FinTechs Offer Trade Credit Bridge Between Banks, SMBs

Small businesses have found it difficult to keep up with digital innovations in payments and financing. Banks too face challenges developing and implementing systems scaled to small and medium-sized business (SMB) digital payment innovation.

FinTech is coming to the digital rescue, developing solutions including networks to bridge the gap.

For example, global B2B payment firm TreviPay’s newest payment network seeks to enable banks to help small businesses accelerate digitization. The Small Business Supplier Network (SBSN) promises the benefits of automation to small businesses, including increasing selling power, while minimizing the costs with a Software as a Service (SaaS), cloud-based solution.

According to a Tuesday (Aug. 9) company press release, SBSN is the industry’s first payments network built for U.S. banks and their small business customers.

PYMNTS research has found that small businesses badly lag their larger competitors in FinTech adoption. Cost is one of the biggest barriers. To the extent that networks can reduce the fiscal toll to enter the digital age, they have potential to accelerate small business adoption and advance SMB competitiveness.

There are many reasons to for small businesses to adopt modern FinTech. According to the TreviPay website, small business benefits include:

• Debt-free liquidity to help small businesses eliminate accounts receivable and increase cash flow — just like card merchant services but designed specifically for B2B transactions.
• Making small businesses more bankable by strengthening their cash flow and balance sheets.
• Enhanced growth potential based on network functionalities including:
• • Qualifying business customers
  • 100% online processes with real-time decision-making
  • An alternative to swiping to authorize a card payment
  • Receiving real-time payments
  • Providing risk-free payments
  • Dispute handling
  • Debt-free payments

TreviPay distributes the network exclusively through banks that will in turn offer the network as a “white label” offering to their small business customers, so small businesses interested in joining the network will need to check with their financial institutions regarding availability.

According to the company, the platform allows banks to set their fees for the service to SMBs in the range of extant card merchant services (2% to 6%). SMBs will want to evaluate network participation competitively and negotiate the best rate.

Banks do have compelling reasons to adopt such offerings. According to the company site, small business is an enormous opportunity due to low adoption of payment technologies. Banks face competition from FinTech disruptors and have a powerful incentive not to be left behind.

Trillions in B2B trade credit flow through small businesses annually. TreviPay says SBSN delivers a new structured financial solution to enabling banks to capture this market opportunity. According to research commissioned by TreviPay, American small businesses with 100 or fewer employees extend approximately $5 trillion in B2B trade credit to their business and government customers every year when allowing them to pay on invoice terms (e.g., net 30, 60, 90+ days) — the original “buy now, pay later.” Extending trade credit to business customers is commonplace and often considered necessary to remain competitive, attract new or larger customers, and deepen existing relationships, all while building loyalty and driving retention. However, small business suppliers still fund most of the trade credit they extend from their own working capital. This longstanding, inefficient use of their limited cash flow is ultimately an impediment to their growth and resiliency.

According to the company website, benefits to banks from using such networks to embrace evolving financial services for SMBs include deepening customer relationships, strengthening customer retention, driving growth, establishing sound risk structure, built-in compliance and quick implementation without expensive and time-consuming systems integration.

Networks such as SBSN offer both banks and small businesses an avenue to digitally transform their back-office operations rapidly without investing the enormous time, effort, and capital necessary to architect solutions in-house.

Both banks and small businesses need to be able to customize off-the-shelf solutions to meet unique sector and vertical market needs. TreviPay says its SBSN solution allows such customization by all parties involved.

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