Closing the $60B SMB banking blind spot
By 2027, ~10% of the $645B SMB transaction‑banking pool will shift to non‑banks.
by Backbase
4 mins read
Introduction
SMBs now expect real-time payments, FX visibility, and embedded trade tools — but most banks still deliver them through fragmented channels. Lower-value cross-border flows make up only ~10% of volume but nearly one-third of global payment revenues, and 35–50% of SMBs already use non-bank providers. And by 2027, nearly $60B in SMB transaction-banking revenues could shift to non-banks and vertical platforms. Without unified platforms, the revenue leakage will accelerate, along with loss of relationships and pricing power.
Banks that collapse silos and deliver one seamless SMB payment and trade experience can turn this shift into a growth advantage.
The untapped opportunity
Small and medium‑sized businesses power economies — ~90% of firms and >50% of employment worldwide — yet their banking experiences still lag. When SMBs can’t get fast, transparent payments or simple access to trade finance, they don’t wait. They switch to modern alternatives embedded in the software they already use.
At the same time, lower‑value cross‑border flows — a sweet spot for SMBs — punch above their weight: ~10% of volume but nearly one‑third of revenue. And 35–50% of small businesses already use non‑bank providers for these payments. That’s revenue (and relationships) moving off‑bank.
Meanwhile, McKinsey’s 2025 Global Payments Report estimates that small business cross-border payments and adjacent services will continue to grow at 6–8% annually, outpacing consumer segments.
But much of that growth isn’t flowing through traditional banking channels.
The risk: revenue leakage to platforms
Bain & Company projects that by 2027 the wholesale payments pool will be ~$645B, and roughly 10% of SMB transaction‑banking revenues will be captured by software providers, fintechs, and the banks that enable them. In other words: if banks keep SMB payments, FX, and trade in separate portals, platforms will happily unify the journey for them.
Meanwhile, banks are racing to modernize. KPMG’s Payments Modernisation survey finds 93% of financial institutions have a program underway or planned—yet many still lack unified, API‑first platforms to deliver real‑time, transparent services at scale.
Speed expectations are also resetting. SWIFT reports ~90% of cross‑border payments on its network reach the destination bank within an hour, moving the bar for end‑to‑end transparency and predictable SLAs.
The cost of fragmentation
Fragmentation doesn’t just drain IT budgets, it shows up as friction in the customer journey, and that friction is where revenue escapes.
Add to that the $2.5 trillion global trade finance gap and the fact that up to 50% of SMBs already rely on non-bank providers for international payments, and the direction is clear: revenue is moving toward whoever solves speed, simplicity, and integration best.
McKinsey notes that better digital experience, faster onboarding, and transparency are now primary drivers of SMB provider churn. Another study shows that 23% of SMBs leave their bank due to poor online service and functionality — an avoidable loss when fintechs and platforms offer unified, workflow-native solutions.
The paradox of SMB banking hasn’t changed: the segment is profitable when delivered at scale, but legacy operating models can’t scale without inflating cost‑to‑serve, representing a structural disadvantage at a time when SMBs expect more and switch faster.
From defense to growth
Progressive banks are starting to flip the narrative. Instead of treating SMB servicing as a cost problem, they’re repositioning it as a growth engine by collapsing silos and embedding value-added services into digital channels.
That means:
One unified flow for domestic and cross-border payments
Real-time FX pricing and status tracking
Digital trade finance initiation, not paper-based workflows
Entitlements and approvals mapped to real SMB structures
Embedded cash flow insights and liquidity tools
As Pleiter notes:
In many banks, the app is still just a servicing app — balances, history, maybe a money transfer. That's the cost of service, not growth. The step up is turning that daily traffic into growth orchestration.
Jouk Pleiter
CEO at Backbase
When platforms own the user experience, traditional banks lose not just transactions — they lose relationships, data, and pricing power.
The $60B shift Bain projects is already materializing in markets where SMBs get faster onboarding, unified payments control, and built-in trade support from vertical SaaS platforms and fintechs.
The Backbase approach
Backbase helps business banks win back SMB payments and trade with a unified engagement banking platform designed to simplify payments, FX, and trade — without a core rip‑and‑replace.
What banks can deliver on Backbase:
Streamlined payment initiation & orchestration across domestic and cross‑border flows, with in‑app approvals and batch workflows.
Embedded FX with integrated pricing and settlement tracking, plus multi‑currency accounts.
Digital trade finance initiation (LCs, guarantees, escrow, receivables financing) within the same SMB workspace.
AI‑driven payment suggestions and liquidity optimization to help owners pay smarter.
Real‑time cash‑flow forecasting & reporting that turns information into action.
The result: lower operating cost, higher wallet share, and the ability to compete head-on with fintechs and embedded finance players.
Ready to see how? Book a strategy call to talk about how Backbase can help you win the SMB market.
