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Anyone who's ever endeavored to build their own company will likely tell you they started out with a dream to build and grow responsibly to someday change the world with their products and services.
While an admirable goal, many small- or medium-sized business owners find that it's a lot harder to achieve than they may have originally anticipated. Global disruptions, economic instability and a dizzying array of new technologies are just a few of the challenges that business owners wrestle with every day.
For the past two years, Payoneer has conducted rigorous research into global small- and medium-sized businesses (SMBs) to better understand their ambitions, challenges and opportunities; how they're preparing for the future; and what the future may have in store for them. This year's SMB Ambitions Barometer revealed three key themes shaping SMBs today.
Related: 63 Small Business Ideas to Start in 2024
1. Despite geopolitical uncertainty, SMBs are feeling good about the economy
Increased global conflict has left SMBs struggling to plan for potential macro events that may impact their businesses, such as rising inflation, product boycotts, trade wars, sanctions and more. In fact, more than 40% of SMBs feel unprepared to tackle such challenges. And from leadership changes in Latin America to military conflict in Europe and the Middle East, macro events have already significantly impacted local businesses and their supply chains.
Despite this uncertainty, SMBs are optimistic about their prospects. In the U.S., 86% of SMBs are confident in their organization's ability to increase revenue, and 85% expect the health of their local economies to improve. Cross-border growth potential is in part driving this optimism. SMBs see international expansion unlocking access to new customers and high-quality vendors, as well as increasing innovation.
Through an enhanced ability to innovate and bring better products to more customers, in more places, U.S. SMBs are diversifying their revenue streams. Nearly two-thirds agree that having a diverse global vendor network helps hedge against the threat of global disruption. SMBs polled in our research work with an average of 29 vendors, up from 21 two years ago.
2. More SMBs are pursuing international growth, but are frustrated by archaic payment systems
Contrary to today, international growth is at the forefront of business owners' minds. Last year, Payoneer found that 72% of SMBs see cross-border expansion as a way to grow their customer bases and revenues, and this year nearly half (45%) of all SMBs in the U.S. say their customer base is now international — four percentage points more than in 2023. Europe stands out as the most-cited destination where SMBs are looking to grow their customer base within the next five years. While SMBs are increasingly interested in cross-border expansion, sending payments globally remains incredibly complex.
This complexity, and the cost to navigate it, has historically locked smaller businesses out of the global market and led the financial sector to lag other industries in innovation. Cross-border and multi-currency services typically aren't supported by local banks, but accessing these services through global banks is prohibitively expensive for smaller businesses. Most fintechs, meanwhile, are focused on peer-to-peer (P2P) payments, not business use cases. Where does this leave SMBs? Despite the profound impact these businesses have on the global economy, society and their local communities, at least 80 million SMBs are deeply underserved by a financial ecosystem that still primarily caters to large multi-national companies.
Inconsistent improvements in payment tools for SMBs also lead to missed opportunities. While cross-border payment capabilities among SMBs are increasing, less than half of SMBs have capabilities for third-party electronic payments, real-time currency conversion or website checkout. A full 44% of SMBs report difficulties in finding a solution that meets their needs, often relying on old-fashioned wire transfers from banks. These barriers limit SMBs' ability to participate in the global economy.
3. SMBs are excited to use AI but are increasingly concerned about cybersecurity
Digital transformation is helping level the field for SMBs, the majority of whom see the pace of technological change as a driver for innovation. AI has emerged as a major competitive advantage, with roughly two-thirds of SMBs across the globe reporting that they either plan to use AI or are already piloting AI to help support customer service, merchandising, inventory management, content creation and translations. Due to their smaller size and lack of organizational red tape, these SMBs can often be nimbler than their larger peers, adapting faster to a rapidly changing marketplace. These advancements also impact hiring — 75% of SMBs are prioritizing hiring employees with emerging technology skills, increasing demand for knowledge workers worldwide and creating new opportunities for budding entrepreneurs and freelancers.
But the astronomical rise in AI has also created new avenues for AI-driven fraud. As large organizations crack down on cybersecurity risks, criminals and bad actors are getting more sophisticated and are targeting less well-resourced SMBs. More than one in three SMBs feel unprepared for potential cyber threats. As a result, reducing cybersecurity risk rose by 63% as a key business goal among SMBs.
Related: Small Business Owners, Don't Run From Technology — Embrace It. Here Are 5 Strategies to Succeed.
Key takeaway
As the world becomes increasingly connected, more opportunities arise for entrepreneurs to leverage growing global trends in economic growth, international expansion and emerging technology. But while talent may be equally distributed, opportunity is not. Despite the important role SMBs play in the global economy, they face an uphill climb to grow and succeed. Understanding the challenges and opportunities these entrepreneurs face can help address gaps in the currently underserved SMB market.
But the first step to creating true equity starts with simplifying cross-border trade, enabling the world's businesses to connect to a rising, global economy.
The information herein and in the report is provided for informational purposes only and does not constitute professional, expert, financial, taxation, or legal advice. In no event will Payoneer or its representatives be liable for any loss or damage including, without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever incurred in connection with the information provided.
