Technology advancements are continuously reshaping not only the way we work, but fundamentally how we operate across nearly every industry. With new innovations unlocked almost daily — each with a unique promise to transform how we do business — how do busy small businesses and their advisors separate the fad from the fancy?
We’ve been doing a lot of thinking about this recently, and it’s a priority for us this year to help demystify some of these trends and shine a light on those which could be key to making business more beautiful in the next decade. Here are the five that we think small businesses should have their eye on in 2023 so they can prepare, lead and advance their businesses for tomorrow.
1. Responsible data use
By 2025, individuals and companies around the world will produce an estimated 463 exabytes of data each day. Almost every digital interaction produces data: sending an email, downloading an invoice, searching for local suppliers, posting a status update — even turning on your connected car.
That data creates opportunities, like deep insights that lead to better products, but also responsibilities around the management of data sharing, collection, protection and privacy. While some small businesses and their advisors have been quick to adopt ways to use data to their advantage, many don’t have the time, resources or networks to understand all the pieces of the puzzle.
There are increasing risks for those that misuse customer data, even unintentionally, so understanding your compliance obligations and implementing responsible practices around data collection and protection is key. Following the insights that arise from Xero’s Responsible Data Use Council meetings is a good place to start (you can even use this quiz to identify your data personality). Or you can use tools like e-invoicing to ease this burden if it’s available in your region.
2. Blockchain for business
Blockchains or decentralised ledgers are a fast-evolving technology that will continue to shift and change as more businesses and governments look at the role decentralisation plays in how we live and work.
While millions of people around the world have used, invested or traded cryptocurrency, blockchain technology is capable of much more than its critical role in enabling these transactions. For small businesses, though, it’s still tricky to see what these capabilities actually look like. And while not all of the problems small businesses face can be solved with technology, the ones dominated by slow, paper-based and often cloudy processes are rife for rethinking.
Take smart contracts, for example. These are essentially lines of code written into a blockchain that automate contractual provisions (like automatic payments) when certain conditions are met. This can drastically reduce the time taken to execute payments for delivered supplies, and also reduce the risk of nonpayment for delivery of goods or services, because payment is automatically triggered as soon as the conditions of the contract are met.
This type of innovation in supply chains also means easier verification of the provenance of goods and services. For example, do you want to know if that coffee you’re drinking is truly fair-trade? How about being able to trace it back to the very beans that were grown to make it? This is the kind of innovation that is made possible when transactions are executed through smart contracts, and written to an open and reviewable ledger like a public blockchain.
An entirely different angle is the concept of self-sovereign identity management, which leverages the same technology to allow aspects of identity to be shared without having to share the actual data itself. So, you could share proof of the claim that you are over 18 without needing to share anything individually identifiable, like your birth date.
By validating these identity claims and assets on a blockchain, businesses could remove some of the compliance costs associated with Know Your Customer compliance, as well as make inroads in validating the recipients of payments to help avoid fraud. Ultimately, understanding how decentralised ledgers like the blockchain could benefit your business means you’ll be in a much better position to adopt them when the time is right.
3. The next generation of AI
Artificial intelligence (AI) has long been the domain of science-fiction, but with each passing year, an increasing number of real-world use cases are showing just how universal and embedded it may become to how consumers and small businesses operate in the future.
AI is already prevalent in our lives in ways we take for granted or don’t often think about: from Google Maps recommending nearby places to eat, to reordering that item you need from Amazon, to finding the next thing to watch on Netflix. Then there are the newer tools like Stable Diffusion and ChatGPT which serve as a timely example of the potential for different AI and machine learning models to achieve things previously only imagined — such as writing essays and letters, creating new music and images from text prompts, and effectively mimicking human conversation online.
Spending on AI systems (including hardware, software, and services) is set to rise in Asia Pacific from $20.6 billion in 2022 to $46.6 billion in 2026, according to IDC’s latest Worldwide Artificial Intelligence Spending Guide. However, misconceptions around AI may be holding many small businesses back from taking full advantage of these capabilities as they hit the mainstream. Namely, a lack of understanding of its potential and how to practically dedicate time to manage it alongside everything else. Other common misconceptions are around what is best practice for how businesses ethically collate, use, and store data.
For small businesses, the opportunity lies in what AI might tell us about the future, providing foresight of what’s to come and removing manual labour to help save time.
That could be predicting cash flow based on both internal business and external macroeconomic data points, automating entire parts of back-office business processes, or helping businesses understand the best times to contact customers and suppliers based on their previous behaviour. AI represents an opportunity to augment small businesses with some of the capabilities only afforded to much larger operations, and it’s an exciting prospect for those with aspirations of growth and scale.
4. Navigating the metaverse
The ‘metaverse’ was an undeniable tech buzzword in 2022, but despite the growing interest, debate continues over what, exactly, the metaverse is and how it will work.
The concept involves a combination of virtual and augmented reality technology (sometimes collectively referred to as ‘extended reality’ or ‘XR’) to allow for a more interconnected, interoperable and immersive experience that blends both physical and digital realms. Like cloud computing and ecommerce, the metaverse has the potential to change how small businesses connect and sell to their customers: whether it’s entirely digital art and services, or digital representations of physical products.
Being able to let your customers see how something would look on them, or how it would look in their home, or their car is already possible — and as physical tools like haptic gloves evolve and hit the mainstream, customers could even choose the experience of how something feels too.
The commercial landscape will also pose some interesting challenges to advising and accounting for business transactions that will have different attributes to those commonplace today. Just as the global pandemic led to video conferencing becoming far more widespread, the technologies that underpin the metaverse are likely to drive significant evolution in how we interact, advise, coach and work with each other on a daily basis.
It may be a few years before we see any truly standardised approaches to the metaverse, but we will see more metaverse-enabling features appearing in existing products and services sooner than that. Just take common games, or popular app crazes like Pokemon Go. Even ChatGPT, which only launched at the end of 2022.
Using current hybrid and media experiences that utilise this tech is a good place for businesses to explore what’s possible. On the advisor side, it’s worthwhile beginning to understand this technology so that you’re well placed to advise clients looking to be at the cutting edge.
5. Embedded finance
Think about the last time you bought something from your phone in only a couple of clicks — this may very well have been due to the use of embedded finance. We’ve seen a radical transformation in financial services over the past decade, largely driven by demand for fast, simple access to financial products inside the platforms and tools you already use, with access to funds and functionality instantly and digitally being a main driver.
In short, things are made easier from exactly where you are by streamlining financial solutions into everyday processes. Technologies like embedded finance and open banking, which are at differing stages of maturity across the world, will continue to gain momentum and strengthen opportunities for small businesses.
The integration of financial services with non-financial business infrastructures is rapidly gaining ground. For example, Apple has added buy-now, pay-later functionality into the iPhone, Amazon has offered lending to sellers, and Xero has added a ‘pay now’ button to invoices with Stripe and GoCardless.
Similarly, open banking standards, embedded finance and open APIs on small business platforms make it possible to gather rich and reliable information on a business’ health and cash flow, removing some of the long-standing barriers that have separated small businesses from willing lenders.
By integrating accounting data, lenders can get direct insight into business performance and management in real-time, giving them greater confidence to make better, faster and more accurate decisions on risk and creditworthiness, making lending more accessible to the right businesses.
Future in focus
For small businesses and their advisors, it’s important to spend some time focusing on what these technologies could mean today, and how they might have an impact on their businesses in the future. For advisors, as with anything, the focus should be on how best to bring clients on that journey with an understanding of both the risks and rewards.
There’s no doubt that it can be hard to separate the hype from reality when it comes to new technology. To capitalise on the transformative potential of these technology trends, more awareness and educational resources are needed to help small businesses and their advisors understand what the current capabilities are, and how they could be applied to their industry in the near future.
We’re thrilled to be launching Future Focus, a series dedicated to removing the mystery, hype — and maybe even fear — from some of those futuristic technologies you’ve always wondered about, but never knew how (or who) to ask. Our aim is to help you get your head around them now so the path to adoption later becomes clearer.