Check Payments are Stifling Your Business Growth
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Structural Changes Attract Customers, Investors to Fintech
For decades, customers and investors were at the mercy of traditional financial services companies. Whether you like the companies and their business models or not, if you wanted payment, loan or deposit services, that’s where you had to go from the customer point of view. If you were an investor who wanted to diversify into financial services, the question was similar because there wasn’t much differentiation between the various options.
Today, fintech has revolutionized the playing field in financial services for customers and investors. Customers can choose to take some or all of their business outside of the traditional financial services arena just as investors can favor fintechs over traditional banks, investment companies and other financial services firms.
The pandemic has only speeded the transition to more choice and more democracy within financial services for both consumers and investors as fintechs continue to build muscle.
In a B2B CashFlow Conversations Podcast hosted by Finexio CEO and Founder Ernest Rolfson, Rolfson interviewed Marwan Forzley, CEO and Founder of Veem, a domestic and international B2B payments company.
“It used to be, pre-pandemic, that we would shop in-person first and then online for what we couldn’t find at the local stores,” Forzley said. “Today, we shop online first unless you’re really stuck and can’t wait for something to get shipped — that’s one trend. The second trend is that it used to be you’d start a business, open an office, find people to work there and pay them by direct deposit from a bank. Today, with so many people working remotely, your staff can be from anywhere and you need to be ready to pay them anywhere.”
“There’s also the rise of more types of payments both domestically and overseas,” he continued. “I think crypto [currency] is here to stay despite the dismissiveness of many who believe that it won’t remain because of a lack of intrinsic value.”
“There’s a big takeaway here that many people don’t understand crypto and that it’s not going anywhere,” agreed Rolfson. “It’s very serious and very real.
Rise of fintechs as neobanks
Forzley also spoke on other trends he is seeing. “The rise of neobanks is interesting in that fintechs are offering services and experiences that are encroaching on the territory of banks but are different than banks,” Forzley said. “I think we are going to see more B2C and B2B neobanks. The market is complicated, so it requires massive simplification over a long period of time, which means that a number of players will emerge to make that happen.”
“It sounds like you’re in the right spot,” commented Rolfson. “What are your thoughts on the timing and speed of payments and how that is evolving?
“This is a great topic — thanks for bringing it up,” Forzley replied. “I think the work Finexio is doing in this area is quite valuable for customers. Capital and payments are close cousins. If you ask a customer what else you can do for them, besides payments, they usually ring up lending. I think there is a lot of room in this market, which will be a key area in the future.”
In 2020 Finexio launched FinexioCash™, which allows suppliers to get paid upon invoice approval. The solution was designed specifically to help U.S. mid-market companies and their suppliers unlock much needed cash to survive and thrive in a more volatile world.
“There is a natural connection,” Rolfson said. “I really think of fintech and what Veem and Finexio are doing as being akin to rail and infrastructure providers. This is stuff that banks could and should do because at the end of the day, everyone has a bank account. It is incumbent upon us as fintechs to make these products and services available in one package, because customers are starting to use Veem, Finexio and others without even thinking to call Chase, Bank of America, or other traditional banks. This is becoming more natural behavior.”
“Customers don’t think twice, when they get in an Uber for example, how they are going to pay for it,” Rolfson continued. “Because they can just press a few buttons on their phone. There is an opportunity for Finexio, Veem and other fintechs to bundle these products and services together that are beneficial for the consumer.”
“This is the reason why fintech exists,” Forzley said. “We provide what is not being offered by traditional providers like banks.”
More choice for investors
For investors, the rise of neobanks and fintechs are filling the gaps left open by banks and creating their own niches, offering abundant investing opportunity. A number of prominent fintechs are expected to go public in 2022, including Stripe, Instacart, Klarna, and Chime. This is following a banner 2021 in which Robinhood, Blend, Freshworks, Remitly, NerdWallet, Expensify, Nubank, Coinbase, Billtrust, Metromile and SoFi all went public.
Going forward, both investors and consumers in both B2B and B2C are likely to benefit from more choice and innovation.
Be sure to check out this episode of our ‘B2B Cashflow Conversations’ podcast with Marwan Forzley, Founder & CEO of Veem.
Five “Secrets” Every CFO Should Know
Accounts payable has traditionally been an integral part of the business, providing a necessary function in the financial cycle. However, it is now being recognized as not just a cost center but also an opportunity to grow profits and scale your business.
In order to achieve business growth, it’s important for CFOs to focus on finding and funding solutions that will drive long-term growth. To help you understand how your AP department can lead your company to better cash flow management and drive more value, we’re revealing five “secrets” all CFOs should know.
“Secret” #1: Leverage Technology to your Advantage
Technology has revolutionized the accounts payable process, making it faster and more efficient. Automated invoice management systems can help you quickly identify and pay invoices, while supplier payment portals allow you to make payments online without having to go through a middleman. Streamlining these processes will not only free up to 84% of your AP staff’s time, but you’ll reduce costs by eliminating manual, paper-based payment processes.
“Secret” #2: Partner with suppliers to make payments faster and more convenient.
This will improve supplier relations while freeing up cash and reducing the time it takes for funds to be received. Suppliers are motivated to get their money faster and more conveniently, so it’s a great place to start. Suppliers want a say in how they get paid and will adopt a solution that provides a payment method that is fast and easy for them. As an added benefit, you can drive value back to your business with early payment discounts and cash-back benefits from rebates and incentives.
“Secret” #3: Forecast Cash Flow and Allocate Resources Accordingly
In order to make sound decisions about where to allocate its resources, a company needs to have an accurate view of its current and future cash flow position. Accounts payable can help the broader business by forecasting cash flow and providing insights into how different decisions will impact the company’s financial position.
“Secret” #4: Control Costs by Implementing Supplier Payment Best Practices
Best practices for supplier payments can help a business save money on administrative and processing costs. This includes negotiating better payment terms with suppliers, taking advantage of discounts for early payment, and using electronic payments whenever possible.
“Secret” #5: Focus on Cash Flow, Not Just Efficiencies
Cash flow is one of the most important drivers for business growth. Accounts payable can lead the way by expanding its responsibility and becoming better stewards of cash flow for their company. That starts with rethinking how paying suppliers can maximize revenue while cutting costs at every turn.
Hopefully these secrets have provided some insight into why your AP department should be focused on driving long-term sustainable revenue growth, not just controlling expenses more efficiently.
Want to learn more? We’ve got you covered! Check out our latest webinar on-demand to learn more about turning your AP department into a value driver for your business.
Payments Mythbusters: Thanksgiving Edition
Myth: Turkey's can't fly.
Fact: Sure they can! They’re just not great at it.
It’s the same with checks and ACH. Can these payment methods get the job done? Of course. There’s just a better way.
Not long ago, the traditional payments establishment and many merchants were downright skeptical about the ability of digitization to streamline and simplify B2B payments. While digital payments have had a transformational impact on the B2B payments landscape, misconceptions linger.
“There definitely remains a knowledge gap with those who perceive payments using ACH or checks as being less costly than digital models,” said Dean Leavitt, CEO & Founder of Boost Payments. “The misperception is that ACH and checks are free, but credit cards cost a lot,” he said.
Finexio aims to stuff that knowledge gap and shed light on truths that will improve your payment process and your bottom line with our series, Payments Mythbusters. In this Thanksgiving-themed edition, let’s set the record straight around digital and card payments vs checks and ACH (the turkeys of the B2B payments world).
Myth: Digital payments carry a high barrier to entry
Fact: Digital payments actually offer improved cash flow and efficiencies related to third-party processors you can hire like Boost and Finexio. One example of this reality, according to Leavitt, is the boom in digital B2B usage during the pandemic. “There’s been lots of businesses going into digital payments driven by the pandemic. People tend not to go back to checks and less efficient payment methods, once they’re hooked on the benefits of digital payments and specifically card products where they are getting that working capital.”
Digital payments allows companies to fill in gaps and continue moving their capital in the right direction, despite shortages of in-person time and interaction to process ACH and checks. Finexio has a dedicated onboarding and customer success team that shortens onboarding times and eliminates implementation and training headaches, allowing companies to focus on doing their business instead of shuffling paper and waiting for payments to clear.
Myth: Digital payments lack ROI
Fact: Finexio cuts costs associated with manual paper-based processes and the opportunity for cash back via early payment discounts and virtual card interchange. By streamlining the payment process with digital payment methods, companies can guarantee not only savings but returns through usage rewards. In addition, the security offered by digital payments will actually create the potential for transaction volume to increase. “Someone is willing to pay that fee instead of just getting a piece of paper sent to them”, Leavitt said, adding, “I see the fees associated with B2B transactions coming down significantly.”
This positions digital and commercial cards as the future of B2B payments, because as more transactions are happening, the price for executing the payments will actually decrease, resulting in an increasingly favorable environment for even more digital transactions.
Myth: Digital payments require expensive technology
Despite the beliefs of organizations and merchants that digital payments mean they have to acquire expensive technology, FinTech companies like Finexio and Boost build the technology capabilities in their back offices so that organizations and merchants can benefit from automation and technology without having to acquire or maintain it.
“The concept of embedded finance with software-enabled platforms that leads distribution for payments products, services and cash management tools, creates a powerful environment for B2B digital payments,” noted Finexio CEO & Founder, Ernest Rolfson. Because large financial institutions can afford to wait on ACH and checks due to their internal funds, they have no motivation to create the next generation of efficiencies.
“Fintech companies can move much quicker in terms of accommodating the needs of the marketplace,” Leavitt said. “You know, the large financial institutions, even the very best of them, the smartest of them, they just can’t move as quickly as a fintech can. And that’s a huge advantage in the marketplace.”
Myth: Digital Payments are Inefficient
This myth is particularly egregious, because, “Digital payments not only [extends] the working capital, the days payable outstanding for the buyer, but they reduce the days sales outstanding for the supplier, thereby increasing their working capital. That’s really the perfect win”, according to Leavitt. By using digital payment methods, companies can quite literally capitalize on new, frictionless efficiencies and keep themselves agile in a developing space, instead of waiting around for ACH and paper checks, and exposing themselves to fraud.
If you’ve bought into any of these myths, hopefully we’ve convinced you to toss them in the trash along with that turkey carcass.
Speaking of that bird….
Myth: Those plastic pop-up thermometers tell you when your turkey is cooked.
Fact: They let you know when the turkey is overcooked.
From all of us at Finexio, have a safe and happy Thanksgiving!
Do you have a payments-related myth you want busted? Tell us about it on Twitter — @finexiopayments #paymentsmythbusters.
Learn more about Finexio and how digitizing accounts payable can be an easy win. Contact our team for a consultation.
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