Small and medium businesses are used to being called the “backbone of the economy,” operated by “salt of the earth” owners. Pats on the back they have aplenty; but what they are missing is an outlet to voice their concerns, particularly their technology concerns, and be heard.
So says Paul Bridgewater, CEO of Sage Payment Solutions, the payments division for Sage North America. Sage cooperated with B2B payments platform PYMNTS.com for the first quarterly PYMNTS.com SMB Technology Adoption Index, powered by Sage (download required) for Q4 2015.
The findings: SMBs seek simplicity, but claim it’s hard to find
Among the Q4 2015 findings: nearly half (48%) of SMBs use one technology supplier to handle accepting payments, processing payroll, issuing invoices and accounting, what Bridgewater calls “The Golden Triangle.” Meanwhile, 34% use two or more suppliers for their financial technology solutions.
Sage believes more of these businesses can benefit from a unified solution with a subscription-based model. And 2016 will be the year that Sage makes the shift away from individual solutions in payments, payroll, invoicing, and accounting, says Bridgewater.
“What you’ll see in 2016 is a shift from integrated to truly embedded [solutions],” he says. “We think that’s a key shift we’re bringing to the marketplace, where an accounting software will be a financial destination for payments. You’ll see that delivered in the first part of 2016 in Sage 50 and Sage 100.”
Presuming businesses want to simplify operations, why would SMBs use multiple solutions for payments, payroll, invoicing, and accounting?
“Those who use multiple suppliers say they do so because it’s the only way they can get everything they want,” says Bridgewater. “Simplifying isn’t just bringing in those three areas, the Golden Triangle; it’s how you truly bring them together where you’ve got one view that lives very much within the accounting software that they use on a daily basis. Up until now you’ve seen suppliers and technology partners in the industry bring those three areas together. But typically they’re offered as three individual products versus [living under] a destination accounting software.”
Payments slow, not SMBs first priority
The research also found that electronic invoicing is gaining adoption as 31% of SMBs use electronic invoicing, and, of those SMBs, 20% can also accept payments electronically.
Frankly, those numbers are low, and likely contribute to the 46% of SMBs that cite not getting paid on time as the most frustrating thing related to receiving payments from customers. Businesses are generally slower to write checks than to make electronic payments. For that matter, check writing is practically non-existent in the European Union and not even included in some Sage products there.
The Index finds that US SMBs are lag in adopting payments technology, with 60% of those surveyed saying their highest area of technology adoption is for managing payroll. They are more focused upon their businesses than payment technology, said Bridgewater in a statement about the Index, “Despite a plethora of options available to streamline the payment process.”
A third interesting finding from the Q4 2015 Index is that 64% of SMBs that are not currently prepared to accept EMV cards (Europay, MasterCard, and Visa) have no plans to do so.
The introduction of EMV-enabled cards is meant to better define who is liable for fraudulent debit and credit card transactions. October 1, 2015 marked the liability shift, placing the responsibility for fraudulent charges made with EMV-enabled cards on the least secure entity – merchants and other SMBs.
“A key thing to remember is that October 1 was very much the start date for EMV, not the end date,” says Bridgewater. Also true, both SMBs and consumers appear baffled by new payment technologies such as Apple Pay, Walmart Pay, Samsung Pay and PayPal. In face-to-face environments, PayPal has achieved just 9% penetration and Apple Pay just 2%, despite its coming standard with iPhones.
Bridgewater says of that confusion, “I think you’ll see that start to clear in 2016, coming from strong information sharing from providers like Sage [about] our small and medium business products. And clearly you’ve seen Visa and MasterCard ramp up reissuance of EMV cards in the marketplace, driven unfortunately by some of the breaches we’ve seen. So around 152 million EMV cards will be issued by Visa over the next four to five years, and Visa is predicting over four to five years that 90% will be chip-and-PIN.” Chip and PIN offers an incremental gain in security over chip-and-signature, the most common form accepted now. “So there will be a four or five year marathon before we see a significant number of EMV compliant cardholders as well as acceptors or merchants in US markets.”
Expect new findings in Q1 2016
Bridgewater says Sage undertook the new research with PYMNTS.com because they felt there was a gap in understanding the views of SMBs when it comes to investing in technology. There are US Department of Labor stats galore about SMBs, but not about their technology requirements. “If we’re going to provide the right level of services and support and technology to [SMBs], it would be pretty strange if we didn’t have a strong vehicle to actually communicate with these businesses and replay their voice back into what we do from a market and product perspective,” he says.
PYMNTS.com gathered 684 surveys, and says Bridgewater “These were not two- to three-minute surveys: these were actual conversations with these businesses. The approximate age of these businesses is 30 years with an average 25 employees and revenues around $5.7, so these are reasonably substantial contributors to the US economy with lots of experience and knowledge around about what works and doesn’t work. We’re not talking about one-man-bands and weekend entrepreneurs.”
“We think quarter-by-quarter is a reasonable timeframe” to publish the index, says Bridgewater. “Think about how quickly technology is changing and the payments industry is changing, and certainly, regulation is changing. A quarterly [cadence] gives us the opportunity to get additional questions and attitudes and perceptions around such topics as customer payments and acceptance, purchase order management systems and service, and how that’s changing.
“Something you will certainly see changing is the access to alternative funding, which changes on a very regular basis. So, there’s that substance of a consistent view, mixing in the new changes that happen on a regular basis.”
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