How fast payments help SMBs thrive

Small and medium-sized businesses can face challenges when it comes to cash flow. But with access to fast payments, they can spend less time focusing on admin and more time on growth

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Running a small or medium-sized business (SMB) has never been more challenging. Not only do business owners have to manage their everyday responsibilities – such as paying staff on time, controlling cash flow and keeping on top of supply chain issues – but they must also deal with soaring inflation, rising interest rates and increasing competition in many markets.

As SMBs grow and diversify the challenges only increase, including knowing how to access the capital they need to expand, streamlining their operations, or spotting new markets and revenue streams. 

Moreover, many small-business owners typically must take care of these tasks themselves as they lack the dedicated resources of bigger companies. That means they often end up spending more time focusing on financial minutiae and administration and less time on growing their businesses.

Swifter, more efficient payments

Poor management of payments and cash flow is a big part of the problem, making it harder for SMBs to function properly – be that by paying staff and suppliers on time, providing excellent payment experiences for customers, or coping with unforeseen shocks to the business.

Unlike consumer payments, SMB payments typically need to go through traditional legacy systems, full of manual processes and opaque payments machinery. As they look not only to simplify cash flow management but also payment terms as buyers and suppliers, they need efficient payment systems with minimal hurdles. 

Research has shown that 38% of surveyed SMB buyers prefer to pay suppliers via automated clearing houses (ACHs)1, but more than 50% of surveyed suppliers would like to receive payments through faster channels. This clear gap in the SMB space is a massive pain point when it comes to managing supplier payments.

Cash-flow issues can have a huge impact on smaller businesses and can create unnecessary stress for owners already dealing with thin margins

But fast payment solutions are increasingly helping small and medium-sized businesses to overcome these issues. Not only are these payments quicker (clearing in 30 minutes or less) but they are also efficient when it comes to managing and reporting payments with automated processes, visibility of funds and increased integration with other financial reporting systems. 

“Cash-flow issues can have a huge impact on smaller businesses and create unnecessary stress for owners already dealing with thin margins,” says Sean Pitman, head of product strategy and commercialisation for Visa Direct Europe, which runs one of the world’s largest high-speed payment networks.

“Being able to make and receive payments in real time2 takes the pressure off, making it much easier to keep on top of cash-flow management and mitigate against sudden shocks to the business.” Last year, 5.9 billion real-time2 payments were processed by Visa Direct across 190+ countries and territories using its bespoke technology. 

Traditionally, Visa credit and debit cards have been used to “pull” funds from accounts to pay for purchases but with Visa Direct funds can also be “pushed” or sent directly to eligible cardholder debit accounts quickly. Many of the world’s leading banks, merchants, fintechs and payment providers now use the technology to meet their customers’ real-time2 payment needs, 365 days a year.

Speeding up merchant settlements

The technology is making a huge impact on the pernicious problem of payment delays. Some 94% of European SMBs surveyed say they want real-time access to settlement funds and yet these transactions can often take days because of the traditional batch transaction processing prevalent in banks today.

For cross-border3 transactions, payments take even longer to clear as they are funnelled through multiple banks and jurisdictions. Pitman says such time lags can mean the difference between the continuation or foundering of a business. “The gap between a customer making a purchase and the money hitting an SMB’s bank account can be stressful and leave its cash flow in limbo.”

One of the ways that Visa Direct helps small businesses is by facilitating fast merchant settlements, for example by helping merchants to access card revenue when they need it, instead of waiting for the usual settlement cycle. It means the SMB can access the funds they need to invest in their business from their Visa-affiliated payment provider in advance – on nights, weekends or during holidays, all year round. With global supply chains and fluctuating lead times on delivery of goods, Visa Direct is helping SMBs avoid some of the pitfalls associated with traditional payments and merchant settlement issues.

The numbers demonstrate this very clearly. Usually, SMBs see a payment cycle of 45-60 business days. This puts enormous pressure on cash-flow management. And if payments are delayed, which happens a lot, there is little wiggle room. Research on SMBs shows that if an SMB is paid within 60 days their average increase in cash flow is 10%1. That increase is 66% if they are paid in 30 days.

Imagine the potential improvements in SMB cash flow management if they can access or send funds in real time2. It would likely reduce the need for high-interest working capital loans, and there would be no more waiting for the money they’re owed and happier business relationships.

Paying employees and refunding customers 

Fast payments also allow businesses to issue real-time2 refunds, a necessity for businesses given that 20% of retail purchases are returned1. Not only are shoppers often discouraged from returning to a brand if refunds are slow, but a fast process can reduce the costs of customer centre refund queries.

Payment solutions can also take the hassle, delays and high costs out of cross-border3 transactions in local currencies. This can be vital to attract consumers in overseas markets who increasingly expect to make and receive seamless payments wherever they are based and buy from. “Shoppers expect seamless payment, shipping and returns processes and businesses must deliver them to maintain a competitive edge,” says Pitman.

Another key benefit of a fast money movement network is the ability to pay workers more quickly and efficiently, which can help small-business owners to attract talent and reduce staff turnover. 

An EWA solution integrated with Visa Direct allows workers to access their earnings as soon as they earn them. The solution has had a big impact in the freelance and gig economies, where workers say they want to be able to draw down pay quickly, rather than waiting for payday.

“If an hourly employee or a gig worker needs funds to make an urgent payment they simply log on to their company’s EWA app, review their available wages and select the amount to send to their eligible debit card and soon to their digital wallet4 of choice,” says Pitman.

The fast payments ecosystem is helping small businesses around the globe access the tools they need to take control of their finances. To offer real-time2 push payments, a merchant, business or organisation must work with a Visa acquirer and Visa Direct solution provider to implement a Visa Direct solution on their platform. Once implemented, that provider’s customers can then receive payments to their preferred financial instrument – their eligible cards, bank account or digital wallet4.

“Consumers today expect payments to be seamless and businesses must respond if they want to thrive in the modern economy,” says Pitman. “By improving the speed, resilience and security of digital payments, SMBs can meet these expectations while greatly helping to reduce the stress of cash flow management.

“That gives company owners the time and space they need to focus on the more important job of building their business.”

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1 Case studies, comparisons, statistics, research and recommendations are provided “AS IS” and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa neither makes any warranty or representation as to the completeness or accuracy of the information within this document, nor assumes any liability or responsibility that may result from reliance on such information. The Information contained herein is not intended as investment or legal advice, and readers are encouraged to seek the advice of a competent professional where such advice is required.

2 Actual fund availability depends on receiving financial institution and region.

3 Availability varies by market. Please refer to your Visa representative for more information on availability.

4 Wallet functionality varies by market. Please consult your Visa representative.