Integrated Payments: The Way To An SMB’s Heart

“Small business” (SMB) is a term that could describe any number of ventures — from an individual Uber driver to a micro-merchant selling handmade jam on the web to an up-and-coming video game company that employs 150 people and has a few million customers. It’s a large and heterogeneous group. According to the United States Small Business Administration, there are between 28 and 30 million small businesses in the U.S. today. And when there are far more differences between them than similarities, it can make SMB-facing businesses a challenge to operate.

What all entrepreneurs and heads of SMBs have in common, according to Rich Aberman, co-founder and Chief Strategy Officer at WePay, is a desire to focus on what they are in business to do — and not so much on the plumbing that powers the cores of their businesses, such as accounting, payments, inventory management and setting up a web storefront. Jam sellers want to make and sell the best jam; Uber drivers want to offer people a lot of rides and software firms just want to ship units.

“Any feature — like invoicing, accounting, setting up a web storefront, enabling payments — that the merchant has to figure out quickly becomes unnecessary overhead,” Aberman told Karen Webster.

In an era where things are increasingly digital, platform businesses have a huge opportunity to capitalize on this growing need, so SMBs can worry about what they do best. And that, Aberman said, is the core of the software-as-a-service (SaaS) revolution.

“The term we use is ‘turn-key’ — the idea that … platforms and marketplaces now offer SMBs an opportunity to grow faster and run better. That platform might be QuickBooks or eBay or Etsy or FreshBooks, but it is that one central, canonical software that becomes the hub or operations for that business. And what the SMB needs increasingly is to have to make one decision: Which of those platforms is the one that represents the best way to run my business?” Aberman said.

Embedding payments as a core service into those hubs, Aberman noted, is becoming a large part of the equation, because the alternative — payments existing as a separately managed silo — is an inferior solution from revenue, data and customer service perspectives.


The “Good” Old Days

Once upon a time —not that long time ago — a merchant that wanted to accept payments had to contract with a third-party acquirer to make it happen, Aberman recounted.

The software platform that an SMB was using might have allowed that payment experience to be integrated, Aberman said, but the payments service and the relationships were essentially kept at arm’s length — which makes less sense as the digital payments ecosystem continues to evolve. A firm migrating away from pen-and-paper bookkeeping to SaaS accounting software is naturally going to start using invoicing features to manage their accounts receivable, and they’ll expect payments to be embedded into that feature.

“The second a small business starts invoicing, it immediately makes sense that the clients they are invoicing will want to pay them online too,” Aberman told Webster. “That is the true value of payments. Online marketplaces, crowdfunding sites, invoicing … payments is a necessary part of getting the full value out of those platform offerings.”

For platforms that are “obsessive” about the user experience, the choice to bake in payments as a native function is a natural part of making sure users get the maximum value out of their products.

“Why would you … [make the merchants] figure out payments separately before they can use your service?” Aberman asked.


A Better Path Toward Revenue

Other than the obvious benefit of making end users happy as merchants grow their businesses, Aberman said those SMBs also net “a bigger piece of the pie” when it comes to the revenue that is generated from providing the payments service to those businesses.

Keeping payments at arm’s length means that the third party managing those payments is charging those transaction fees, he said. When the platform embeds payments inside its own software, SMBs have greater claim to a bigger piece of those fees.

Moreover, he noted, you’re also making the software itself more desirable to users, who now have one less thing to worry about on the business logistics front, since not offering processing is going to reduce the number of users of their software.

The SMB end user will also have been given a better mechanism to capture revenue, since there isn’t a small business in the world that doesn’t want to make it as easy as possible for their customers and clients to pay them. When a customer desires a good or service, they don’t want to think about how they are paying or what they can pay with. The more the merchant can step up to the challenge and make the customer’s desire a click away, the more money there is for everyone to make, Aberman emphasized.

“There’s a huge push to make … payments seamless to the point they are almost invisible to the customer, almost like magic over the course of the purchase decision,” he said.

With the reams of data thrown off through all these integrated transactions, SMBs and platforms can both build better paths to future revenue.


Digging Deeper into the Data

Among the problems merchants face in the march to digitization is fractured data streams.

Aberman said most SMBs are used to a set-up where they log in to their merchant dashboard and see their transaction history. That data, however, is limited to what card was used, what amount was charged and on what day the transaction was done. Sophisticated players might take it a step further and show trends, such as best and worst days.

Meanwhile, he noted, these SMBs have an entirely separate set of data streaming in from business management software or commerce platforms. To see that data as a single stream, they must open both accounts at once.

Inefficient, obviously, but it’s a problem with an easy fix: tighter data integration between payments, the marketplace and software platform providers.

“As a merchant, I want to be able to see who my best customers are, what my bestselling items are, where my outstanding invoices are — but that is not information that my payments provider processing my transactions is going to tell me,” Aberman explained. “But that data is easily captured by the software platform … SMBs are using … particularly when payments are embedded.”

More than just giving their end users a better, clearer and more actionable data stream, platforms get to look at an aggregate of all transaction data, which, in turn, creates a virtuous cycle where they can build better experiences for both their clients and those clients’ end users.

“Platforms are … all about two things: building a better user experience and data — and how the latter informs the former,” Aberman told Webster.


The Next Generation of Experiences

When one considers the Uber experience, Aberman said, it is easy to miss the magic of the payment for both the consumer and the driver. The passenger exits the vehicle after their ride and is charged — and they can count on it being the right charge. The driver charges the passenger for the ride — and they can be sure they’re getting paid for it. No one involved in the transaction has to do any work other than sit in the car or drive it. The customer doesn’t have to take out a card, and the driver, as a micro-merchant, doesn’t have to figure out the financials to accept payment for the ride.

The Uber platform does all the work for both sides of the transaction — without either side having to think or worry about it.

And that experience — where the payment method folds into the regular business flow for the merchant without any hassle or complexity of settlement appearing for either the buyer or the seller — is ideal.

“Say I am an Etsy seller,” Aberman surmised. “I can sell to anyone in the world and that buyer can use any payment they want in their local currency, and I am going to get that money deposited into my account in the U.S. without having to think about it. Etsy solves a problem for me that I don’t want to figure out as a micro-seller.”

These are complex problems micro-merchants probably couldn’t figure out on their own, such as cross-border transactions. The average gym operator doesn’t want to figure out what it means to sell across channels. An SMB that wants to sell via social media doesn’t need to know all the intricacies of using Pinterest vs. Facebook.

These opportunities, and more, Aberman told Webster as their conversation concluded, sum up the future of commerce and software platforms: working in partnership with customers who increasingly rely on them to deliver solutions seamlessly.

When “we look at a future of integrated payments, it is really about a path forward, where platforms can do more for their users, who can, in turn, leverage that into doing more for their customers,” Aberman said. “That’s a commerce environment in which everyone wins.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.