FinTech Payments

Visa’s Kevin Phalen: Global SMBs Get Back To Business Optimistic About The Future

August 04, 2020 at 08:15AM

The global pandemic has changed commerce fundamentally — a fact confirmed in Visa’s new Back to Business study.

To say that consumers have shifted dramatically toward digital commerce — or that small- to medium-sized businesses (SMBs) all over the world have been rapidly pivoting to keep up with them — is almost an understatement.

According to the eight-country study, 78 percent of consumers have changed how they pay for things so as to reduce contact in their commerce. And more than two-thirds of SMBs (67 percent) have launched something to meet that need — whether an eCommerce site or a switch in their point-of-sale (POS) technology to contactless.

But Visa’s Kevin Phalen told Karen Webster in a conversation about the Back to Business study that none of that is surprising. What Visa witnessed worldwide within the pandemic’s first 60 days of shutdown was SMBs embracing new channels during “that really critical time,” he said. They made quick pivots into the new digital environment as they tried to figure out how to keep their current customers and bring in new ones.

But Phalen said that what is surprising is how good SMB owners worldwide are feeling as they come out of mandated shutdowns and more or less get back to business. According to the survey, three-quarters of them (75 percent) report being positive about the future.

“The thing that really blew me away was how optimistic small businesses are,” he said. “They are also still concerned, but they’re looking at this like they are going to hunker down and get through it. That was very evident in the study — and not just in the U.S. but in all eight of the markets in which we did the research.”

Optimistic, but committed to continuing to revise how they do business and expand whom they do business with. Phalen said Visa is committed as well to helping SMBs roll out key changes over time.

“The consumer and the small business have to think about safety in ways they would have never done pre-COVID,” he said. “And when you think about a lot of the data that came out of the study, it re-emphasizes the reality that the consumer and whether they feel safe [is] at the top of every merchant’s list now.”

“For those that are struggling to deploy that, I think they’re going to see difficulty in maintaining some of those consumers,” Phalen added, “because what we also saw in the study is that many [consumers] are willing to pivot to a [payments] infrastructure that they feel more safe in.”

The New Normal

Phalen said small merchants must pay attention to where customers have already headed in pursuit of safety. For instance, Visa’s survey found that 78 percent have adapted how they pay. Some 49 percent say they shop online when they can, while 48 percent are favoring contactless payments and 46 percent say they’ve cut down on cash use.

Customers are also far less resistant to trying something new than they’ve historically been, with 70 percent recently using a new shopping or payment method for the first time. That includes using tap-to-pay for in-store purchases (which 26 percent have done), shopping for groceries or household items online (34 percent), picking up restaurant carry-out curbside (28 percent) and buying online and picking up in store (25 percent).

“As a small business, you have to adapt and pivot your style to how that consumer is thinking about safety and how they want to interact, whether it’s ordering online and having it delivered or taking away or curbside — [or] even just thinking about wearing masks,” Phalen said.

He added that small shopkeepers had to figure out almost overnight how to move their businesses online and digitize even their physical operations so they could keep the customer relationships they already had.

“It’s an absolutely huge shift for so many small businesses to have made so quickly,” Phalen said.

SMBs Still Need Help

But unsurprisingly, Visa’s survey also found that SMBs owners feel like they need more support. For example, Phalen said they need support at the community level in the form of relaxed regulations to turn streets into outdoor cafes. They also need federal government support in the form of funds to keep their doors open.

And of course, they also need customers’ support. Just 9 percent of consumers told Visa that they shop exclusively at locally owned businesses versus 15 percent who shop exclusively at larger retailers. (Most consumers do a mix of both.)

“Historically, maybe there is a perception that it is easier to go to the big box versus the small business,” Phalen said. “But I think in today’s environment, if that small business can connect through multiple channels versus the physical-only channel, it can stay relevant and connected. And we’re glad to see more digital advertising and using social media to drive their agendas.”

What Comes Next

Despite their overall optimism about the future, SMB owners surveyed by Visa said they believe that the difficulties they’re facing won’t be over anytime soon.

Globally, SMB owners estimate at least six to 10 more challenging months before their businesses are back to fully operational. Their biggest concerns in the meantime are revenue declines (52 percent), attracting new customers (46 percent) and having to reduce wages or salaries (22 percent).

Phalen said that’s why Visa is continuing efforts worldwide to help boost SMBs’ profiles through programs like She’s Next.

“We’ve got to put that umbrella of advocacy across small businesses because they are so critically important,” he said. “Unless they remain healthy and grow, most economies are going to struggle because more than 60 percent of the people who are working are typically working for small businesses.”

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