Small (Biz) Is Beautiful and Plentiful (for Paying and Borrowing)

On the fifth day of Christmas, in the United States, Santa gave payments small businesses. Sure, small is beautiful as the blockbuster 1973 book by that name insisted. But even better when it comes to businesses—small is a lot!  There were almost 28 million of them in 2007. Now, about 22 million of them didn’t have any employees and were probably operated part time, but there were more than 6 million with employees and almost 700,000 of them had more than 20 workers.  Every year roughly 500,000 new small businesses are born and those new firms have accounted for preponderance of job growth in the American economy for some time. 

To be clear, small businesses weren’t really a new gift to the payments industry. This present has been around for a while but only recently the industry has really awakened to the possibilities that these so-called “little” guys provide and payments providers will be thinking of lots of new products and services to serve up to them in the coming year.

Small businesses need just about everything the payments industry has to offer—they are like merchants and consumers rolled into one.  Many of them have to accept payments from consumers so they need merchant processors; they are paying their suppliers so they need ways to help them do that; and they need financing, which the smaller ones do on their personal credit cards, especially now.

This past year a number of payments companies started new offerings targeted to small biz or beefed up their offerings.  That’s likely to expand in 2011.  At the beginning of the year Square made a splash with their service that helped small (mainly teeny tiny) businesses accept cards on a mobile phone.  But others like RoamPay and GoPayment weren’t far behind.  American Express Open kicked off the new year with a service, AcceptPay powered by PaySimple, that provided small businesses with an easy online solution for tracking invoices and accepting payments. 

Small businesses also buy from each other and from larger businesses.  They are an important segment in the move to wean American businesses from paper checks.  Lots of players are attacking this problem. The leader in helping small businesses is Intuit which launched its Intuit Payment Network which uses the ACH system to transfer funds and is integrated into Quickbooks.

Financing small businesses is both an enormous opportunity and one where greater innovation and efficiency would really help the economy.  The last few years have been rough for small firms who at the very small end have tended to rely on consumer cards or bank loans, factoring, and other sources of lending.  While a lot of these firms haven’t had much appetite for borrowing, those that have needed financing have had a lot of trouble getting it.  The payments industry and businesses swirling around it are awakening to these possibilities

In 2011 and beyond we will see lots of entrepreneurs and intrapreneurs figuring out ways to provide more value to these millions of businesses.  The opportunities outside the US, especially in the emerging economies, are perhaps even greater.


 

Twelve Days of Christmas

 

     

  1. Did Payments Get a New Mom, or Enter Rehab?
  2.  

  3. Will 2011 Be The Year of the Opt-In?
  4.  

  5. Is 2011 the Year for Social Commerce?
  6.  

  7. New Global Payment Schemes: Imitation, the Sincerest Form of Flattery?
  8.  

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Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 AML/KYC Tracker Report provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

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