Nudging EU small businesses towards digital adoption: What role does their mindset play?

This post is part of a series from Mastercard Strive EU program exploring the ways digital solutions can boost the resilience and growth of European small businesses.

What if the most significant barrier to digital adoption among small businesses in the European Union isn’t time or budget constraints but instead their beliefs and mindset about digital solutions? This is one of the questions that we at the Mastercard Strive EU program think about, especially as it relates to the design and delivery of digital solutions for small businesses that our partners are developing.

Across the EU, micro- and small businesses are critical powerhouses — they make up the greatest share of EU enterprises, employ almost one-third of the population, and are performing better than enterprises of other sizes in terms of real value added to the EU economy. Yet these small businesses need support in the transition toward a digital and sustainable future. This is why we launched an Innovation Fund last year to test and scale viable, early-stage solutions that drive the growth and resilience of EU small businesses.

Small business beliefs about technology, and about the digital economy more broadly, play an important role in developing digital solutions. Beliefs are a critical predictor of adoption. They are also valuable for assessing new technologies, such as digital solutions focused on sustainability, cybersecurity, embedded finance, and artificial intelligence, which are being developed by startups like our partners that serve small business customers. By focusing on small business views, startups can better assess their business cases and anticipated returns for their users, in addition to identifying ways to increase small business awareness.

What are we learning about small business beliefs about digital technology?

To better understand some of the particular beliefs small business owners in the EU hold about digital solutions, our partners are engaging with their customers to identify these beliefs and adapt their solutions accordingly. Our partners report that the EU small businesses they engage with tend to exhibit the following beliefs that impact their willingness to try and adopt digital solutions.

• Value of and return on investment (ROI) for digital solutions: Given the many competing demands that small businesses must contend with, our partners find that small businesses’ views on the value and anticipated ROI of digital solutions can be a challenge. This is equally true for our partners developing sustainability or climate action-related solutions — such as Ragna’s AI-powered sustainability advisor for MSEs and tilt’s climate data analytics solution to support low-carbon transitions — where the solution must show a clear ROI alongside the climate benefit for small businesses.
• Complexity and required capacity to adopt solutions: Particularly for our partners developing sustainability-related solutions supported by AI, perceived complexity and the capacity required to adopt these solutions can also be a hindrance. For instance, our partner It Goes Forward, which offers a product return solution for small businesses, found that identifying potential small businesses with which to pilot their solution was often limited by the technical capacity required for integration.
• Relevancy of solution for their business: Our partners developing sustainability-focused solutions, like Ragna and tilt, have found that small businesses don’t perceive the same regulatory pressures or sense of urgency around climate change and action as larger businesses do. Thus, they tend to believe these solutions are less relevant to them and that other motivators are important to address. Further, tilt has observed small businesses express uncertainty around regulatory requirements and how political developments might affect current and future climate policies. This is similar for partners developing cybersecurity solutions for small businesses, such as Lupasafe and Redamp.io, who find that small businesses underestimate the likelihood of cybersecurity breaches and associated costs.
• Supplier or customer preferences: Ragna and tilt have also found that, where supply chain partners expect certification or compliance with ESG-related standards or regulations, sustainability-related solutions are more valued by small businesses. This is also similar to customer preferences, particularly for small businesses that operate in tourism industries where consumers have green preferences and where these businesses are directly impacted by climate change. Sustainability-related solutions are more connected to these businesses and offer a competitive advantage.

Despite these beliefs, our partners also find that small businesses are more likely to test and integrate digital solutions into their daily processes compared to their larger counterparts. As Gaelle Legelard from Ragna explains, “I think there’s a curiosity, and the energy in a small business is very bubbly. They’re always looking for … the things that could help [them] be better [and] get more clients.” Compared to larger businesses, our partners have found that small businesses are more likely to take a risk to test new technologies and more likely to test new ways to engage with their customers. In turn, adapting their solutions to address these small business beliefs is essential.

Shifting small business mindsets and adapting solutions to drive adoption

To better tailor their solutions to small businesses, our partners are adapting their design and delivery to drive greater adoption by:

• Making the business case for small businesses to adopt: Our partners It Goes Forward and Ragna are making clear connections between small business returns and sustainability outcomes by framing their sustainability-focused solutions as an opportunity or an avoided risk. “It’s important to be able to say ‘We have an example business case already calculated’,” explains Carina Johed from Ragna, “By implementing this recommendation you will decrease your CO2 emissions by X percent, and at the same time, lower your cost with Y.” Additionally, Ragna, and It Goes Forward have found the use of peer networks and case studies to be valuable, observing that people get motivated to act when they know that somebody else has been doing it successfully.
• Reducing capacity requirements and complexity for digital adoption: Our partners are also exploring ways to reduce complex adoption processes for small businesses.
• Ragna is finding a balance between the appropriate level of data required to use a solution (which can be onerous) while still being able to offer small businesses valuable tailored and actionable advice from this data.
• tilt requires minimal data input from small businesses to help reduce the burden and delicately balances the number of data points, selection options, or visible information needed to generate relevant results while keeping the tool as simple as possible for small businesses.
• Embedded finance solution Bizcuit offers small businesses access to financial management features from within a financial provider environment (e.g., a bank or payment service provider) they are familiar with. This builds trust with small businesses and removes the burden of dealing with too many apps and digital products.
• It Goes Forward is simplifying its pricing models. Particularly as small businesses may not have the bandwidth to integrate a full solution, offering the use of one feature from a solution can, in turn, help them get used to the solution and shift mindsets towards full adoption in the future.
• Lupasafe is simplifying its cybersecurity training solution by making it easy to include personalized learning pathways focusing on the specific sectors in which small businesses operate, increasing the relevancy in their day-to-day operations.

By understanding EU small business beliefs toward digital technology, our partners can adapt their solutions to increase their value proposition and relevance in the daily processes for small businesses. Together, these efforts are nudging small businesses toward digital adoption and a digital and sustainable future.

We’ll continue to share more progress from our partners, and we encourage you to learn more about how the Mastercard Strive EU program is boosting the resilience and growth of European small businesses.