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By Tatiana Walk-Morris
Source: www.paymentsdive.com, March 2022
Dive Brief:
- According to a survey of 563 small business owners by American Express and its Kabbage subsidiary, 90% of businesses haven’t had to slow down, limit or halt their operations due to the omicron variant of COVID-19.
- Survey respondents said their average monthly revenues rose 77% during the six months prior, rising to $84,935 in February 2022 from $47,900 in July 2021. During that same timeframe, their average monthly profits saw a 39% increase, according to the survey results, which were released Wednesday.
- In adjusting for inflation, on average, respondents raised their prices by 21% across sectors, citing rising costs from their vendors (54%) and raw materials (45%). Nearly two-thirds (65%) of small businesses said they’ll keep their inflation-adjusted pricing for the next six months, per the survey.
Dive Insight:
Although small businesses seem to have weathered the worst of the coronavirus pandemic, American Express’ findings indicate business owners are bracing for the aftermath of the crisis.
More than half of survey respondents (53%) said they anticipate supply chain trouble affecting their businesses for the next three months to a year. Meanwhile, less than one-fifth (18%) of small businesses plan to raise their prices more in response to inflation.
“Small businesses are preparing for a new type of market. One that’s not driven by the direct impact of COVID-19 – but rather, one determined by the economic aftermath of the pandemic,” said Kathryn Petralia, co-founder of Kabbage, per the release. “Economic indicators like inflation will require adjustments, but the new data illustrates how small businesses are making changes and adapting.”
As businesses adjust, research suggests they seek faster payments and are relying on digital payments for future growth.
According to a Federal Reserve survey released last year, about three-fourths of U.S. businesses anticipate using faster payments, but more than half of micro-businesses expect to adopt faster payments soon. A Visa survey released in January found that roughly 75% of small businesses think accepting digital payments is critical to their growth this year.
With businesses seeking faster payments and bracing themselves for economic shifts, payments providers have been releasing payments tools and acquiring payments companies to strengthen their current features. The Afterpay purchase will make Square (now Block) more appealing to small business owners looking to offer a buy now-pay later option to customers. Meanwhile, Mastercard partnered with Flowcast and Highnote to issue a credit card for small and mid-sized businesses.
Before and after the American Express acquisition of Kabbage in August 2020, the two have targeted small businesses with new products. In February 2020, Kabbage introduced a custom loan program tailored to small businesses, allowing them to get loans between three or 45 days. Last June, American Express and Kabbage introduced a no-fee checking account for small businesses that included a 1.1% annual percentage yield (APY) for balances $100,000 or less.
– Tatiana Walk-Morris
