The views expressed by Entrepreneur contributors are their very own.
Anyone who has ever tried to start their very own business will probably tell you that they began with a dream of building and growing a company responsibly and one day changing the world with their products and services.
While this is an admirable goal, many small and medium-sized business owners are finding that it is much harder to achieve than they may initially expect. Global disruption, economic instability, and a dizzying array of recent technologies are just a few of the challenges business owners face every day.
For the past two years, Payoneer has conducted rigorous research on global small and medium-sized businesses (SMBs) to higher understand their ambitions, challenges, and opportunities; how they are preparing for the future; and what the future may hold for them. This yr SME Ambition Barometer revealed three foremost themes that are currently shaping small and medium-sized businesses.
1. Despite geopolitical uncertainty, small and medium-sized enterprises feel good about the economy
The rise of conflicts around the world has made it difficult for SMEs to plan for potential macro events that might impact their businesses, reminiscent of rising inflation, product boycotts, trade wars, sanctions and more. In fact, greater than 40% of SMEs feel unprepared to face such challenges. And from leadership changes in Latin America to military conflicts in Europe and the Middle East, macro events have already significantly impacted local businesses and their supply chains.
Despite this uncertainty, SMEs are optimistic about their prospects. In the US, 86% of SMEs are confident in their organization’s ability to grow revenues, and 85% expect local economies to improve. The potential for cross-border growth is partly driving this optimism. SMEs see international expansion as opening up access to latest customers and high-quality suppliers, and increasing innovation.
With an increased ability to innovate and deliver higher products to more customers in more places, U.S. SMEs are diversifying their revenue sources. Nearly two-thirds agree that having a diverse global network of suppliers helps protect against the threat of global disruption. SMEs surveyed in our study averaged 29 suppliers, up from 21 two years ago.
2. More and more small and medium-sized businesses are looking to expand internationally, but are frustrated by archaic payment systems
Unlike today, international growth is at the forefront of business owners’ minds. Last yr, Payoneer found that 72% of SMBs see cross-border expansion as a way to grow their customer base and revenue, and this yr, nearly half (45%) of all SMBs in the US say their customer base is now international — up 4 percentage points from 2023. Europe stands out as the most cited destination for SMBs looking to grow their customer base over the next five years. While SMBs are increasingly interested in cross-border expansion, sending payments around the world stays incredibly complicated.
This complexity and the costs of navigating it have historically excluded smaller corporations from the global marketplace and led to the financial sector lagging behind other industries in terms of innovation. Cross-border and multi-currency services are not typically supported by local banks, but accessing these services through global banks is prohibitively expensive for smaller corporations. Meanwhile, most fintech corporations focus on peer-to-peer (P2P) payments somewhat than business use cases. Where does that leave SMEs? Despite the profound impact these corporations have on the global economy, society, and local communities, at least 80 million SMEs are deeply underserved by a financial ecosystem that also primarily serves large multinational corporations.
Inconsistent improvements to SME payment tools are also leading to missed opportunities. While cross-border payment options are growing among SMEs, fewer than half of SMEs have the ability to use third-party electronic payments, real-time currency conversion or website payments. As many as 44% of SMEs report difficulty finding a solution that meets their needs, often relying on old-fashioned bank transfers. These barriers limit SMEs’ ability to participate in the global economy.
3. Small and medium-sized businesses are eager to use artificial intelligence, but they are increasingly concerned about cybersecurity
Digital transformation is helping to level the playing field for small and medium-sized businesses, most of which see the pace of technological change as a driver of innovation. AI has change into a key competitive advantage, with about two-thirds of small and medium-sized businesses worldwide reporting that they plan to use AI or are already testing it to help with customer support, sales, inventory management, content creation, and translation. Because of their smaller size and lack of organizational bureaucracy, these small and medium-sized businesses can often be more agile than their larger counterparts, adapting more quickly to rapidly changing markets. These advances are also having an impact on employment, with 75% of small and medium-sized businesses prioritizing hiring employees with latest technology skills, increasing demand for knowledge staff worldwide and creating latest opportunities for aspiring entrepreneurs and freelancers.
But the astronomical growth of AI has also created latest opportunities for AI-based fraud. While large organizations are combating cybersecurity threats, criminals and bad actors are becoming more sophisticated and targeting less well-off SMEs. More than one in three SMEs feel unprepared for potential cyber threats. As a result, reducing cybersecurity risk has increased by 63% as a key business objective among SMEs.
Key conclusions
As the world becomes more connected, there are more opportunities for entrepreneurs to capitalize on growing global trends in economic growth, international expansion, and emerging technologies. But while talent could also be evenly distributed, opportunity is not. Despite the necessary role SMEs play in the global economy, they face a daunting challenge to grow and succeed. Understanding the challenges and opportunities these entrepreneurs face might help address gaps in the currently underserved SME market.
But the first step towards creating true equality starts with simplifying cross-border trade, enabling businesses in all places to join the growing global economy.
The information contained in this document and report is provided for informational purposes only and does not constitute skilled, expert, financial, tax or legal advice. In no event shall 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 incurred in connection with the information provided.