SMBs Zero-In On RTP For Recovery

Small businesses, not multinational conglomerates, create most American jobs. That’s why everyone from governments to private enterprises to nonprofits are working furiously to help small and medium-sized businesses (SMBs) weather the COVID storm and remain viable.

PYMNTS’ September Disbursements Tracker®, done in collaboration with Ingo Money, looks at the challenges SMBs are contending with during this deeply unsettling economic episode.

“Microbusinesses are fighting hard to stay afloat as the ongoing pandemic continues to close businesses and cause bankruptcies worldwide. Many of these entities have been forced to rethink their business models, as the health crisis has impacted both how consumers want to pay and how businesses can make B2B payments to their vendors or other partners, according to the Disbursements Tracker®. “Having a transparent, real-time view of cash flow is critical for businesses to stay profitable at this time — as is making sure they can receive disbursements such as government loans as quickly and as easily as possible.”

Transparency into finances and real-time funds access are among the top strategies for SMBS, as outlined in this instructive new edition of PYMNTS’ Disbursements Tracker®.

Ubiquity and Velocity

Legacy payments are proving to be a major barrier to establishing a superior new cash flow schema for Main Street businesses. Financial institutions (FIs) of every stripe are moving to address the gap – sometimes quickly, sometimes not.

“In order for SMBs to truly capitalize on the speed of instant payments, they also need ubiquitous choice in payment methods available across the channels they use. There is still much work to do here. A recent PYMNTS study indicated that while the number of disbursements is increasing, the number sent instantly barely breaks 10 percent,” Drew Edwards, CEO at Ingo Money, told PYMNTS.

Delivering on the promise of instant payment ubiquity “requires innovation from the treasury banks that are necessary parties to these transactions, but face existing legacy technology and infrastructure challenges,” Edwards said. “With FinTechs ready to step in and bridge the gap, the promise is near. To help keep SMBs going, to help keep the economy moving in a post-COVID-19 pandemic era, the corporates need to keep pushing for instant, so much so that the banks will not be able to ignore [it].”

Be that as it may, much work remains. “Interest in quicker disbursements may be growing, but their availability is still limited, especially among microbusinesses. PYMNTS’ Disbursements Satisfaction Report 2020: Monetizing Payout Choice found that just 8 percent of these firms could receive their money via instant payments,” per the Tracker. “Such payments could be made directly to credit, debit or prepaid cards or to digital or mobile wallets.”

Real-Time, Real Soon

The provision of real-time payments (RTP) turns out to be a major draw for SMBs — no surprise there, given the COVID cash flow crunch — but parties agree that it needs to happen faster.

“One recent survey found that more businesses are seeing real-time payments’ benefits firsthand, with only 9 percent of corporate professionals stating that they have no plans to implement the TCH’s RTP rail,” the Disbursements Tracker® states.

“Nine out of 10 businesses also reported broad interest in the network, with the study finding that 81 percent of those firms believed RTP would significantly shift how they made and received payments in the future.”

In that survey, 52 percent of businesses said they will join the RTP network to manage their cash flows more effectively. Close to 40 percent said they will use RTP to fully replace paper check payments and migrate disbursements to digital channels.