Author: Alena Sarri, Managing Director, Aquatots Swim School
Small businesses make up 90% of the global economy. Yet nearly half of them still don’t have a digital strategy. That gap between the businesses going digital and the ones stuck on paper represents one of the biggest opportunities in fintech right now.
The global digital transformation market sits at roughly $1.1 to $1.7 trillion in 2025. Small businesses are the fastest-growing segment within it. However, the speed of adoption varies wildly depending on where a business operates, how many employees it has, and whether it can access the right tools at the right price.
COVID Changed Everything, But Not Equally
The pandemic compressed years of digital adoption into weeks. McKinsey found that companies accelerated digitisation of customer interactions by three to four years in just a few months. Remote working went from “maybe someday” to “live by Monday” at a speed nobody predicted.
Around 70% of small businesses either adopted digital tools or ramped up their existing digital efforts during COVID. Contactless payment acceptance among US small businesses jumped from 67% to 92% between 2019 and 2021. Global e-commerce’s share of retail climbed from 14% to 17% in the same period.
The survival data tells a clear story. Firms that made it through the pandemic were significantly more likely to have digital tools in place. Importantly, this effect was even stronger for smaller firms than for larger ones.
But here’s the catch. The acceleration hit unevenly. Firms in East Asia quadrupled their digital investments, while adoption in many developing regions stayed below 30%. The digital divide didn’t shrink during COVID. It grew wider.
The Toolkit Is Powerful But Fragmented
Small business owners now have access to tools that would have cost six figures a decade ago. Stripe processed $1.4 trillion in payments in 2024. QuickBooks holds 62% of the accounting software market. Shopify powers 4.8 million active merchants, with 90% of them being small businesses.
The problem isn’t a lack of tools. It’s connecting them. The average small business juggles four to six platforms, and owners spend 20 to 25 hours per week just reconciling data between them. Connecting Shopify, Square, and QuickBooks often requires expensive third-party integrations or custom work costing $10,000 to $50,000.
This “integration tax” is a hidden cost that platform vendors have little reason to fix. Meanwhile, 65% of small businesses say they would switch software providers that don’t offer embedded financial services like payments, lending, and insurance built directly into the tools they already use.
Embedded finance is the clearest answer to this problem. The market hit $156 billion in 2025 and is growing at nearly 24% annually. When financial services live inside operational software rather than in separate apps, the friction disappears.
Some Countries Are Getting It Right
The best evidence for what works comes from Singapore. Their SMEs Go Digital programme achieved 95.1% digital adoption among small businesses in 2024, and AI adoption tripled in a single year. The programme succeeds because it bundles advisory services, pre-approved solution grants, and industry-specific digital plans across 22 sectors. It’s backed by SGD 500 million in government investment.
Brazil took a different approach by building public infrastructure. Pix, the country’s instant payment system, now has 160 million users processing up to 290 million transactions daily. It costs nothing for merchants to use. That single decision removed the biggest barrier to digital payments for millions of micro businesses.
In Africa, mobile money has leapfrogged traditional banking entirely. The continent hit 1.1 billion registered mobile money accounts in 2024, representing 53% of the global total. Kenya’s financial inclusion rate jumped from 26% to 84% largely because of M-Pesa.
India’s UPI processed over 20 billion transactions in a single month in late 2025. These government-built payment rails do what no private platform can: eliminate cost barriers at scale.
What This Means for Fintech
Three trends will define the next five years for small business digital transformation.
First, AI is moving fast but unevenly. About 40 to 55% of US small businesses now use AI in some form, but 82% of businesses with fewer than five employees believe it doesn’t apply to them. That’s a product design gap, not a technology limitation.
Second, embedded finance will reshape how small businesses interact with all their software. When payments, lending, and cash management live natively inside booking systems, invoicing tools, and POS platforms, the 20-hour weekly data reconciliation problem goes away.
Third, the winners will be platforms that solve integration. All-in-one ecosystems like Square, Shopify, and Zoho are growing precisely because small business owners don’t want to be IT administrators. They want to run their businesses.
The $5.7 trillion MSME finance gap across developing markets remains the largest untapped opportunity in fintech. Closing it requires more than better apps. It demands the kind of infrastructure thinking that made Pix, UPI, and M-Pesa transformative.