EVALUATING THE SMALL BUSINESS PAYMENTS MARKET (Dec 2017)

Cards, Checks, and Cash

Payment Innovations

Bill Payment and Invoicing

Key Finding from a Previous Phoenix Synergistics Survey:

Findings from the 2015 Phoenix Synergistics study, The Small Business Payments Market, reveal that traditional payment methods are still the top performers in the small business payments market.

Has usage of innovative payment methods increased over the past two years?

  

This study examines the small business payments market assessing small business attitudes toward and usage of traditional and innovative payment methods.

National Internet Survey – The survey will include 800 online interviews with owners and executives of small businesses with annual sales of $50K to $5M.  Industry categories include manufacturing, wholesale, retail, and services.

Key Dates

September 22, 2017 – Final acceptance of client comments on the questionnaire.

September 22, 2017 – Charter fee date.

November 2017– Initial results available.

December 2017 – Project Report available.

Strategic Objectives

  • Profile the current payment behaviors and preferences of small businesses – including cash, checks, debit cards, credit cards, online payments, and mobile payments. Determine if certain payment methods are used for specific purposes.  Assess the motivations or reasons for using a particular payment method instead of others.
  • Identify immediate opportunities to shift payment patterns among small business customers. Ascertain perceived problems with current payment methods. Evaluate if payroll processing represents an opportunity for providers.  Assess the barriers to adopting direct deposit.
  • Explore how financial institutions can assist small business customers with their bill payment needs. Determine how many bills are paid per month and what methods are used. Determine the barriers that exist to further adoption of both online and mobile bill payment.
  • Measure the potential for further expansion of mobile payment activities among small businesses. Examine current activity – including bill payment, transfers between accounts, loan or credit card payments, e-commerce, and point of sale payments. Assess the viability of mobile B2B payments.
  • Evaluate how providers can help small business customers improve or streamline their methods of payment acceptance from customers. Identify how payments are currently accepted and which methods are most prevalent. Assess the potential for innovative options for accepting payments –  such as electronic invoicing, mobile RDC, and mobile processing of card transactions.
  • Assess the relationship implications related to adoption of certain payment methods – including such aspects as having a credit card from the main checking provider and conducting online bill payment at the FI’s site. Determine if mobile payments are driven by apps downloaded from FIs.
  • Determine how new payment methods and options should be marketed to small businesses.  Evaluate the effectiveness of traditional segments – such as sales volume, industry classification, or number of employees.  Explore how current payment behavior relates to the potential for innovative payment alternatives.

Research Issues

  • There is a great deal of activity in the small business payments market as new payment alternatives appear almost overnight. Digital services such as PayPal and Square are just a couple of the options.  These new services give small businesses an array of payment choices to use in all types of situations. Traditional options such as checks and cash are frequently used and in some cases are the preferred payment alternatives. Payment cards, including credit and debit cards, are also available to meet the payment needs of small businesses. Small businesses can now offer their customers a number of payment options.
  • Online bill payment is common practice among small businesses.  This activity is expected to gradually move to mobile devices.  Remote deposit capture services have been available for a number of years.  Providers can offer payment solutions in the areas of payroll, merchant processing and accounts receivable which are designed to make the day-to-day operations of the small business easier and more seamless.
  • Competition in the small business payments market is intense as Fintech and other non-traditional providers design and market new products and services.  These companies are creative, agile and aggressive competitors. Traditional institutions need to be ready to face this competition with their own innovative payment products.  In this environment, it is essential for providers to understand the payment needs of small businesses. [F258]