As the financial services space focuses on digitizing offerings for their small business customers, much of these efforts are targeting online banking portals accessed via desktop. But mobile devices are an increasingly important part of a small business' financial management strategy, adding another channel on which banks and FinTechs must innovate to disrupt and improve SMB finances.
Ranjit Charles, vice president and chief architect at small business accounting software firm BizTechnologies, told PYMNTS in a recent interview about the evolving role of the mobile device for SMBs, beyond its ability to enable remote access to information.
Today, he explained, small businesses often do the bare minimum to manage finances, despite the rise in FinTech platforms and products available to them. A business owner may be able to generate an invoice and collect payments – “maybe reconcile their bank accounts, or have their accountant do this for them," said Charles. But outside of basic accounting, manual processes and paper still rule.
And while technology has advanced to improve ease of use of mobile solutions, he added, those advancements haven't always made their way into enterprise financial management solutions.
"When these systems start becoming as easy as taking a selfie, every small business will want to use it," Charles said.
One of the biggest impacts of mobile-based services will be the shift from weekly or monthly processes to operating in real time. For example, said Charles, checking metrics of day-to-day activities – including order progress, payment status, shipments, outstanding payments, revenues and more – can be accessed on demand, a need that Charles said will become increasingly important for the small business owner.
"No one wants to wait to get back to the office or their home office to get this information," he noted.
Beyond Metric Checks
Aside from checking up on various business metrics, the mobile and real-time nature of the personal device supports faster payments, invoicing and other financial processes. But the mobile device can be an essential tool in other ways, most notably through the camera and voice recognition technologies integrated in today’s smartphones. The ability to take a picture of a receipt and automatically capture expense data, for instance, is a natural progression of a smartphone's functionality in the small business financial space.
Research shows small businesses are already urging their financial service providers for mobile-friendly services. ACI Worldwide analysis released in 2017 found that more than two-thirds of the interactions small businesses have with their banks are either online or via mobile devices, but small business owners are also quite willing to go outside of their mobile banking apps to manage company finances. Researchers warned that FinTechs and alternative financial service providers are missing an opportunity to challenge traditional banks' dominance with SMBs if they don't provide adequate mobile services.
More than a third of SMBs surveyed told ACI Worldwide that they already use non-bank financial apps to make B2B payments, with younger entrepreneurs showing the highest penetration rate of mobile banking and other financial tools.
"The younger generation of entrepreneurs who have grown up with their smartphones and payment technologies like Venmo will be looking for similar capabilities in the business," noted Charles.
Open Banking Opens Doors for Mobile
According to Charles, the gradual emergence of open banking in the U.S. is paving the way for more effective mobile financial solutions for the small business community. That's because as the functionality of the mobile device expands for small business finance, so does the need for all of those services to interconnect and share data.
As small businesses adopt technologies to automate and streamline accounting, inventory, time tracking and human capital, or manufacturing, they develop what Charles described as "islands of software" that fail to communicate with each other.
"Unfortunately," he said, "we [the SMB software industry] have not made this easy enough for them to use. Or, vendors package their software in a way that forces them to keep purchasing more software to use in other areas of their business. So they end up with 20 different pieces that are not integrated."
Software service providers may add new features to their solutions, but Charles noted this can often require a small business owner to hire consultants or obtain training to understand how to use a tool that continues to grow in sophistication.
The smartphone forces solution providers to focus on the intuitiveness of their services for easy use on a mobile device. Flexible interfaces support connectivity with third parties, said Charles, such as integrating with bank accounts via APIs. Open banking initiatives will continue to push for this streamlined, interconnected ecosystem of small business tools to be adoptable for a mobile platform, he said. An electronic invoice sent via mobile device that facilitates immediate electronic payment, or the mobile receipt capture of an expensed transaction, can integrate that information back into accounting systems, for instance.
While the evolution of small business FinTech has recently focused on cutting down the complexity of enterprise-grade software to offer those tools to SMBs, the industry is shifting toward heightening the sophistication of small business software, without sacrificing usability.
"Small businesses, in most cases, need the same things large businesses do," said Charles. "Sometimes faster, with fewer people, and a much smaller (or no) budget."