Small businesses, particularly those launched by younger entrepreneurs, are often assumed to be a key driver of B2B FinTech innovation as business owners seek sophisticated, automated technologies to run their businesses.
While user experience is key, these tools must also be agile enough to rise to small- to medium-sized businesses’ (SMBs’) digital-native foundations.
Yet this assumption, according to Jason Polancich, CEO of Invoia, fails to take into account the millions of SMBs throughout rural America, where many business owners — even millennial entrepreneurs — simply aren’t interested in complex technological solutions.
At the same time, as more SMBs experiment with the subscription revenue business model, the need for tools that can support their recurring invoicing and collections processes in an automated way is on the rise.
Striking a balance between simplicity and agile technology has been a struggle for many payments firms looking to meet the collections needs of SMBs in areas beyond the biggest urban markets, Polancich recently told PYMNTS in an interview. But when platforms can promote automation without adding complexity to the user experience, these technologies will be able to find traction within SMBs everywhere.
SMBs’ Technology Challenge
Invoia, which recently announced a rebrand and shift of its focus onto the recurring payments collections arena, has learned a lot about its SMB users since first launching as a tool for restaurants and bars to allow patrons to pay their bills on their mobile phones, said Polancich.
One of the biggest lessons would perhaps come as a surprise to many in the SMB FinTech space.
“We learned that a lot of small business owners in this day and age are not tech savvy at all,” he said, adding that even millennial-run SMBs can struggle. “They have a hard time using online banking. And this is across industries, whether law, healthcare — these are educated people who do not know technology or business, and yet they’re in business and making lots of money.”
According to Polancich, much of the assumption around SMBs’ digitization expertise comes from startups in metropolitan areas. But in rural Alabama, where many of Invoia’s users are based, SMBs are representative of the needs of millions of smaller firms outside of those urban areas.
That lack of technological and business expertise can have profound impacts on the way they manage their company finances.
“That has been one of the biggest surprises: A lot of our customers had no robust accounting,” he added. “They weren’t reconciling their books on a monthly basis; they weren’t closing out accounts. It’s kind of scary.”
A lack of adequate accounting and financial management tools and practices can be detrimental to any business, but as more SMBs explore opportunities in the recurring revenue model, the need to obtain greater control over and visibility into cash flows is of paramount importance.
This is especially true for SMBs that would not normally operate in a subscription model, with Polancich pointing to the home improvement market as one particularly unexpected participant in this space as local companies like lawn mowers, electricians, plumbers and more make the shift to subscription offerings.
As they make this shift, what’s key to collecting payment is simplicity, he said.
For Invoia, that means offering payment acceptance through any kind of credit card, and only credit card. SMBs were struggling to manage their use and integration of an array of payment rails and networks, from Venmo to ACH, many of which don’t offer recurring payment functionality. Pairing down functionality to one payment method is most effective for these users, noted Polancich.
Even adding bank transfer capabilities was too much added complexity for many business clients, he said, explaining that Invoia has recently hidden that direct bank transfer functionality — without any SMB users asking for it back.
“We had rolled out the checking account feature, but no one ever used it,” he said, adding that payers will often find it too burdensome to figure out their bank account and routing numbers, and then endure their bank’s multi-factor authentication process, to choose bank transfers over card payments.
For the SMBs themselves, Invoia is also focusing on simplifying the process through which owners manage the data from their incoming payments for accounting and reporting purposes, with the platform allowing for file export so SMBs can send that information off to their accountants. Moving forward, Polancich said there will also be data integrations with back-office platforms like QuickBooks and Xero.
It’s all about designing a user face that strips away unnecessary and unwanted features, and prioritizes ease-of-use, to meet the collections needs of SMBs outside of the major cities.
“These folks really don’t want to spend any time getting paid,” he said. “They’re focused on running their business; they want this to be more automatic. They just want this to be simple and easy.”