Financial inclusion: Advancing SMBs
Kim Bynan | SVP, Head of Prepaid & Government Solutions, FIS and Mike Kresse | SVP, Head of Business-to-Business Payments & Money Movement, FIS
January 17, 2022
Historically, the term “financial inclusion” has referred to the industry’s efforts to empower individuals to take advantage of the different offerings a financial institution can provide. Financial inclusion can benefit individuals in many ways, such as encouraging the opening of a new savings account to take advantage of interest increases or beginning a journey in investment. However, many in the industry do not currently realize that small and medium size businesses (SMB) are also among this segment. Today, 10% of these SMBs are unbanked while 25% are under-banked. The main reason for these surprising percentages has been a combination of both increasing software-as-a-service models as well as financial products requiring hands on attention from business owners. The latter often leads to business owners, who are already focused on building their customer base, to opt out of different financial products that could truly change their business. In addition, this segment typically earns under $30,000 annually, meaning that many in this population need cash-flow and financial solutions that can directly support their business. This problem was only made worse since the beginning of the pandemic as businesses also had to dramatically shift their business models to create an omni-channel experience for their customers.
How does financial technology advance financial inclusion for SMBs?
Financial technology brings universal financial access through solutions that have a focus on three key areas. These areas are:
Helping businesses make the shift to a post-COVID world: One of the most drastic changes that SMBs felt because of the pandemic was providing an omni-channel experience for customers. This meant that businesses needed to get set up online fast or risk losing their hard-won customer base to the convenience of a large retailor. This also included accepting all forms of payment, specifically for EBT recipients who rely heavily on merchants that accept this form of payment. For example, Worldpay by FIS launched an online PIN solution called EBT eAccept. This allowed more merchants to accept EBT e-commerce purchases and has expanded the merchant network by over 300 locations, allowing more shopping options for EBT recipients.
Improving cash flow to keep businesses healthy: By partnering with a fintech company such as FIS, merchants can open an online business account easily and efficiently. These accounts have multiple benefits but most importantly, SMBs can now receive money much faster. This provides options on how to manage funds and allows for the best possible choice to be made.
Simplifying financial products to make them more accessible: As mentioned before, a large reason for business owners to opt out of different financial services is due to the complexity of the product and the involvement on their part. Business owners want to focus on building their customer base and not on the back-office, financial aspect of the business. However, by integrating fully independent financial products & services into a single platform where customers interact already, financial institutions can simplify the complex world of finance. This means allowing customers to send invoices, accept all forms of payments, secure financing, pay bills, etc. all through a technology as convenient as an app.
Financial inclusion is essential not only for the individual unbanked consumer but also for a notable segment of SMBs. However, by simplifying the complex world of finance to the point where it is like a typical consumer experience, financial institutions can overcome this obstacle and provide essential financial services for these businesses.