Helping Small Businesses Help Themselves05.21.2018
In today’s financial technology industry, we hear a lot of buzzwords like artificial intelligence and biometric authentication. While this is important to keeping the industry innovative, there is less focus on technology that is proving to be crucial to supporting today’s growing number of small business owners: mobile check deposit.
The Evolution of the Small Business Owner
Small businesses are an important part of the U.S. economy. In fact, according to the Small Business Administration, they accounted for more than half (64 percent) of total net new jobs created between 1993 and 2011.
Despite this, larger corporations are still viewed as having the greatest impact on job creation, when in fact, small businesses make up 99.9 percent of all businesses in the U.S. – and this number is growing continuously. According to the Kauffman Foundation, there are approximately 530,000 new business owners each month. Moreover, Millennials have become the new face of the entrepreneur by starting businesses more rapidly than the generations before them, including Baby Boomers.
Small businesses face a lot of uncertainty. The Small Business Administration reports that approximately half of businesses fail within the first year and the U.S. Bureau of Labor reports that only one-third survives ten years. But the reasons for their failure may not be because of a lack of market preparedness. Nationwide’s recent Small Business Indicator report found that millennial entrepreneurs are the most prepared and forward-focused in the market, but they lack the financial tools they need to succeed.
So What Does The New Business Owner Want in a Credit Union?
Convenience. These small businesses are taking on new forms as millennials take over. No longer are credit unions catering solely to brick-and-mortar organizations, but also to Instagram-friendly trades like food trucks. These new types of business owners have different needs, and they expect everyday banking processes to run more smoothly than ever before.
Furthermore, the average business owner expects the same level of modernization and accessibility from their financial institution as they do from their smartphone. Because many of today’s entrepreneurs have grown accustomed to the speed, and innovation of technology, they want most of the processes in their life to function in the same manner – banking included.
These new business owners also expect the same conveniences they receive as a consumer, such as depositing checks through their mobile device. In fact, a survey by the Raddon Financial Group revealed that more than half (52 percent) of businesses with up to $10 million in annual revenue rely on mobile banking to access and manage their accounts. For millennial business owners, mobile banking is even more important, with nearly 70 percent relying on their mobile device.
Clearly, mobile services are a must-have, but less than 30 percent of financial institutions with $10 billion in assets or less and 20 percent of credit unions offer mobile banking to their small business accounts, according to Aite Group. Even the larger banks with more than $10 billion in assets are failing to meet this demand, with only 65 percent offering mobile services, pointing to the earlier challenge that many small businesses fail due to a lack of financial tools.
Lack of Mobile Check Deposit Now a “Deal
Mobile services are – we can all agree on that. continue to take a back seat in the mobile and digital services discussion, despite their importance. The use of has declined, but the checking industry is not in a tail spin anymore, leveling off mainly because checks are still the preferred method of payment for businesses. According to a 2017 report by the Federal Reserve System, checks are the second most frequent way that businesses make payments following ACH credit transfers.
For consumers, are still relevant, especially for large transactions. In fact, the 2103 Fed study found are still generally used to pay for bigger sums such as rent. While other payment methods emerge, checks are not going away.
For small businesses, this is especially the case, yet few financial institutions offer convenient ways to deposit those checks into small business accounts. of the financial institutions that do offer business clients with these solutions are simply white-labeling consumer products, which do not provide businesses with the f functionality they need to be successful, such as multi-location features and risk thresholds.
Gone are the days when people visit their local branch twice a week to make a deposit, and because of this change an on-the-go mobile check deposit solution is an .
Mobile deposit is no longer an extra feature to enjoy; an expectation. to offer small business customers the option to deposit checks through their mobile device will drive them to institutions that do, meaning a loss in a very profitable and growing market segment. Don’t make this mistake.
Murthy Veeraghanta is chairman and CEO of VSoft Corporation, a global provider of information and technology solutions for financial institutions.