B2B Payments

Filtering The Good From The Bad In SME Banking

Industry players have been stepping on their soapboxes to tell the world that traditional banking is broken for the small business segment. But for SEED, a new online SME banking platform, that doesn’t mean banks don’t have a place in helping small businesses manage their cash flow.

SEED was started by Ryan Hildebrand and Brian Merritt, who met at Simple, a consumer-facing banking service. Merritt told PYMNTS that while still at Simple, he saw how challenging it was for businesses to get the same quality and services in their online banking.

“While we were at Simple, we heard small business owners say they wish they could use Simple or something like it to manage their business,” he said. “So we started looking at the marketplace, and we didn’t see anything out there that we, ourselves, would want to help manage our own business. We’ve been frustrated with online banking ourselves.”

Merritt said that traditional banks and even alternative financial services players were offering services that were more “cosmetic” – flashy and attractive, yet not the most useful to small business owners.

But while banks fall short with their SMEs, Merritt and Hildebrand took notice of what banks are best at: things like actually managing funds, regulatory compliance, and providing the infrastructure necessary to conduct transactions. Banks, Merritt told PYMNTS, can partner with SEED (itself not a bank) and take advantage of a new source of customer acquisition.

SEED fills in the gaps that are becoming necessary for a new generation of small business owners, Merritt said.

“More and more business owners are younger, and have high expectations around technology and the user experience,” he explained. “Traditional banks haven’t been able to keep up.”

[bctt tweet=”More business owners are younger, and have high expectations”]

He added that after speaking with hundreds of small business owners, time and time again, similar complaints surfaced: It takes too long to get even the most basic of tasks done. If a business owner wants to open an account, it takes time to physically go to a bank branch, fill out paperwork, and wait for it all to clear. Sending a bill or wire transfer is unnecessarily complicated. And online and mobile tools offered by traditional FIs, he said, are built on legacy infrastructure.

By integrating the tasks banks are best at into a single, open platform, SEED can provide a unified portal for small business owners to manage their finances.

Merritt said that while many of SEED’s features are still in the works, the platform provides more than the traditional account balances and transaction history that a small business owner might be able to access after being onboarded to a consumer online banking platform.

Information like notifications that payroll is coming up, and a feed similar to one you might find on Facebook that outline various business processes, make it easier for SME owners to orientate themselves. As an open platform, other FinServ players can partner with SEED to integrate their own small business banking services in. This allows the platform, said Merritt, to hit on multiple pain points that small businesses endure today when seeking online financial services – from billing and invoicing to accessing working capital. Such a broad offer, he added, means businesses get a well-rounded, holistic view of their business.

“Part of our goal is using data to let users understand where they are at, where they’re going, and what they might need to change,” Merritt explained.

The information managed on the platform can also help SMEs pre-qualify for loans, and allows business owners to wade through the deluge of alternative lending choices to complete a single application on SEED’s online lending marketplace portal. Merritt said that these choices in lines of credit and lending products will expand as the company grows.

Speaking of growth, SEED has already seen its fair share of it. While it hasn’t technically launched yet, the company announced last month that it raised $5 million from venture capitalists, a round led by General Catalyst. That funding, Merritt explained, actually occurred earlier this year after SEED’s graduation from the YCombinator incubator. Since that fundraising, SEED has been building up its team and strengthening its product.

Merritt said SEED is likely to first take on some customers and startups in the FinTech industry, and gradually expand to more mom-and-pop small businesses. The platform will be available on an invite-only basis, he added, so SEED can control its customer growth.

And when SEED begins adding these customers in a few months – and offering its service starting at $99 per month – Merritt said he hopes to bring to life his vision of reimagining what small business banking should be.

“The challenge that small business owners have are all largely the same,” he said. “They find it too difficult to work with their banks, it’s too time-consuming, they feel nickel-and-dimed, and they don’t feel like they’re getting any competitive advantage form their bank. We saw an opportunity to use data, technology and service to help a small business owner grow their business.”


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.