Payments Power the Real SMB Transformation as AI Arrives on Main Street

The conventional logic has always been that small businesses had smaller needs than their enterprise peers.

But with Google this week launching new enterprise-grade artificial intelligence (AI) tools designed for small- to medium-sized businesses (SMBs), a move that follows on the heels of Anthropic’s Claude SMB Tour that will take Claude for Small Business on the road and provide live, half-day AI fluency training for 100 local small business leaders at each stop, it’s clear that small business capabilities are getting a big upgrade.

Behind the flash of AI headlines, however, it’s the humble system of record that is undergoing potentially the biggest upgrade on Main Street.

Across the small-business technology landscape, software providers are transforming systems of record into systems of action, with payments emerging as the catalyst. Rather than merely tracking invoices, expenses, supplier obligations and customer transactions, today’s platforms enable businesses to initiate, manage and automate payments directly within the workflows where those activities originate—an especially attractive proposition for resource-constrained businesses seeking efficiency.

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Main Street Shifts as Payments Become Core to Workflows

Business owners have come to expect their software solutions to reduce administrative burden rather than simply organize information. But their expectations typically serve as a leading indicator of the reality of what existing and legacy solutions can provide. An accounting platform might generate an invoice, for example, but business owners still need to leave the application to collect payment. A purchasing manager could approve a vendor bill inside an accounting system, yet the actual payment often occurs through a bank portal, leaving financial workflows fragmented across multiple providers, interfaces and processes.

Today’s SMB solutions are working to eliminate those handoffs. After all, recording a bill is useful; paying it automatically is more valuable. Tracking an invoice matters; collecting payment immediately matters more.

At the center of this transformation is embedded finance. The rationale is straightforward. Payments represent the moment when business activity becomes economic activity. They are where cash flow changes, supplier relationships are maintained and revenue is realized. By controlling the payment experience, SMBs gain a deeper role in both their retail customers’ commerce experience and their wholesale suppliers’ experience.

“Ready for Change: Why Nearly Half of SMBs Want to Ditch Cash and Checks,” a PYMNTS Intelligence report produced in collaboration with Mastercard, found that many SMBs want to reduce their reliance on cash and checks by switching to modern, digital payment options.

What began primarily with payment acceptance has expanded significantly. Small-business platforms now facilitate accounts payable, accounts receivable, instant settlements, working-capital loans, business cards, expense management and cash-flow forecasting.

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The Future System of Record for SMBs

Traditionally, systems of record were repositories of information. Their primary value came from storing, organizing and reporting business data. The next generation of platforms is evolving into something more dynamic and becoming active participants in business operations.

Payments are accelerating this transformation because they sit at the intersection of software, finance and operations. Every business transaction ultimately culminates in the movement of money, making payments a natural focal point for platforms seeking greater relevance and deeper customer relationships.

The most important software platforms of the next decade may not be those that best record what businesses have done. They may be the ones that help businesses decide—and execute—what happens next, a workflow that is becoming increasingly borderless as global commerce and digital innovations intersect.

“SMBs make cross-border payment on a daily basis, not an occasional basis. It’s becoming part of mainstream banking rather than episodic or occasional banking.” Pratik Khowala, global head of transfer solutions at Mastercard, said to PYMNTS.

“If banks don’t provide really intuitive, flexible and transparent solutions to these SMBs,” Khowala said, “it’s going to be very difficult for them to keep loyalty of those customers.”

That’s supported by PYMNTS Intelligence research conducted with Mastercard, which found that 57% of U.S. small- to medium-sized businesses (SMB) source goods or production inputs from overseas suppliers, making cross-border payments an increasingly routine part of day-to-day operations.

The challenge for SMBs will be balancing integration with flexibility, ensuring that operational efficiency does not come at the expense of optionality. Maintaining a clear focus on results will only grow more crucial as AI tooling spread across the SMB landscape. PYMNTS wrote last month that smaller businesses represent a “critical proving ground for AI because its constraints are different.”

Mid-market companies, that report added, don’t often have the luxury of rebuilding systems from scratch. They run on thinner margins, depend on legacy software and focus on operational continuity before technological experimentation.

“For these businesses, AI succeeds only if it becomes practical,” PYMNTS wrote.

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