Accelerated Payments Set to Boost Growth for Small Businesses

Small- to medium-sized businesses (SMBs) often bear the brunt of significant payment delays. However, the recent news that the U.S. securities market will transition to a T+1 standard settlement cycle highlights the increasing importance of faster payments for Main Street SMBs. They are not just seeking speed but also striving for improved cash flow efficiency.

As the realm of instant payments continues to advance, the potential for SMB growth is enormous. By overcoming challenges and leveraging opportunities presented by real-time transactions, SMBs can enhance working capital efficiency, elevate customer satisfaction, and gain future-ready competitive advantages. This sets the stage for a more dynamic and prosperous business environment.

The transition towards real-time transactions is not merely inevitable but essential. As the FedNow Service nears its one-year anniversary, faster payments within the SMB sector are poised to improve both the quality and speed of commerce, ultimately enhancing overall cash flow for a significant segment of the economy.

The drive towards real-time payments is supported not just by businesses but also by banks and financial institutions. These entities are responsible for facilitating transactions within seconds and providing round-the-clock access to funds.

Historically, SMBs have been underserved by financial institutions that struggle to categorise and address their needs adequately. This has led to fragmented solutions, leaving many small businesses with incomplete views of their finances, cash flows, and payments.

Consequently, many SMBs grapple with operational inefficiencies and have a growing demand for secure and convenient payment methods that offer greater financial visibility. Instant payments can improve the quality and speed of commerce and the overall cash flow of half of the economy. 

Smaller businesses tend to face greater uncertainty around payments. Faster payments provide more certainty than traditional, delay-prone methods. 

Over 80% of SMBs now receive instant ad hoc payments for their goods and services. In return for this speed and convenience, 57% of SMBs expressed willingness to pay a fixed fee for instant payments.

Despite these advantages, the smallest SMBs, those generating less than $100,000 annually, have reduced their use of instant payments, likely due to the associated costs. However, these costs may be minimal compared to the ongoing expenses embedded in legacy payment mechanisms fraught with delays, fraud, and uncertainty. There’s a huge opportunity for small and mid-size businesses, and even large businesses, to move away from checks and adopt other payment methods.