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Small business

Closing the gap: why AI is reshaping what PayFacs can do for SMEs


August 2026

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For decades, the tools that helped big companies get ahead – sophisticated forecasting, real-time fraud detection, automated reconciliation, data-driven credit decisions – have effectively been locked away for smaller businesses.

Cost, complexity and specialist knowledge left small and medium enterprises (SMEs) managing their finances with a fraction of the resources available to larger competitors. But AI is dismantling that divide, and SMEs are embracing it: according to a study by Javelin Research, six in ten (60%) SMEs are using AI for business purposes, with the most common use cases including customer service (51%), data analysis (49%), and marketing (47%).[1]

With the next wave of innovation, including in agentic AI, this gap will close even further, and for payment facilitators (PayFacs) and other enablers, this shift is more than something happening in the background. It's an opportunity to reduce payments complexity for the SMEs they serve and deepen the role they play in those businesses' day-to-day operations.

Powering smarter payment orchestration

By embedding AI directly into existing workflows – such as banking apps – PayFacs can transform manual, fragmented processes into automated, intelligent experiences.

This shift is already underway among some PayFacs. “AI has the potential to fundamentally change what's possible for small businesses. The biggest opportunity lies in taking the data and capabilities already available to them and turning those into simple, actionable support, helping business owners understand what's happening, make better decisions, and spend less time on administration,” says John O’Bierne, CEO at Square. “We're exploring how AI can make that experience much more intuitive. Managerbot is one example: it brings together insights from across a seller's business and allows them to interact with that information conversationally, so they can get answers and take action without needing to become an expert in the underlying tools or data. Ultimately, the value of AI for SMEs will be in reducing complexity and giving owners more time to focus on running and growing their business."

Intelligent payment routing, for example, uses real-time transaction data to send payments through the most efficient channels and cut costs. Automated reconciliation, where machine learning instantly matches incoming payments with outstanding invoices, is another game changer.

With recent research showing more than a third of senior payment professionals believe investing in AI-powered payment orchestration is essential to staying competitive, the opportunity is something that forward-looking PayFacs are unlikely to ignore.[2]

“AI supports the entire payments value chain, across AP and AR flows from end to end,” adds Thomas. “If a PayFac can apply AI to measure inflows more accurately, and whether a payment has been applied yet, that saves a lot of the AR team’s time. It’s a real differentiator and something that I think will spiral over the next 10 years.”

Unlocking access to credit

The same data advantage that makes smarter orchestration possible is also reshaping another long-standing SME pain point: access to finance. With SMEs continuing to struggle with finding the right financing solutions, AI can also help to open up access to credit by replacing traditional, rigid underwriting methods with faster, more inclusive, and more data-driven models.

“PayFacs can assess how much that SME is expected to bring in from receivables payments versus upcoming payroll and supplier costs to better gauge a forecasted cash flow gap,” explains Thomas. “The power of Gen AI is that it can identify where there are opportunities to cover funding gaps or to smooth out seasonality issues, and then push out the right solutions, whether that’s tailoring an existing line of credit or suggesting an appropriate new loan provider.”

With a study by Salesforce showing 91% of SMEs say using AI boosts their revenue[3], the future for PayFacs involves moving from simply processing payments to providing embedded, intelligent, and AI-augmented financial tools that enhance the overall business workflow of those they serve.

This is the thinking behind Mastercard's Virtual C-Suite, a new agentic experience designed to help small businesses operate with executive-level insight and decisioning. Each agent acts as a digital executive, supporting key responsibilities ranging from finance and fraud prevention, through to marketing — giving business owners deeper visibility into their operations and the tools to act on it.

“Asia Pacific is home to some of the world's most dynamic and diverse SMEs, and they're navigating complexity at a pace unlike anywhere else,” says Anouska Ladds, Executive Vice President, Commercial and New Payment Flows Asia Pacific, Mastercard. “By working with Mastercard, PayFacs across the region can deliver faster onboarding, enhanced fraud protection, and the next generation of AI-led, embedded financial services that can improve SME retention while helping increase revenue per merchant.”  

For PayFacs, initiatives like this point to where the category is heading. The role is no longer just to move money reliably - the opportunity now is to become the intelligent layer that sits between an SME and the complexity of running a modern business: routing payments, reconciling accounts, flagging cash flow gaps, and surfacing the right financing at the right moment.

PayFacs that get there first won't just process more transactions, they will become integral, long-term partners to their SME customers.

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