2020 has been a challenging year for almost everyone, and small businesses have been among the hardest hit. According to the U.S. Small Business Administration (SBA), there are 31.7 million small businesses in the United States, making up 99.9% of all businesses in the country. This makes small businesses a critical part of the national economy, which means they are key clients and important relationships for financial institutions to maintain.
The primary need for a small business is to manage cash flow. According to a 2016 report from the JPMorgan Chase & Co. Institute, the median small business owner only had 27 days of cash reserve, and with 81% of small businesses being a single-person run operation, getting to day 28 could mean financial life or death. Even more shocking - the situation now is even more critical in 2020. Small businesses that once relied on in-person interactions to receive payments are now forced to find new ways to accept payments online because of the COVID-19 pandemic.
This leaves room for financial institutions to step up and offer solutions that can help small businesses weather this storm. Key findings from the 2019 Federal Reserve Payment Study highlight the year over year declines of cash and check payments and the reduction of in-person card payments. Add in COVID-19, and the need for small businesses to adopt Ecommerce has been dramatically accelerated.
Why Small Businesses are Turning to Non-Banking Competition
Accepting digital payments is a new way forward for small businesses, and right now, non-banking competition is offering the solutions small businesses prefer. Small businesses need Ecommerce methods, like mobile deposit technology and online payment acceptance, so they turn to fintech challengers who have more robust digital capabilities that help them get paid.
Non-bank providers—like PayPal, Square, and Quickbooks— make it easier for a small business owner to get paid and optimize cash flow because they don’t have the same compliance and legal restrictions as financial institutions. They can offer a full suite of services designed specifically to serve a small business, including simplifying the receipt of online payments, better forecasting, and online lending. It is clear why small businesses are choosing non-banks to handle their finances, but it doesn’t have to be this way.
Where Financial Institutions Need to Pivot
Now is the time for financial institutions to upgrade small business banking. Banks need to learn and understand the makeup of small businesses, especially their issues and needs, to offer the right solutions for them. This means financial institutions need to evolve to provide online receivables because what fits a small business is using a simple app, depositing their money from all these different methods, and optimizing their cash flow. Financial institutions need to lock in the direct deposit for small business accounts.
Implementing these new solutions for small businesses doesn’t need to be a complicated overhaul. Small business banking products and services can integrate back into a bank solution as “embedded” fintech. Financial institutions need to make it easier for small businesses to work with them while managing their business.
How Autobooks Can Help
As a provider of small business banking solutions that make it simple to get paid online, manage cash flow, and automate accounting, Autobooks can help financial institutions provide a small business e-commerce platform directly embedded within their existing digital banking channels. Autobooks automates bookkeeping tasks, simplifies the reporting small businesses need, and takes the pain out of payroll.
As a payment facilitator (PayFac), Autobooks can enroll, risk score, and underwrite a small business to receive online payments in minutes, not days. This rapid onboarding process enables financial institutions to lock in the small business direct deposit. Combined with easy-to-use accounting functionality, Autobooks eliminates the need for a small business to turn to a third-party accounting or payment provider.
Additionally, Autobooks makes it simple for financial institutions to upgrade small business banking. Autobooks comes with pre-built core, digital banking, and payment integrations that remove a new project's technical burdens. Additionally, Autobooks is there to help launch the product by providing a comprehensive suite of go-to-market services proven to drive product awareness, adoption, and utilization. These services include consistent email marketing, training staff to answer small business questions, and education. Best of all? Most financial institutions can launch Autobooks in 90 days from contract signing.
Partner with Autobooks and transform your existing digital banking channels into an Ecommerce platform for small businesses.