more common, the green shoots of a rebound are starting to become visible in the form of merchants turning their processing services back on and transacting business again, Taylor said.

But she added that merchants are coming back online with business models that are somewhat different than what came before. So, whenever the recovery really kicks into high gear, many businesses might look different than they did when they shut down three months ago.

Omnichannel For All

Taylor noted that omnichannel commerce already existed before the pandemic, but its scale and reach have expanded markedly during the crisis.

“'Omnichannel' used to be code for the big guys trying to figure out how to dominate the market, but after COVID-19, it means something entirely different,” she said. “Consumers absolutely are going [to] purchase differently post-pandemic, across the board. They may want to come to the store for servicing. They may want to order online and pick up curbside. But it's this ability to meet the customer where they are and where they want to be that is now the differentiator for all business – and small businesses have to be part of that.”

How they actually get there can vary by vertical, by customer base and by specific needs, but Taylor said that most such efforts will be through partnerships with payments facilitators. She said Software-as-a-Service (SaaS) providers can help firms migrate to an omnicommerce offering that features a seamless payment experience, no matter where the consumer’s touchpoint with the business happens to be.

A Focus on Contactless Commerce

Of course, “touchpoint” might no longer be the right expression to use, given that part of the great omnicommerce expansion will include increased use of contactless payments in a world where consumers fear catching COVID-19, Taylor said.

SMBs can accommodate that with a host of methods: mobile wallets, contactless cards, QR codes, paying in-store via a mobile app, etc. Taylor said the power of omnicommerce in the post-pandemic era will be its ability to increase consumers’ comfort by allowing clients to decide exactly how much in-person interaction they want. And although the pandemic will someday end, consumer fondness for that customizable experience likely won’t.

“We hope COVID will go away, [but] the behavior isn't going to go away,” Taylor said. “People are going to be pretty accustomed to not wanting to touch things – to either just wave their phone or their card or just order and complete the transactions right on their mobile devices. So, I think the solutions going up now are for the long term, and we're seeing some really good innovation out there.”

A Hopeful Tomorrow

The pandemic has been an incredible incubator for digital progress, but Taylor said that doesn’t change the fact that it’s also extracting high costs.

Some businesses – particularly those in especially hard-hit verticals like travel and entertainment – simply won’t manage to outlast the pandemic.

PYMNTS’ early May survey of small businesses found that only 48.1 percent of them expect to survive the COVID-19 economic meltdown. Still, that’s up from just 41.8 percent who felt that way in early April.

However, the share of SMB owners who are sure they can’t make it through the pandemic also increased to 7.2 percent in May, up from only 5.3 percent on April 20. Taylor said SMB closures will also exact a toll on the software providers, payments facilitators and FinTechs that offer specialty services to affected verticals.

Moreover, she said there’s no simple “big vs. small” formula that will determine which firms survive. On one hand, many large firms will push through thanks to their advantages of scale, vendor relationships and funds on hand. On the other hand, small, single-location firms enjoy the benefit of being able to quickly integrate and push out innovations.

It’s the firms in the middle – which are too small to have massive budgets for innovation and too large to instantly innovate – that Taylor said she thinks will have the most trouble.

“I think that's going to be a little bit of a barbell,” she said. “I worry about the medium-sized businesses and their ability to support the cost of the change just to make it through this pandemic.”

But she noted that the pandemic will end eventually – and the overall U.S. economy will make it through. However, the rest of 2020 will likely involve rebuilding and resetting. Taylor said that most of Wells Fargo’s data from SMBs indicate that few are expecting a recovery to get much off the ground before 2021.

“When we look at our data now, [figures] suggest that we're starting to again see green shoots of merchants reactivating card processing volume because customers are coming back in,” she said. “I do think we will see a very solid rebound because customer demand is still out there. Merchants are just finding new ways to engage it.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

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.

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