Potential Opportunities for Mobile B2B Payments

Navigator Edition: May 2012
By: Balaji Viswanathan and Brian Rutland

Small business card issuers are always on the lookout for strategies to transition spend from checks to cards.  Although issuers have had some success, checks are still quite prevalent representing two out of every five payments made, and three-fifths of payments received for businesses with less than $1 million in annual revenue according to 2011 data from Cash Edge.

For small businesses, a key benefit of card payments is convenience.  Mobile could add significant value to small businesses by improving the ease of making payments.  For example, swiping cards and taking card numbers over the phone could be replaced by a streamlined process powered by a mobile app.

Small businesses’ unwillingness to sign up for merchant accounts and a perception that acceptance costs are high and complex have conspired to perpetuate the use of checks.  Providers of mobile payment solutions could leverage their experience in the consumer market to reduce this resistance by offering easy signup processes, simplifying pricing structures, and eliminating upfront terminal purchase or rental costs.  Potential product features to address the needs of small businesses could include (i) receipt and invoice capture with integration with payments; (ii) line-item detail (e.g., taxes); and (iii) upload of data into popular small business accounting solutions for ease of back-end cash application, reconciliations, and reporting.  We envision support for B2B, such as the capabilities referenced above, could be achieved by repurposing or repositioning mobile functionalities that are already available in concert with customized education for the market.

Although the mobile payments market for small businesses is still quite new, we expect opportunities for mobile payments to mimic the consumer markets in many respects and represent a significant opportunity for providers to differentiate their solution.

For more information, please contact Balaji Viswanathan, Consultant specializing in Commercial Payments, balaji.viswanathan@firstannapolis.com; or Brian Rutland, Analyst specializing in Commercial Payments, brian.rutland@firstannapolis.com

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