Today’s future-fit commercial payment capabilities couldn’t have picked their go-to-market timing better.
As businesses look to shape and refine their economic forecasts and downstream working capital needs for the near future, they’re realizing the need to modernize their commercial spend operations and tap emergent financing solutions to better operate in an increasingly digital landscape.
It is a critical inflection point for Main Street.
Just half of small business banking customers are now considered financially healthy, and many businesses — particularly small and medium-sized businesses (SMBs) — are financially vulnerable, suffering from capital constraints and left trying everything they can to simply stay afloat, much less ahead of their competitors.
But each competitive edge counts in today’s operating environment, and two areas that are receiving increased attention from both businesses and solution providers are alternative commercial payment vehicles and data-led business financing solutions.
Access to working capital and other financing solutions is tightening due to macro pressures, leading organizations to rethink their commercial transactions and optimize for liquidity management.
Still, there remains no boilerplate solution to navigating today’s troubled economy, and old habits around legacy workflows die hard.
Businesses that take decisive action now will be best positioned for future success within tomorrow’s ecosystem relative to their slower to adapt peers.
See also: A Tight Economy Calls for Spend Management Automation
The world is moving toward digital money movement, and businesses need to stay on top of the trends within electronic payments to remain competitive.
Paying commercial vendors remains a major legacy pain point for businesses of all sizes and sectors. The commercial payment process has historically been riddled with hurdles and mismatches when it comes to how firms pay and get paid, with systems talking past each other and accounts payable and accounts receivable departments still swimming in paper and paper-based processes.
“There’s still an awful lot of cash and paper checks being used,” Judith McGuire, SVP global products at Discover® Global Network, told PYMNTS in a recent discussion. “We have an environment where consumers are growing ever more digital, but then when we get to business purchases, everyone is back to cash and checks.”
PYMNTS research has found that embedded finance could help move commercial transactions beyond the confines of the paper check and the paper invoice.
Given the many welcome benefits digital transaction capabilities provide, this is a fortunate evolution.
Modernizing commercial payments helps both buyers and suppliers manage their cash flows by simplifying cash management and invoice reconciliation, as well as offers benefits such as cost savings, trackability, speed and security.
The ability of digitization to provide greater certainty on either side of the transaction than traditional paper-based methods is something that both buyers and suppliers are increasingly looking for in light of the uncertainties swirling around today’s operating environment.
The legacy banking system wasn’t designed toward making it easy for unproven and newer businesses to apply for loans, and many SMBs have stayed away from digital options like neobanks as a result of a lack of education around their offerings.
This has left many firms facing a liquidity crunch.
“What we’re seeing is an increase in need from small businesses for funding,” Scott Steinberg, chief product officer and chief operating officer at data intelligence platform Enigma Technologies, told PYMNTS.
As the financing landscape continues to evolve, understanding the evolving preferences and needs of SMBs will be crucial for lenders.
And as the payment stack modernizes, commercial and virtual cards are emerging as a crucial tool — and lifeline — for businesses looking for a little more working capital flexibility, or capacity for agility within their operations.
Findings in the PYMNTS study “Main Street Health Q2 2023: Credit’s Key Role in SMBs’ Plans,” a collaboration with Enigma, reveal a 63% increase in the share of SMBs planning to use business credit cards compared to those that have access today.
Oded Zehavi, CEO at Mesh Payments, told PYMNTS that part of the reason businesses are turning to virtual and commercial cards is because, “it saves so much time for finance teams … even though historically there was a feeling that vendors don’t like it, they prefer checks, delays and inefficiencies across other commercial payment instruments add a lot more manual labor to operations”
And in challenging times, just making life easier is often at a premium.
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