With 4.3 million new business applications processed in the U.S. in 2020 ― an increase of 23% from the prior year ― and more than 5 million applications estimated to be filed this year, the pandemic is driving a unique operating landscape for small and midsize businesses (SMBs) and an opportunity for financial service providers to deliver automation solutions.

A “COVID class” of businesses has been springing up, and these new businesses are expected to be online, tech-savvy and using cashless, mobile technology, according to a study from marketing agency Cargo.

The study surveyed attitudes, operational changes and financial services needs during the pandemic from nearly 1,400 SMB owners and decision-makers across the U.S. and Canada. It included businesses with two to 99 employees across a range of industries, and from companies in operation less than a year to more than 20 years.

Small businesses “are making improvements … that will help them keep their existing customers, acquire new ones, bring their products and services global and manage teams that could be located virtually anywhere,” the study states. “It is a new age of opportunity for financial service providers.”

Loyalty could be an advantage

When it comes to financial services, “SMBs across the board were uniformly happy” getting all their services from the same vendor, according to the study. “Since the vast majority of SMBs prefer to do all their financial business with the same provider … roll all of your offerings into one integrated ecosystem of financial products and envelop them with a common value proposition,” the study suggests.

In a significant difference, 66% of surveyed SMB owners and decision-makers said they use the same bank for personal and professional needs, but that figure drops to 33% for the segment of “COVID class” SMB owners and decision-makers.

Even so, “whether its 63% or 33%, these figures show a prime opportunity for [financial service providers] to look for new business customers within their existing clients,” the study states. Notably, the smaller the SMB, the stronger the feelings the study uncovered that their financial service provider does not offer tech solutions to meet their banking needs.

The study also finds that SMBs prioritize three areas in which they need assistance from their financial service providers: help with day-to-day issues such as invoices and payments, timely transfers and confirmation, and setting up accounts and services. Automation can play a central role in each of these, Dan Gliatta, founder and chief strategy officer at Greenville, S.C.-based Cargo, told Bank Automation News.

“Automation is absolutely a critical tool for a few reasons, all accelerated by the impact of the pandemic and the seismic shifts in consumer and business behaviors,” said Gliatta. Digitization of payments and operations has spurred the need for automated services, he added.

“Established small businesses were forced into a digital transformation to meet the new demands and workstyles,” Gliatta noted. “And the COVID class, those SMBs born during the pandemic, have digitization in their DNA, since they were built to meet current and future demands.”

The labor shortage, coupled with 40% of SMBs making work-from-anywhere policies permanent, also increased the need for automation. SMBs “know what needs to be done, but without the people to do it, they are leaning on partners such as financial service providers to help automate wherever possible,” he said.

“The two biggest barriers to automation and digitization are one, where to start, and two, what’s out there ― perfect opportunities for financial service providers and banks to start a conversation with SMBs as a business partner versus a transactional seller,” Gliatta said.