Benchmark Bytes: What Types of SMBs are Adopting Fintech?

As part of the ritual of examining local commerce and SMB Saas strategies, Localogy goes right to the source: SMBs themselves. How do they feel about marketing and operational software? What features do they want? And how has their hunger changed during a global pandemic that has hit local businesses hardest?

Localogy’s latest Small Business Trends report answers these and other questions across the SMB SaaS product set, which we examine in this Benchmark Bytes series. After the last installment examined the types of fintech that SMBs are adopting, we flip the script this week to examine the types of SMBs that adopt fintech.

Starting with the size of business, the biggest adopters (37 percent of the sample) have headcounts between 1-10. That’s followed by SMBs with 11-25 employees (27 percent), 26-50 employees (18 percent), and those with 50+ employees (percent). This means there’s an inverse relationship between size and fintech adoption.

As for vertical breakdowns, the biggest SMB fintech adopters are restaurants (25 percent). That’s followed by home services (23 percent), retail (16 percent), automotive (14 percent), and professional services (11 percent). This adoption happened between March and October 2020 when the survey was fielded.

What Does it All Mean?

Going a bit deeper, a few things jump out at us:

— The biggest realization from these data is that there’s an inverse relationship between size of business and fintech adoption.

— This is somewhat surprising as smaller businesses tend to be less tech adoptive, due to both budget and savvy.

— Then again, many fintech offerings are meat to be lower-cost alternatives to high-end financial or accounting services (think: Quickbooks, TurboTax, etc).

— These data could also be interpreted to mean that smaller businesses are the biggest untapped SMB segment, with several larger businesses already equipped with fintech.

— Some SMBs may have more time to apply to longstanding admin projects and “cleaning house,” during lockdowns, where things like bookkeeping and other fintech functions make sense.

— Restaurants’ leading position as a fintech-adoptive SMB segment is logical, given that they’re high-volume, high-frequency businesses, meaning complicated bookkeeping.

— The same can be said for retail, which is the second most adoptive vertical.

— Conversely, some verticals have less frequent transactions but higher stakes which likewise compels fintech offerings to manage transactional or tracking matters.

— This can be said for health and medical services, professional services, automotive and home services.

Time to Shine

Stepping back, Fintech is having a moment. It continues to grow rapidly as a business category, including its SMB adoption. Fintech startups are generally thriving with exit velocity, funding, and public-market performance. It’s becoming a leading subsector of the broader SaaS universe.

Meanwhile, new fintech users shown above could represent permanent adopters — a concept that’s accelerated in the Covid era as SMBs are forced to accelerate their digital transformation. This sends them into the arms of SaaS providers to accomplish a range of operational and marketing functions.

We’ll return in the next installment to go deeper on other areas of the SMB fintech adoption. That will include top goals and what types of SMBs are adopting. Let us know what additional insights jump out at you from the above data, and stay tuned for more breakdowns in our Benchmark Bytes series.

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