What’s Up With SMEs: Payments Fraud, Mobile Lending, And Inflation

When operating a small business, “up” is typically a positive direction. SMEs need profits, sales, and performance all to be on the rise. But up isn’t always good. In the latest PYMNTS Data Digest, we look at the research on what’s “up” with SMEs — like optimism and borrowing levels. But often, stats going up — like inflation, the Federal Interest Rate, and corporate payment fraud levels — threaten the growth of small businesses.

Inflation means U.K. SMEs are experiencing a 3.2 percent increase in business expenses, said Barclays. The bank found that more than half of those small businesses, though, aren’t preparing for inflationary pressures. Its small business cost index, released in conjunction with the Centre for Economics and Business Research, found that the 3.2 percent increase in business costs for SMEs due to inflation is significantly higher than the 1.1 percent increase marked in February 2016. Two-thirds of small businesses said they will be forced to raise prices if inflation also rises again.

Small business optimism in the U.S. New data from Capital One found that half of SMEs surveyed said they are optimistic about current business conditions, up 9 percent from a year ago. Half also said they expect those conditions to improve in the next six months — the highest level since spring 2012, the bank said. But while optimism may be up, plans to hire new staff, boost marketing, or invest in new technology aren’t, with the majority of SMEs saying they have no plans to do any of this in the next six to 12 months.

Mobile SME loan applications. The latest analysis from Biz2Credit found that more small businesses are using a mobile device to apply for a loan, with more than half of those applications (55.8 percent) coming from a mobile device as of September 2016. It’s a more than 15 percent jump from a year earlier, researchers noted, and reflects an increasing demand for mobile-friendly offerings from the world of financial services.

Corporate payments fraud, marking 2016 as the year in which more U.S. corporations were hit with payment fraud than ever before, according to the Association for Financial Professionals (AFP). The AFP’s newest report found 75 percent of companies fell victim to payments fraud in 2016, up from 71 percent in 2015. Reversing the downward trend, check fraud specifically is on the rise, the report found, while 74 percent of businesses also reporting being hit with a business email compromise scam, the instance of which jumped by 10 percent in 2016. The increase in fraud coincides with separate data from EiQ Networks, which found less than 15 percent of IT security professionals at SMEs said they feel confident existing technology deployed at their firms is enough to combat threats like payments fraud.

The Federal Interest Rate. After the U.S. Federal Reserve increased the interest rate by a quarter of a point last month, data from Dun & Bradstreet found that businesses say that hike will impact profitability and restrict hiring. Mid-sized companies in particular, the report found, are especially concerned as profitability declined for the first quarter, and fewer said they were able to qualify for credit in Q1. Still, the report found continuing progress for small businesses, with fewer small businesses operating at a loss in the first quarter compared to a year ago.

Small business borrowing. The latest from Thomson Reuters and PayNet in their Small Business Lending Index for February saw an increase in small business borrowing in the U.S., likely fueled by federal plans for tax cuts that could boost corporate profits. But President Donald Trump’s failed efforts to overhaul the national health care law led to increased uncertainty among small businesses, the report found.