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The Impact of Artificial Intelligence on Small- and Medium-Sized Businesses

The findings of Payoneer’s, a fintech company, latest research found that small- and medium-sized businesses (SMBs) are recognizing the need to leverage new technologies, such as artificial intelligence (AI), to be competitive in the global market. In today’s fast-paced global economy, SMBs are realizing the importance of staying technologically relevant to remain competitive.

In its second annual SMB Ambitions Barometer, it surveyed nearly 3,800 SMBs across 15 countries in early 2024 to gauge the factors critical to their growth. This comprehensive study highlights the growing recognition among SMBs of the necessity to embrace AI technologies to drive growth and succeed in the global marketplace.

“We are seeing unprecedented global growth opportunities for the world’s entrepreneurs and small businesses, who are leading a new wave of globalization,” said John Caplan, CEO of Payoneer. The changing landscape of global trade and commerce is providing SMBs with exciting growth prospects, prompting them to explore innovative solutions such as AI to capitalize on these opportunities.

Caplan also noted that SMBs are facing an ever-growing number of macro challenges and are preparing to drive efficiencies by adopting AI technologies, partnering with more vendors, and breaking into new trade corridors. The adoption of AI and the expansion of vendor networks are crucial steps that SMBs are taking to overcome challenges and remain competitive in a rapidly evolving international market.

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The research saw that the respondents, 46% of which are serving international markets (up by 4 points from last year), are increasingly leveraging AI and diversifying their vendor networks to support growth ambitions and navigate global challenges. The integration of AI and the diversification of vendor networks are key strategies that SMBs are implementing to drive growth, enhance competitiveness, and address the complexities of international trade.

AI Adoption and Expansion Into New Markets

A significant portion of SMBs are integrating AI into various operations. Specifically, 62% are using or piloting AI for customer service, 64% for merchandising, 62% for inventory management, 62% for content creation, 64% for competition analysis, and 63% for supply chain management. The widespread adoption of AI across different business functions underscores the importance of technological innovation in driving operational efficiency and strategic decision-making.

To boost their supply chains, SMBs now collaborate with an average of 29 vendors, up from 21 two years ago. This includes partnerships with law firms and marketing agencies. In the Philippines, 63% of SMBs believe a diverse vendor network shields them from global disruptions, a sentiment shared by SMBs in other regions. The expansion of vendor networks and strategic partnerships are instrumental in enhancing supply chain resilience and mitigating risks associated with global disruptions.

SMBs are increasingly looking to expand into Europe and Central Asia, with 40% prioritizing these regions, up from 33% in 2023. The primary drivers for this expansion are new business opportunities (45%), meeting customer demand (38%), and regional proximity. This shift is part of a larger trend toward trade diversification, which is driven by ongoing trade tensions between China and North America, complicating traditional business routes. The exploration of new markets and regions is essential for SMBs seeking growth opportunities and market expansion.

Local Economy and Market Challenges

Philippine SMBs, while expanding globally, are also focusing on hiring local talent, with 86% prioritizing it. This approach not only supports globalization but also strengthens local economies. Also, 93% of SMBs in the country are optimistic about increasing their revenue in the next 12 months, and 90% expect improvements in the local economy. The emphasis on local talent recruitment and economic growth reflects SMBs’ commitment to supporting local communities and fostering sustainable development.

For Philippine SMBs, brand awareness and marketing are cited by 38% as top challenges in new markets. Despite this, 46% feel that digital transformation has eased the barriers to global market entry. However, more than 40% of SMBs overall feel unprepared for global disruptions such as geopolitical conflicts, product boycotts, and trade wars, up from 36% in 2023. Cybersecurity threats are also a major concern. The growing awareness of digital threats underscores the importance of enhancing cybersecurity measures and adopting proactive strategies to safeguard business operations.

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