We all have that friend who loads up his or her social feed with inspirational memes on the daily. With seemingly nondescript motivational commentary, there is no real reason to remember them, yet one in particular lodged in my consciousness: a mountain climber hanging precariously from the edge of a cliff, snow-capped mountains framing her feat. Under this image, one word is emblazoned: Perseverance.
It was John D. Rockefeller who said:
“I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature.”
Taking that one step further, oftentimes, it’s human nature—coupled with a healthy dose of aversion to change—that gets in the way of accomplishment. This sentiment rings true for all of us in financial services. When we look at B2B check writing, for example, we see the last mile in payment digitization. Yet, the most recent Federal Reserve Payments Study reports that “the long slide of check payments appears to have tapered off somewhat,” with the rate of decline slowing. By far, businesses write the majority of checks, and in 2015, businesses averaged 24.1 checks per month.
I can feel the collective scratching of our heads, as we all ask the same question. Why?
According to René Lacerte, Bill.com’s CEO and Founder, this late adoption of digital payments by businesses have more to do with process than behavioral quirks. In October, René spoke on a panel at Money 20/20 where he offered a unique perspective:
"Banks and their partners need to broach business check writing from an operational standpoint, meeting customers wherever they may be."
He pointed out that for businesses, checks superficially may offer process advantages, creating a natural slowdown in approvals. This bonus approval time provides busy staff with a window to assess invoices, determine what they were for, and control when they need to be paid. When looking at B2B check writing from that vantage point, the question becomes not, "why do you write checks," but "why should you switch?"
In that light, the key to eliminating B2B checks is to remove friction from the reconciliation process in a way that honors the business need for controls around the payment. For example, René and his cohorts on the Money 20/20 panel—executives at Mastercard, Bank of America Merrill Lynch, Nvoicepay, and Glenbrook Partners—discussed the new real-time payments rails being developed. They collectively agreed that for businesses, the true value of this payments system rests on the robust data capability it offers.
For small and medium businesses (SMBs), speed may be a nice-to-have, but the majority of business owners aren’t necessarily clamoring for everything to move faster. However, with the real-time system leveraging ISO 20022 formats, there’s opportunity for invoice information to travel seamlessly with the payment. Creating a new rail from scratch means that the system is being designed to consider the potential for such future activity.
Yet, a new system isn’t the only technology development that’s making "right now" the "right time" to tackle B2B payments. Technology adoption by way of the smartphone is shifting the entire landscape. According to a June report from Pew Research:
“About three-quarters of U.S. adults (77%) own a smartphone, up from 35% in 2011, making the smartphone one of the most quickly adopted consumer technologies in recent history.”
This means your SMB owner will be expecting a business banking experience that allows him or her to do pretty much everything from a smartphone. The only question remaining is the pace at which that business owner’s expectation will become a commonplace demand of their bank, and a likely cause to switch if not fulfilled.
The good news is that today’s technology creates new opportunities for further digitization, as well as offering solutions for back-end support for simple integrations. For example, the cloud lowers the cost of technology-based payment offerings and makes them more broadly accessible to businesses. This surge in affordable, efficient technology means banks rest on a mountain of new opportunity. Holding that customer relationship in their hands, banks remain central to customer needs and can leverage technologies that meet, and even precede, demands by partnering with trusted and proven FinTech providers.
In fact, an upcoming session this month at the Small Business Banking Conference addresses this partner-based model, exploring the pivotal role banks play in ushering in a new era of technology-driven efficiency in business. Brad P. Hawley, Executive Director of Business Banking Strategy & Execution at JPMorgan Chase, and Blake Oliver, accounting firm manager at Armanino, will team up with our own head of product and marketing, Sanjeev Kriplani, to discuss how banks can lead change in the way they serve today’s SMB customers while positioning themselves to be the go-to financial partner for the incoming generation of business owners.
There’s no denying that change is happening around us, and although B2B checks are still being written in surprisingly persistent volumes, as the business owners of tomorrow take the reins, digital payments will become the expected norm. It is in our best interest to heed the wisdom of that motivational meme: We must persevere. As the industry moves to eliminate checks from business payments, the road ahead remains a long one. But with conviction and a laser focus on partnerships that allow banks to meet customers wherever they are, we will be successful.
Are you or your colleagues attending Small Business Banking? Be sure to say hi and check out what Bill.com will be doing in Austin.