By Melinda Roylett, Managing Director, Lloyds Merchant Services
The way we pay has changed more in the past five years than in the previous fifty. From biometric authentication and digital wallets to AI-powered personalisation and instant settlement, the checkout is no longer just a place where transactions happen; it’s now central to the customer experience. As expectations become more sophisticated, Small and Medium-sized Enterprises (SMEs) reach a crucial point where adapting can unlock new opportunities for growth and enhanced customer engagement.
At Lloyds, we’ve been closely tracking the pace of transformation and the impact on small and medium-sized businesses. The key message from across the ecosystem is clear: disruption is here, and opportunity lies in embracing it.
Shifting expectations, rising pressure
Today’s digital-first consumers expect payment experiences to be fast, frictionless and secure, whether they are buying online, in-store or somewhere in between. But our research shows SMEs are struggling to keep pace. Only 27% feel confident in their omnichannel payment setup, while nearly half haven’t upgraded their systems in the past two years.
This technological gap is widening at a time when customers are increasingly turning to digital wallets, subscription models and wearable tech. In 2024 alone, digital wallets accounted for over a third of global consumer spending, and by 2030, their usage is projected to exceed $28 trillion (approximately £20.7 trillion).
Embedded finance is also gaining traction, with more than two-thirds of digital consumers now relying on it for credit, insurance and investment products integrated directly into their purchasing journey.
SMEs must reimagine their payment experiences to reflect these new norms, but doing so can be daunting.
The legacy challenge
Many SMEs are held back by outdated infrastructure. Payment systems designed for a slower, less connected era are no longer fit for purpose. Without real-time processing or modern fraud detection, businesses face delayed settlements, lost sales and weakened customer trust.
Integrating newer technologies often means navigating fragmented vendor ecosystems, complex pricing structures and complex regulatory requirements, leaving many unsure of how to proceed.
The cost conundrum
Cost is a common obstacle. For SMEs operating on lean margins, investing in new payment platforms can feel risky. Ongoing subscription fees, hardware upgrades, staff training and system integration all require careful budgeting. Given today’s economic challenges, many businesses are thoughtfully weighing how to approach transformation to maximise opportunities while managing risks.
However, the cost of standing still is often greater. Customers increasingly abandon purchases when checkout experiences are slow or inconvenient. Businesses unable to offer mobile payment options, flexible fulfilment or alternative credit methods risk losing ground to more agile competitors.
Gaps in skills and support
Access to expertise is another hurdle. While large firms have teams dedicated to fintech strategy, SMEs often rely on generalists juggling multiple roles. This lack of technical capacity can lead to delays, missteps and missed opportunities.
Fortunately, the tide is turning. Many platforms now offer integrated, plug-and-play solutions designed specifically for smaller enterprises. Lloyds Merchant Services, for example, provides cloud-based point-of-sale systems combined with bundled services and guided onboarding, making support more accessible and tailored to the needs of SMEs.
Payments innovation as strategy
The technology now available presents genuine potential to drive efficiency and growth. Real-time payments, for instance, allow businesses to receive funds instantly, supporting healthier cash flow and reducing dependency on credit. Real-time Account-to-Account (A2A) payments in the UK are forecast to grow by 14% annually from 2023 to 2027, reflecting the rising demand for speed and convenience.
Embedded finance, meanwhile, integrates financial services directly into everyday business platforms, making payments, lending, and other tools more accessible within existing workflows. The global embedded finance market is projected to reach $7.2 trillion (approximately £5.3 trillion) by 2030, reflecting its rapidly growing role in business operations.
Virtual cards exemplify embedded finance in action. As digital payment cards are created and managed within these platforms, businesses can control spending, simplify reconciliation, and reduce fraud without physical cards. By embedding virtual cards into their systems, SMEs can streamline transactions and gain greater financial flexibility without disrupting their operations.
Artificial intelligence is also levelling the playing field. Today’s AI tools enable small businesses to make data-informed decisions about inventory, pricing and customer engagement without needing in-house specialists. Combined with Open Banking and blockchain, which improve transparency and integration, the opportunities for SMEs are expanding.
Building better experiences
Payment innovation ultimately benefits customers. The ability to pay on any device, through any channel, with seamless authentication is no longer a novelty, it’s an expectation. And when businesses get it right, the results speak volumes. Conversion increases, trust deepens, and loyalty improves.
At Lloyds Merchant Services, our mission is to help businesses build these experiences. From mobile-friendly checkouts to omnichannel setups and data-led analytics, our solutions are designed to be scalable, secure and strategic.
For businesses seeking funding, our Merchant Cash Advance product links finance to future sales, giving SMEs quick access to cash flow without fixed monthly repayments.
We also offer tailored support across industries, helping businesses turn transaction data into insight and align their payment strategy with customer needs.
The road ahead
The payments landscape will continue to evolve, and businesses must adapt to it accordingly. From wearable tech to embedded finance, the frontier is expanding rapidly. For SMEs willing to adopt new technologies, understand changing customer expectations and invest in flexible systems, the potential is enormous.
Change isn’t coming; it’s already here. With the right mindset, partnerships, and tools, SMEs can turn that change into a lasting competitive advantage.
About the Author
Melinda Roylett was appointed as the Managing Director of Merchant Services at Lloyds Banking Group on 30 January 2023. She brings deep experience in payments and financial technology, combined with a passion for helping small and medium-sized businesses fulfill their growth ambitions. Melinda is responsible for delivering part of the Business & Commercial Banking payments strategy, including developing products and propositions for card acquiring (Cardnet) payment types and enabling customers to do business with ease.
Before joining Lloyds, Melinda worked in financial services companies, including Square and PayPal, as well as serving as Global Head of Small & Medium Businesses at Afterpay. Melinda also has a breadth of strategic leadership experience from her time as General Manager, UK and Ireland, for Uber, and was a Senior Manager in Cards and Payments at Lloyds in 2006.