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As the engine that generates 60 to 80 percent of new jobs created, the small business community could potentially lead the way in the economic recovery.
Small businesses are an essential part of the fabric of American life. They represent 99.7 percent of companies, with 77 million people – or more than half of U.S. workers – employed by small businesses. Small businesses with annual revenue under $10 million account for about two-thirds of total U.S. payment transactions.
Despite this strength of numbers, most small businesses find themselves underserved by their financial institution. Bankers historically faced a dual dilemma in catering to smaller companies, viewing them as expensive to serve based on their preference for personal service; yet at the same time companies were perceived as price sensitive or even unwilling to pay for the level of products and services they demanded. As a result, institutions delivered small business products from the retail side of the bank, often using consumer product offerings that did not mesh well with the companies’ needs or requirements.
Majority of Small Businesses Looking to FIs for Electronic Payments Technology
The contemporary small business has evolved, however; driven in part because in the current competitive landscape, “survival of the fittest” is truer today than ever before. Advanced technology is a ubiquitous part of our society, and small businesses in general have become more comfortable using technological tools. Small business recognizes that they can leverage technology to “do more with less.” About two-thirds of small businesses manage their finances with accounting software, and 80 percent say they want their financial institution to provide a technology-based electronic payment platform.
What does this mean for community banks who are interested in winning a larger share of this “Main Street” market at the expense of the biggest banks, who have traditionally served the lion’s share of this group? It means today there is a window of opportunity to gain a bigger slice of this exciting market. (A word of caution to those banks that fail to seize this opportunity: over half of small business owners say they would change their bank if a competitor offered the right mix of products and services.)
The speed of life for most small business owners is hectic. Time is one of their most precious resources. Their top priorities are running their company efficiently and profitably, and serving their customers. These activities usually take precedence over driving to the branch to make a deposit. Many small companies choose to implement RDC based on the convenience and time savings. With RDC, the deposit can be made at a time that is convenient with their schedule, without leaving their work premises.
Hectic Schedules Make RDC A Necessary Convenience
Forty-one percent of Americans run a small business in addition to their primary job. These workers may not have the luxury of taking time during the day to make a trip to their financial institution and must make their deposits when their schedule permits. For these entrepreneurs, RDC represents a convenience that may in fact be viewed as a necessary tool for staying on top of administrative tasks required to keep their company progressing forward.
Another way that RDC benefits small businesses is by giving them the means to deposit payments into their account faster and more frequently, ultimately improving cash flow. Although checks heavily dominate small business receivables, small business owners make fewer trips per week to the branch to make their deposit than their larger company counterparts. By employing RDC to make a deposit daily or as payments arrive, companies can improve their cash management and eliminate “desk float.” According to Aite Group, 50 percent of small companies said faster availability of funds would increase their interest in using RDC. Faster funds availability is an important advantage, as small companies typically need those funds for purchasing supplies and meeting payroll.
The small business market for RDC may appear to be richly rewarding for banks and credit unions seeking new depository relationships; however, new challenges accompany these opportunities. Institutions offering RDC to small businesses must use diligence by employing “know your customer” strategies and by leveraging the complete complement of risk mitigation tools that are now standard fare in the “next generation” RDC solutions. This will not only help protect the financial institution, it will also serve to assist the company in identifying potential fraud.
There is another compelling reason for institutions to reach out to small businesses with RDC: RDC has proven to be a “sticky” product. Companies that have tried RDC love it, and virtually all continue to use it. RDC benefits both the institution and small businesses; it is a valuable tool for developing lasting, profitable depository relationships, and a way for small companies to harness technology to maintain viability and fuel growth.
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Article Source: ArticlesBase.com - Check Deposits at the Speed of Life
