SMB Instant Payments Deep Dive Report

New Data: Instant Payments Go Beyond the Need for Speed

July 2024

Small to mid-sized businesses find that instant payments can offer meaningful benefits, such as strengthening the bottom line and helping minimize risk. Instant payments adoption is not uniform, however. SMBs that receive payments from individual customers are twice as likely to receive instant payments than SMBs that receive payments from other businesses.

While instant payments are popular across SMB sectors, more than 90% of SMBs still received some form of non-instant payment in the last year.
Transportation firms receiving instant payments from other businesses are 49% more likely to have very healthy balance sheets than those that do not, representing the widest gulf among B2B segments.
Firms receiving payments from individuals rather than businesses are especially likely to cite risk reduction as a top benefit of receiving instant payments.


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    Instant payments offer many benefits for small and medium-sized businesses (SMBs), yet data shows that businesses are not sending them very often. In fact, small businesses receiving payments from individual consumers were twice as likely to receive them instantly than those receiving from other businesses. The resulting advantages for SMBs across sectors — ranging from restaurants to transportation and hospitality to healthcare — include reduced risk management and healthier balance sheet performance, particularly for those receiving instant payments from individuals.

    These are just some of the findings detailed in the “SMB Instant Payments Deep Dive,” the latest PYMNTS Intelligence brief. This brief examines the receipt of instant payments by small businesses. It considers whether these SMBs receive most or all their payments from individual consumers or other businesses. The analysis includes the resulting benefits for each. The brief draws on insights from a survey of 2,346 SMBs generating revenues up to $10 million in the last year, conducted Jan. 31 to April 1.



    Key Findings

    Small businesses receiving payments from individuals are more likely to rely on instant methods than their B2B counterparts.

    A key distinction between types of SMBs in this report is their source of payments. Small businesses in three of the four segments studied — restaurants, healthcare providers and hospitality/hotels — are more likely to receive payments from individuals rather than from other businesses. The exception is within the transportation industry. Small transportation firms are more likely to receive payments exclusively from other businesses (and be considered B2B) rather than individual customers. Overall, just 27% of these firms derive their revenue exclusively from other businesses.

    Healthcare SMBs

    that receive most or all payments from individuals are 2.5 times more reliant on instant methods than those that receive most or all payments from other businesses.

    While more SMBs receive payments from individuals than from other businesses, B2B firms tend to have higher revenues. For example, B2B firms in the hospitality/hotels segment have an average revenue of $2.6 million. Meanwhile, the average revenue for hospitality/hotels receiving payments from individuals is just $1.3 million.

    Out of the categories analyzed by PYMNTS Intelligence, healthcare SMBs that get most or all payments from individuals were revealed to be 2.5 times more reliant on instant methods than B2B healthcare SMBs. Forty-eight percent of healthcare companies and 57% of transportation businesses receiving payments from individuals received instant payments. The corresponding shares among B2B companies in the same segments are 19% and 22%, respectively. While these payments are popular across segments, 90% of all SMBs analyzed still used some form of non-instant payment — such as check, automated clearing house (ACH) or credit card.

    SMBs that use national banks are more likely to rely on instant account-to-account payments.

    25%

    OF HEALTHCARE PROVIDER SMBs USE NATIONAL BANKS.

    SMBs in the hospitality, healthcare, transportation and restaurant sectors are more likely to rely on regional and local banks than national banks. Restaurants and transportation SMBs are the most likely to use credit unions or local banks, at 54% and 48%, respectively. SMBs in healthcare and hospitality, on the other hand, are most likely to use national banks. One-quarter of healthcare firms and 19% of hospitality firms use national banks.

    While national banks are not SMBs’ most popular type of financial institution, those that use them seem to gain an advantage. National bank-using SMBs are more likely to receive instant account-to-account payments. This strong correlation suggests that national banks make instant payment use especially convenient.

    Healthcare firms that serve individuals and use national banks are the most likely to rely on instant account-to-account payments, at 35%.

    SMBs receiving instant payments are more likely to have a healthy balance sheet.

    Across all sectors, SMBs receiving instant payments seem to be reaping the benefits on their balance sheets. Positive balance sheet impacts are the greatest for B2B firms, even though the actual use of these payments among them is lower than with firms that receive payments from individuals. For example, the balance sheets of B2B transportation firms receiving payments instantly are 49% more likely to be very healthy than those that did not. That gap represents the widest difference for B2B firms across segments.

    Among the SMBs receiving instant payments from individual consumers, restaurants display the most benefit, as restaurants receiving these payments were 55% more likely to have a healthy balance sheet than those that did not.

    SMBs that receive instant payments report high satisfaction with the experience. Among SMBs receiving these payments, satisfaction rates were high across all segments we analyzed, although businesses focused on receiving from individual consumers reported slightly higher satisfaction rates than B2B businesses. Both the high satisfaction and the difference between consumer-focused and business-focused SMBs are especially true for the hospitality sector. It features the greatest share of satisfied SMBs when receiving from individual customers, 88%, and a drop when receiving instant payments from businesses, 74%.

    88%

    OF HOSPITALITY SECTOR SMBs ARE SATISFIED WHEN RECEIVING PAYMENTS FROM INDIVIDUAL CUSTOMERS, LEADING ALL SECTORS.

    Transportation SMBs are the exception to the trend, as transportation firms receiving payments from businesses show greater satisfaction than those receiving from consumers. One explanation for this difference may be that transportation firms have more B2B customers.

    The most important benefits for SMBs receiving instant payments include risk reduction, speed and cash flow management.

    As already mentioned, SMBs are experiencing a healthier bottom line and high satisfaction with instant payment usage. Although valuable, those may not even be the most important benefits for an SMB. Among SMBs receiving payments instantly from individuals, risk reduction stands out as one of the most important benefits, especially when compared to companies receiving from businesses.

    28%

    OF HOSPITALITY SMBs NAMED RISK REDUCTION AS THE TOP BENEFIT WHEN RECEIVING INDIVIDUALS’ INSTANT PAYMENTS.

    Risk reduction especially resonates with the hospitality and transportation segments. Data shows that 28% of each named it the top benefit when receiving individuals’ instant payments. For SMBs receiving from other businesses, the top benefits of receiving these faster payments are speed and cash flow management. Regardless of customer type, SMBs across segments are experiencing some benefits from receiving instant payments.

    Conclusion

    Small businesses are reporting many benefits from receiving instant payments, whether from individual customers or businesses. Across sectors from hospitality to transportation, the receipt of instant payments is linked to healthier balance sheets and reduced risk, among other positives.

    Despite the advantages, some factors likely still limit the adoption of instant payments. In some sectors, such as restaurants, the number of customers using these payments may be limited. Other potential issues include a lack of awareness of these options, or lower enthusiasm to send these payments than receive them. Nonetheless, the links to better bottom lines suggest that receiving instant payments will be on the rise — if SMBs have their way.

    Methodology

    This “SMB Instant Payments Deep Dive” is based on a survey conducted from Jan. 31 to March 25 of 2,346 SMBs in the transportation, restaurant, hospitality and healthcare sectors. These SMBs generate $10 million or less in annual revenue. The report examines the impact of receiving instant payments among SMBs and key factors, such as whether the firms receive payments from individual consumers or other businesses.

    About

    PYMNTS INTELLIGENCE

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multi-lingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

    The PYMNTS Intelligence team that produced this report:
    SVP and Head of Analytics: Scott Murray
    Managing Director: Aitor Ortiz
    Senior Analyst: Lauren Chojnacki, PhD
    Senior Writer: Anna Sofia Martin


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