If the financial services industry intends to make headway in helping small- and mid-size (SMB) business owners stem their dependency on paper checks, it will require cross-industry collaboration and data sharing.
That was a key takeaway from the recent Commercial Payments International (CPI) webinar, Reducing Supply-chain Inefficiencies Through Electronic Payment Solutions, which gave executives from BillGO and Deluxe an opportunity to discuss their collaborative efforts to digitize payments to SMBs.
“Until we collectively — as an industry — find ways to make it easier for small businesses to adopt and create a relationship digitally … I think we’ll still be seeing a lot of checks,” said Michael Reed, SVP with Deluxe Payments. “A lot of small businesses get very comfortable with the way they do things and — for right now — the check is fairly predictable and convenient.”
Cindy O’Neill, President of BillGO’s Biller Solutions, agreed.
“Checks are the default here,” she said. “Consumers and businesses are paying by check. It’s just easier. And I don’t think as an industry we’ve focused on enabling the supplier side [to receive] electronic payments.”
Read Cindy O’Neill’s insights on the Future of Virtual Cards.
Both Reed and O’Neill were featured guests in the webinar, which examined why so many SMBs are left out of many mainstream electronic payment networks. In O’Neill’s view, this absence reinforces the reliance on paper checks and manual processes.
“A friend of mine is a small business owner who wants to pay by card,” O’Neill told attendees, “but often they don’t have the option or the ability to pay by card because the supplier does not accept a card or an electronic payment, so [the small business owner] has to send out the payment by check.”
The Path to Electronification
Hugh Gallagher, director with Edgar, Dunn and Company, served as moderator and asked if technology was the answer.
“To the extent we can use artificial intelligence and networks to identify … who a particular payer or payee is and how they might prefer to send a payment or receive a payment, then we can [build relationships] behind the scenes at a cost base that makes sense,” said Reed. “We can use AI and [payment] waterfalls to determine who someone is and how they might like to get paid or pay. I think that’s how technology can help advance this.”
Not only could cutting-edge technology better identify payment preferences, O’Neill added, but it could also deliver a wider array of payment choices to small business owners enabling them better manage their APs and ARs.
“Sixty-five percent of small businesses still use Excel spreadsheets and checks to pay their employees.”
“Often … we’re forcing a payment [method] on them that they would not choose to take,” she said. The result: many SMBs and suppliers experience what she called “portal fatigue” — the exasperation that follows logging in to a multitude of different platforms to manage invoices, make payments, complete payrolls, confirm identifications and complete other routine tasks. Portal fatigue, she said, forces many entrepreneurs to simply tap out and give in.
“After a while,” she said, “it’s just easier to say ‘send me a check.’”
But it doesn’t have to be this way, said Reed. Introducing a consolidated resource for billers and suppliers would empower them to manage all their payment activity through a single portal.
“The interplay between deliverables and receivables has really become almost paramount, particularly for a small business,” he said. “Sixty-five percent of small businesses still use Excel spreadsheets and checks to pay their employees. If they are going to pay their employees with checks, they are probably fairly confident in that process [when] making a payment.”
The solution, he said, is to “look at both sides of the coin and figure out how we help customers solve one of these problems they have — either paying an employee or getting paid by a supplier — and then use those platforms and tools to bring the other side of the equation into that application.”
BillGO, Deluxe and a Network of Networks
To that end, O’Neill and Reed discussed collaborative initiatives BillGO and Deluxe are exploring that will enable the two organizations to work together in creating an environment that would combine AP and AR functions in a single platform, making it easier and more efficient for SMBs to pay, get paid and reconcile payments.
“I spoke at a CPI event last year where we are focused on the accounts payable side,” O’Neill said. “Now we’re seeing more focus on the accounts receivable side. But both sides are really important to make the exchange of data. And once you do that, you open up the door for real-time payments and other faster payment methods.”
“A network-of-networks concept isn’t new. We’re using that same concept the banks used years ago for the consumer-side, but we’re now starting to use that for the small business side.”
Opening that door, Reed said, is just the beginning.
“The more we can know and understand the pay and get-paid preferences of our customers, the better we’ll be at building networks and platform services that will enable a large enterprise to access that network to get a payment to a small business or for small businesses directly,” he said.
“A network-of-networks concept isn’t new,” said O’Neill. “We’re using that same concept the banks used years ago for the consumer-side, but we’re now starting to use that for the small business side for business payments.”
By employing a network-of-networks model, she said, BillGO can more efficiently speed payments. For example, if a payment comes into BillGO and it can’t be processed through BillGO’s payment waterfall, they can send it to Deluxe to be processed through its network. Meanwhile, she said, Deluxe can use BillGO’s network in a similar manner if needed.
Either way, small business owners benefit: by combining two of the industry’s most extensive biller networks, payments can be processed faster, cheaper and more efficiently.
“And that’s just two different networks,” O’Neill added. “There are other networks out there. And that’s the value of working together as an industry. “
Next Steps:
Want to know what your customers want in bill payment technology? Download BillGO’s latest eBook, The Battle for Bill Pay, which includes two years of data detailing consumer patterns and preferences.
