Magazine article American Banker

Pay Up! Why SMBs Are Embracing P2P

Magazine article American Banker

Pay Up! Why SMBs Are Embracing P2P

Article excerpt

P2P Payments Now A SMB Lifeblood

While loan approvals remain a frustration, there is far more common--and harrowing--pain point for small to midsized businesses (SMBs): Not getting paid on time.

The joke of "the bigger the client, the slower the payment" may be tired but it's still true. To stay afloat, many SMBs rely on faster payments from consumers and other small businesses. Conversely, they're often cognizant about paying their own suppliers and vendors quickly.

You would think banks, most of which fit the definition of an SMB themselves, would be more mindful of this struggle. But even online bill pay and ACH--the crown jewels of "business banking"--take 2-3 business days (or more) to post. Throw in the weekend and a banking holiday and it can take a lifetime for a SMB to get the cash it needs for inventory or payroll or, yes, even loan payments.

Staggering P2P Adoption

Here's the thing: The FIS 2017 Performance Against Customer Expectations (PACE) Report found that SMBs are adopting digital payments at more than three times the rate of everyday consumers--and they're using them as a way to quickly pay vendors and most likely take payment.

In fact, according to PACE, 40% of SMBs reported using person-to-person (P2P) payments to pay a vendor or supplier in the past 30 days. Compare that to just 12% of U.S. consumers who reported making P2P payments. Even more interesting is that the usage rate climbs to well over 50% for businesses with more $25 million in annual revenue.

What is clear from the PACE data is that there is a fierce battle brewing between primary banks and outside services like Square Cash, Venmo and PayPal for P2P loyalty. …

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