Four key insights for building Fintech solutions in the US small enterprise market

Share this post

The enormous market of US small businesses — composed of roughly 30 million small and medium businesses (SMBs) and another 16 million freelancers — has up til now been largely ignored by traditional financial institutions. Seen as high-risk and low-profit, SMBs have been pushed to the edges of banking and financial services. But that might change. Here are some lessons we have learned.

Where does one make money in banking? Traditionally, the answer would have been two-fold: either in the extremely high volume retail banking market, or otherwise in serving large enterprises. The retail banking market is characterised by large populations of relatively homogenous consumers, and it was here that the first explosion of Fintech offerings took place. On the other side of the spectrum, banks serving large enterprises could tap into their large financial flows with bespoke, tailored solutions.

Yet in between those extremes sits the main driver of the US economy: the market of SMBs.  A market that has mostly been ignored and neglected, and could even be considered some sort of modern underbanked.

The SMB market represents a vast spectrum of business customers, ranging from single-person freelancing businesses to enterprises employing hundreds of people and generating tens of millions of dollars in annual sales. Each of these businesses tends to have financial and banking needs far more complex and unique than a retail customer, yet deliver financial streams far smaller than their large enterprise counterparts.

As such, financial services providers have often perceived the SMB market as an unattractive middle ground: too complex for one-size-fits-all offerings, and too small to profitably offer tailor-made solutions.

Thankfully, that view is shifting, and in the next few years we expect to see a rapid expansion of Fintech offerings in this market. The success of Fintech offerings in the retail space has both proven what is possible and normalised the idea of financial services offered through digital-first platforms. As competition in the retail space continues to intensify, the mostly untapped market of SMB customers will start to look more and more compelling.

Soon enough, we will see adventurous entrepreneurs bringing modern financial services and Fintech conveniences to every small business in the country. Those who can build elegant solutions and find viable distribution pathways will likely be well received — most small business owners are ready to say goodbye to their mix of feature-limited business checking accounts, hard-to-access lending options, and error-prone Excel spreadsheets.

For the brave-hearted Fintech entrepreneur willing to venture into this new territory, we offer a few pointers and hard-won insights:

1. BaaS platforms in the US are underdeveloped compared to other regions, due to their more complex environment

Fintech products heavily rely on their underlying Banking as a Service (BaaS) platform and bank relationships. In fact, they can only innovate and disrupt to the extent that their infrastructure enables it. In order for Fintech to innovate more quickly, strong infrastructure platforms are needed. Most big BaaS providers have a focus towards the retail consumer market, leaving the BaaS space for small enterprises relatively nascent. There is a pressing need — but no satisfying solution — for a business-first platform that makes it easy to quickly and efficiently stitch together attractive Fintech solutions that cater to the needs of SMB clients.

A Fintech entrepreneur with a SMB-focused offering in 2021 should not (yet) expect to find the maturity in platforms and infrastructure that is available for consumer Fintech. It goes without saying that building a platform sturdy enough to serve this market yet flexible enough to innovate and iterate at the speed of business is a major engineering challenge. For the moment, know that the BaaS offerings in this space are still relatively nascent.

2. SMBs want a bundled solution so they can focus on other things

For practically every SMB entrepreneur, doing their finances is a pure cost center and often an emotional drain to boot. Rather than acting as a part-time CFO and spending time pulling financial services together, they seek solutions that let them focus on scaling their business.

For Fintech providers to cater to these needs though, the complicating factor is that every small business is different, and thus has different needs in their financial services. Expect it to be hard to build a one-size-fits all solution that satisfies a large percentage of SMB customers sufficiently to make it work. Instead, embrace the heterogeneity of the market, which leads us to our third point…

3. Start with a small vertical and serve them well. Expand from there

With such a variety of needs, the best way to approach the problem is to start with something small. For example, when we started our engagement with SteadiPay, they were focused exclusively on offering a service for small businesses to reap the benefits from credit cards while avoiding painful overdraft fees. That’s a simple, narrow problem to start with.

Once that was up and running, they added additional services: a cash optimiser to put unused cash to proper use, as well as a dashboarding tool to aggregate all financial streams and help predict and optimise a small business’s cash balance. In a world where hardly any infrastructure exists, even narrow problems like that take significant engineering resources. So start narrow and expand from there.

4. In the next few years, expect US-focused solutions to pick up speed faster than any other region

In its current state, US infrastructure to support SMB Fintechs is a decade behind leading markets like Singapore and London, but the signs are clear that the ecosystem is starting to pick up momentum. In 2020, investment in US Fintech companies outpaced EMEA investments by a factor of five. In the long run, the US market of small and mid sized companies provides an area of opportunity far greater than small national markets like Singapore or the many European markets.

For the US, the market of small enterprises represents such a significant economic driver that it is impossible to ignore for much longer. Even though US Fintech players didn’t get the early start and favorable tailwind of government stimulus or standardisation efforts like open banking, the first successes will be able to grow much faster and with fewer restrictions than their European or Asian counterparts.

In conclusion: we see promising movement in the US SMB Fintech space, with players like Steadipay, Wise and others carving out their respective niches in this growth market. Just as in the retail Fintech space, there’s ample opportunity for those willing to explore and pave their own track.

Curious to learn more about this space? Contact me at to exchange ideas and discuss trends and make sure to tune in to our podcast with Anthony Strike from SteadiPay to get more insights.

Submitted by Vacuumlabs

More To Explore


Are you a member of The Payments Association?

Member benefits include free tickets, discounts to more tickets, elevated brand visibility and more. Sign in to book tickets and find out more.


Log in to access complimentary passes or discounts and access exclusive content as part of your membership. An auto-login link will be sent directly to your email.

Having trouble signing?

We use an auto-login link to ensure optimum security for your members hub. Simply enter your professional work e-mail address into the input area and you’ll receive a link to directly access your account.

First things first

Have you set up your Member account yet? If not, click here to do so.

Still not receiving your auto-login link?

Instead of using passwords, we e-mail you a link to log in to the site. This allows us to automatically verify you and apply member benefits based on your e-mail domain name.

Please click the button below which relates to the issue you’re having.

I didn't receive an e-mail

Tip: Check your spam

Sometimes our e-mails end up in spam. Make sure to check your spam folder for e-mails from The Payments Association

Tip: Check “other” tabs

Most modern e-mail clients now separate e-mails into different tabs. For example, Outlook has an “Other” tab, and Gmail has tabs for different types of e-mails, such as promotional.

Tip: Click the link within 60 minutes

For security reasons the link will expire after 60 minutes. Try submitting the login form again and wait a few seconds for the e-mail to arrive.

Tip: Only click once

The link will only work one time – once it’s been clicked, the link won’t log you in again. Instead, you’ll need to go back to the login screen and generate a new link.

Tip: Delete old login e-mails

Make sure you’re clicking the link on the most recent e-mail that’s been sent to you. We recommend deleting the e-mail once you’ve clicked the link.

Tip: Check your security policies

Some security systems will automatically click on links in e-mails to check for phishing, malware, viruses and other malicious threats. If these have been clicked, it won’t work when you try to click on the link.

Need to change your e-mail address?

For security reasons, e-mail address changes can only be complete by your Member Engagement Manager. Please contact the team directly for further help.

Still got a question?