Banks are losing influence in the U.S. small business payments market. Fintech companies are rapidly securing customer touchpoints as they integrate payment functions directly into accounting and sales-management software.

American Banker reported on Oct. 28 that U.S. small businesses are making wide use of fintech and non-bank payment platforms in both consumer payments and business-to-business transactions, rather than traditional bank services. The survey was conducted in May to June among 501 U.S. small businesses. It classified firms by headcount into micro businesses with 1 to 9 employees, small businesses with 10 to 99, and mid-sized businesses with 100 to 999.

The survey found 95 percent of respondents said they were generally satisfied with their current payment methods. High fees, complex system implementation procedures and lost sales from payment failures were cited as major inconveniences.

For consumer payments, adoption of PayPal and Venmo was highest at 88 percent. Mobile wallets such as Apple Pay and Google Pay stood at 58 percent. Among payment processing platforms, Square led at 49 percent, well ahead of Stripe at 18 percent. Shopify Payments was at 22 percent, and buy now, pay later stood at 19 percent.

Fintech use also stood out in business-to-business payments. Micro businesses tended to use PayPal, Venmo and cash, while larger firms increasingly used credit cards, virtual cards, billing management software and bank transfers together.

Crypto and stablecoin payments, by contrast, remained at an early adoption stage regardless of company size. A lack of understanding of related technology was cited as a key barrier.

Fintech strengths include not only payment speed but also connectivity with work systems. They integrate payments into accounting software, enterprise resource planning systems and point-of-sale systems so businesses can handle transfers, settlement and transaction-history checks in one place.

Banks have deposits and existing payment infrastructure, but an analysis said their competitiveness is weakening in the software where transactions actually take place.

The outlet recommended banks expand real-time sending and receiving functions and use the international financial messaging standard ISO 20022 to link invoices and transaction details to payment information.

Small business funds have not left banks, but an observation said banks' revenue and customer relationships could weaken as the channels customers use to execute payments shift to fintechs.