Addressing SMB Faster Payments Challenges

Reed Luhtanen, Executive Director, FPC

On the heels of Small Business Month in May, we reflect on small businesses’ impact on our economy and communities. At the FPC, we also see it as a time to inspect the challenges many small-to-medium-sized businesses (SMBs) face in payments—and the ways faster payments can solve pain points.

For instance, recent research points to SMB issues in processing ad hoc payments. According to the latest data, 57% of accounts receivable (AR) transaction volume is in the form of non-recurring, ad hoc payments. And this accounts for 72% of SMBs’ AR volume in dollars. It ends up representing a significant portion of SMB’s payments mix. Unfortunately, the processing of these ad hoc payments is, more often than not, manual, inefficient, and time-consuming, resulting in loss time, reduced cash flow, and more.

Yet, the solution exists in the form of faster payments. Automated faster payments can enable efficiencies, improve cash flow, and provide other benefits like enhanced business relations. While faster payments offer solutions, adoption has not yet been high, for many reasons, including lack of business awareness, unavailability of options, and business’ opposition to change. In fact, our 2023 Faster Payments Barometer indicated that a number of businesses did not see faster payments as a “must-have,” which likely has slowed progress.

But the times are changing. In just-released research from  Federal Reserve Financial Services, ad hoc payments rose to the top as a use case for faster B2B transactions. Businesses, large and small, believe faster payments can help lower costs (48%); allow for instant funds availability (33%); and improve efficiency (23%). So, the tides are turning toward an increase in adoption of digital, faster, and instant payments services by businesses. Case in point: Digital wallet use alone climbed 31% year over year to 62%. And, overall, receipt of instant ad hoc payments has grown 24% since September 2023.

The data is clear: Businesses of all sizes see the value of faster payments in today’s economic environment. However, while I think we can appreciate the strides we are seeing, much work still lies ahead of the industry to address faster payments issues. The Barometer showed us that businesses still need more from us. For instance, interoperability/lack of standards and high implementation costs remain a concern for these organizations.

So, our journey continues, with SMBs a key segment of our efforts. SMBs are an integral part of the fabric of our industry. Therefore, we need to keep working, advocating, and innovating to find the solutions to move the whole industry forward. And we invite you to join us on this journey toward a more united faster payments landscape.

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