Restoring Cash Flow…With Cards

Small businesses are the hardest hit by the COVID-19 pandemic, which i2c President Jim McCarthy describes as unlike any disruption seen in the modern age. As customers vanished, cash flow went from being the most important thing to being “the only thing in a survival-type economy,” he recently told PYMNTS.

Almost ironically, card products are poised to play a big part in the 2020 cashflow survival story.

McCarthy notes that cash – unlike the novel coronavirus – is not spreading at the moment. “In the payments space, how do you get cash now? How do you get lines of credit open, whether it’s through the stimulus package or SBA loans or through friends and family?”

“There are a lot of retailers that are now looking to their local community to effectively prepay through gift cards to sustain themselves in the short term,” he said.

Similarly, offering payment choice has gone from a “fun idea” to “mission-critical” faster than anyone could have predicted. “These are choices we’re having to make every day – like what is the most important thing to do for your health, but also to feel secure,” McCarthy told PYMNTS. “Payment choice will be very important with respect to keeping your business afloat. Cards and electronic payments are becoming more and more important in an age where getting guaranteed funds quickly, getting money into the bank account to keep a business open, are the drivers both today and into the future.”

Given the ubiquity of cards and the ability to get fast payment guarantees by using them, “In the short term, I think cards will be a very important way for companies to pay bills and get their supply chain back up and running,” McCarthy said. “We’ve already seen innovation in the space with respect to cryptocurrency networks, as well as some of the things the broader domestic and global networks are doing to effectively replumb electronic payments for real-time payments.”

McCarthy noted that unlike the 2008 crash, with COVID-19, “The good news is that banks are kind of leading the way as opposed to where we were 10 years ago coming out of the Great Recession. They have strong balance sheets and the ability to lean in and lend, which is very important.”

He explained that large money center banks worldwide, which have been working at solving global supply chain and liquidity issues, “are in a very good position to lead the way. And there’s been work going on, whether it’s around SWIFT or domestic real-time schemes, where the banks have been having discussions and looking at ways to accelerate real-time payment rails, which I think are good building blocks” for the COVID recovery effort, McCarthy added.

Calling for a “unification” of sorts for payments rails to inject more interoperability and overall momentum, McCarthy said, “We’ve started to see this with things like what Ripple’s been trying to do, and certainly with what Visa has been trying to do with B2B Connect. And we’ve been thinking about how to make the payment rail more efficient, less opaque, more transparent from a liquidity perspective, to solve some of the pain points that exist today in trade finance.”