1. Leaders across the public and private sectors have long recognized the importance of supporting small businesses. Across OECD countries, small- and medium-sized businesses (SMEs) represent around 99% of all firms, are a main source of employment and generate 50% to 60% of value added on average.
2. But it isn’t just about economies, it is about stronger communities and greater social inclusion. And by helping small businesses accelerate their digital journeys, it has a multiplier effect in building much wider access to the digital economy.
SIMPLE AND SECURE TECHNOLOGY
1. Digitization is non-negotiable for small businesses today. According to a Mastercard study, 75% of small businesses incorporate digital tools into their daily operations, with two-thirds emphasizing the importance of a seamless digital experience for their success.
2. However, achieving this smooth experience remains a challenge. One in four small business owners is overwhelmed by managing more than six different platforms each day, consuming two of their most precious resources: time and money.
3. SMEs are also being left behind when it comes to accessing the most transformative technologies, putting them at a further disadvantage. And the more complex the technology – whether it be big data, cloud computing or artificial intelligence (AI) – the less likely it is that SMEs are adopting them, according to the OECD.
4. In particular, the potential of AI for small businesses is substantial: AI and data-first solutions can drive greater inclusion and resilience, enabling them to get capital, go digital, and grow networks and know-how.
5. AI solutions can also help with protecting small businesses, that are often targeted by hackers precisely because of their size and lack of access to fraud prevention tools. In 2023, over 40% of cyberattacks were directed at small businesses.
6. Given the pressures of running a small business, it is impossible to expect owners to keep track of the latest updates or research the best network monitoring software, but trust with customers that has taken years to build can be shattered in seconds by a cybersecurity breach. In fact, around 60% of small businesses that experience a cyberattack go out of business within six months.
ACCELERATING ACCESS TO FINANCE
1. Increased digitization can help to expand new credit opportunities for small businesses, tackling one of the biggest barriers to growth and success.
2. The International Finance Corporation (IFC) estimates that 65 million firms, representing 40% of formal micro, small, and medium enterprises (MSMEs) in developing countries, face an annual financing gap of $5.2 trillion – equivalent to 1.4 times the current global MSME lending levels.
3. A lack of access to credit creates massive challenges for small businesses – including cash flow, limited competitiveness and innovation, and a dependence on informal lending. Given the importance of small businesses to economies around the world, this is hindering efforts to address investment, job creation and income inequality. It is also a missed opportunity for banks and financial institutions, when approached in the right way.
4. New innovations will support this. By leveraging open banking, small business owners can share their financial data securely with lenders. This transparency allows for a more comprehensive assessment of creditworthiness, facilitating quicker and more inclusive lending decisions.
5. Fintech companies are increasingly developing innovative solutions tailored for small businesses, recognizing the opportunity presented by the long-standing gap in services and tools that meet the needs of SMEs. The latest Mastercard Start Path cohort features startups that are digitizing key functions for SMEs such as supply chains, spend management platforms, onboarding, risk monitoring and embedded financial solutions.
6. The next step is to drive forward stronger connections between fintech companies and traditional lenders to create new models that leverage digital tools to create and scale more flexible, customizable and cost effective credit and services solutions for small businesses.
TAKING A NEW APPROACH
1. Partnerships are the key to success. And we can’t think across traditional lines – it needs a unique blend of the scale of the public sector, the local knowledge and reach of philanthropy and the innovation of the private sector. To better help small businesses, they need to be impactful, adaptable and scalable.
2. For example, in November 2024, the Asian Development Bank (ADB) and the Mastercard Impact Fund, administered by the Mastercard Center for Inclusive Growth, signed an agreement to catalyze lending for MSMEs, focusing on women-led or -owned businesses and access to climate finance. The partnership will support up to $1 billion of credit access to MSMEs over a four-year period through on-lending by financial institutions, complemented by Mastercard Impact Fund’s grant of $5 million.
3. Another example is around helping to strengthen cybersecurity practices. In 2023, the Mastercard Strive EU program launched an Innovation Fund to identify innovative cybersecurity solutions, and improve awareness, preparedness and resilience for European small businesses.
4. Lupasafe, which supports small businesses by making cybersecurity effortless and affordable with the Lupasafe Cyber Monitor, was one of the grant winners. In Belgium, through its partnership with UNIZO – the largest Flemish organization for self-employed entrepreneurs – Lupasafe will provide small businesses with direct access to the platform, enabling them to receive immediate feedback on mitigating cyber risks and help them develop compliance with the EU’s NIS2 regulatory framework.
Source:
https://www.weforum.org/stories/2025/01/digital-economy-small-businesses/
