THE SMALL BUSINESS PAYMENTS MARKET (June 2015)

Checks, Cards, and Cash

Payment Innovations

Challenges and Opportunities

Key Finding from a Recent SYNERGISTICS Research Survey:

Results from a 2012 SYNERGISTICS survey revealed that close to four in ten small business checking holders say they still use checks most often as a payment method. Three in ten checking holders use credit cards most often, and one-quarter cite debit cards. How has this picture changed, if at all?

F233 Prop Graphic

Highlights of the Study

This study examines small business usage of various payment methods, as well as reaction to innovative and non-traditional alternatives.

National Internet Survey – 600 owners/executives of small businesses with annual sales of $50K-$5M. Industry categories include manufacturing, wholesale, retail, and services.

 

Key Dates

March 27, 2015 — Charter fee/Intro pricing ends.
March 27, 2015 — Final acceptance of comments on questionnaire.
June 2015 — Project Report available.

Strategic Questions

  • What types of payment methods are currently used by small businesses and for what purposes? What are the motivations or reasons for using various payment devices – including checks, debit cards, credit cards, prepaid cards, automatic payments, and online payments? Do the perceived benefits or problems with current payment methods represent opportunities to shift behavior?
  • Can small business deposit activity be streamlined or made more efficient? What is the current average frequency of deposit making and the average number of items deposited? How prevalent is usage of remote deposit capture – both PC-based and mobile – and is there potential for expansion?
  • Does payroll processing represent a payment activity that offers new opportunities for providers? How do small businesses currently handle their payroll? Is direct deposit widely used and what barriers to adoption exist? Are prepaid payroll cards a realistic alternative for the small business market?
  • Does small business bill payment activity present unique needs for providers to address? How many bills are typically paid per month by small businesses, what methods are used, and what are the reasons for using them? Is online bill payment widely used or should providers shift activity in this direction? What issues or barriers exist to further adoption of online bill payment?
  • What is the position of mobile devices as a payment option among small businesses? How widespread are mobile payment activities – including bill payment, transfers between accounts, loan or credit card payments, and e-commerce? How likely are small businesses to adopt these activities?
  • Do the patterns of payment acceptance among small businesses indicate areas for improvement? What payment methods are currently accepted and which are most prevalent? How do small businesses use or react to innovative options for accepting payments from customers – such as electronic invoicing and mobile processing of card transactions?
  • How should providers approach and segment the small business market for promoting usage of various payment methods and options? Are traditional indicators – such as sales volume, industry classification, or number of employees – most appropriate? Does current payment behavior point to the potential for adoption of innovative payment alternatives?

Research Issues

  • The small business payments market is exploding. Not only can small businesses make payments using a wide variety of methods including cards, checks and cash, they can also accept a number of payment alternatives from their customers. Payment methods range from the traditional such as checks and cash to innovative services such as mobile banking and payments.
  • The list of digital payment options and services such as PayPal and Square keeps growing. While small businesses continue to use checks and cash, they are increasingly moving to payment cards. Credit cards, debit cards and now prepaid cards are all available to small businesses for their payment needs. Small businesses are using electronic bill payment services and have a wide array of options available when making purchases online.
  • Remote deposit capture by PC or mobile phone may provide fee revenue opportunities for providers. Payment solutions in the area of payroll, merchant processing and accounts receivable can also be offered to small businesses. Nontraditional providers are aggressively competing for their share of the small business payments market with a myriad of innovative products and services. It is essential that financial services providers understand the payment needs of small businesses in order to develop products and services that will assist in growing the small business relationship. [F233]