Solving the SMB Credit Crunch

According to Mercator Advisory Group, 64% of small and medium businesses (SMBs) report having financial challenges. Additionally, 69% have used personal funds and personal credit to meet those financial challenges.

Financing has always been a challenge for SMBs, and COVID-19 has only exacerbated that problem. According to the Biz2Credit Small Business Lending Index, overall loan approval rates in December 2020 were down over 50% vs. December 2019. Big banks only granted 13% of small business loan applications vs. 28% in December 2019. Over the same period, small bank lending dropped even more dramatically, from 51% of loan requests to just 18%.

There are a lot of reasons for the sharp decline. A number of small businesses were hurt badly by the pandemic and likely determined too risky in the current environment. In other cases, small business owners simply lack a proper credit history or suffer from poor credit ratings from the past. Either way, they can’t get access to the credit they need—either in the form of loans or business credit cards— to maintain and grow their business.

The problem is traditional credit issuers are ill-equipped to meet the needs of small businesses. For one, they are overly risk-averse and they try to manage that risk with irrelevant data, passive processes, and stale credit monitoring that does not accurately reflect a small business’ true credit worthiness. As a result, issuers push small businesses to low revenue/low risk pre-paid debit cards which require personal guarantees or expensive revolvers. Other options such as Buy Now, Pay Later-type solutions for businesses can increase short-term buying power, but they also come with high fees and do little to help build credit lines for the longer-term health of the business.

Small businesses require more flexible financing alternatives that are better suited to their specific needs and set them up for long-term success and financial independence rather than continuous struggle and revolving debt. They need tools that enable them to use their cash flow and credit more easily instead of putting up barriers that restrict their options.

For example:

Eliminate personal credit scores and guarantees from the process. Evaluate the credit worthiness on the business, revenues, capital requirements and cash flow.
Offer small businesses a credit vehicle that combines a credit card with a line of credit.
Consolidate the small business’s spending on that card and integrate it with the merchant’s credit card processing system to make managing cash flow automatic and easy.
Let merchants designate a portion of their daily settlement to be deposited into their credit account and automate those deposits.
Make those funds available to the merchant immediately to effectively run and invest in their business.
Automate daily deposits to the card and eliminate the need to worry about paying bills monthly and keep interest fees that cut into merchants’ bottom line to a minimum, even zero with regular settlements.
This approach helps small business owners avoid relying on personal credit cards, high interest term loans and merchant cash advances or personal assets to fund their business. It allows them to use their personal credit more efficiently and avoid amassing personal debt that could create credit issues and affect their ability to make future personal and business investments. By consistently paying off or paying down their balance, they can build their credit without incurring more and more debt. It also builds up a cash reserve that can then be used when an emergency need arises.

Small businesses face unique credit and cash flow challenges that need to be addressed with innovative thinking. We can’t solve the problem by trying to retrofit traditional tools. That has been proven over and over again.

Eugene DeSilva is the General Manager, Small Business Credit Solutions and PayVus for Aliaswire, Inc., a Massachusetts-based fintech company that works with banks and businesses on digital payments and credit. Eugene has over 25 years of experience in the global payments industry working with small and mid-size businesses at MasterCard, American Express and CIBC.

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MPC announces keynote speakers

MPC21, the Mobile Payment Conference, is being held August 17th – 19th this year in Phoenix, AZ. 

MPC recently announced event highlights and the speaker lineup  for their 2021 Digital Commerce Event.

Scott Goldthwaite, President of Aliaswire, has been announced as a keynote speaker.

Scott will be speaking about new Banking and Fintech solutions for financial institutions and their commercial clients.

Read full The Green Sheet article.

Surcharging & Cash Discounts – Strategic Considerations

By Andy Waskey
Partner Solutions

I recently had the privilege to participate in the Mobile Payments Conference panel session panel to discuss, Surcharging & Cash Discounts…Separating Fact from Fiction. Surcharging as a business practice has gained momentum over the past several years and, when done correctly, can be a very useful tool to ease the costs that merchants and billers have traditionally absorbed as a cost of doing business.

Three primary business principals apply to instituting a surcharge business solution:

Effective Pricing – to ensure adoption and to minimize payer impact

• The offer of “free” merchant processing is very enticing to merchants/billers that month after month see their processing expenses cut into their bottom line. It is, however, important as a payments technology/service provider to educate the merchant/biller on the hidden cost of fee-based processing, including but not limited to customer satisfaction, customer retention, and timely payment submission.

• As a payment technology provider, Aliaswire’s DirectBiller® payment platform can assist merchants / billers in the establishment of their compliant fee-based program to balance the benefits of deferred cost processing. DirectBiller can be configured to set a customer-paid fee that will cover the cost of interchange/dues and assessments and a reasonable cost of service. This includes agreeing to spread (just as in pricing a traditional merchant) or perhaps a hybrid fee program that reduces merchant/biller cost as well as minimized payer impact. As a best practice, we at Aliaswire review our surcharge portfolio monthly and quarterly to identify card usage trends and adjust the fee accordingly to ensure that the fee to the payer is reasonable and appropriate. In short, it is essential to share with your clients the entire cost structure and agree to a fee solution that maximizes payment channel adoption.

Surcharge is best for certain markets

• Educating your merchant/Billers and sharing that information with their payers is an important responsibility, perhaps explaining to payers that paying a fee for a specific type of payment allows the business to keep prices down. Also, offering no fee ACH, as an alternative goes a long way to winning a payer’s trust.

• Traditionally, surcharging has been applied in retail/restaurant/card present environments, however, there has been a lot of push-back by consumers who can take their business elsewhere for the same product/service and not pay a fee. In our experience, we have seen successful surcharge in card-not present environments for merchants /Billers in financial services and B2B markets where ACH is always the “free option”

Being Compliant – to adhere to the changing state rules with technology solutions

• Merchants/Billers rely on their trusted partners to guide them and help navigate one of their most essential business functions, payment acceptance. This is true of any merchant processing experience; in the case of fee-based processing, this adds additional complexity.

• In a surcharge model, the merchant is ultimately responsible for association rules as well as state rules about payment acceptance, often in a CNP environment.

• To maintain compliance with card brand and individual state regulations, Aliaswire’s patented technology, TranCentives® instantaneously verifies multiple criteria of each individual transaction, such as the credit card BIN, ZIP code of payer, transaction value to verify compliance and block non-compliant transactions.

Aliaswire understands the challenges the modern Merchant/Biller face; our DirectBiller platform along with our patented TranCentives® transaction-level compliance and rate calculation engine, enables a compliant, full-service, fee-based solution for merchants/Billers.

PODCAST: How Financial Institutions Can Recapture the Bill Pay Market

In recent years, merchants have chipped away at the bill payment market, offering consumers a pleasant overall experience and a breadth of payment options. While many financial institutions offer forms of bill payment, the experience, transparency, and setup is not ideal for consumers. Because of this, merchants continue to gain bill pay market share. 

To take a closer look at why it is important for financial institutions to recapture the bill payment market and how leveraging electronic bill payment and presentment (EBPP) technology enables them to do so, PaymentsJournal spoke with Nirmal Kumar, CTO and Head of Product at Aliaswire, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

Listen to Full Podcast and Read Supporting Article on PaymentsJournal 

 

Aliaswire Receives Visionary Award at MPC20

Chicago and Rohnert Park, Calif., Aug. 25, 2020 ‒ Aliaswire Inc., a leading payments technology innovator serving financial institutions, today received the prestigious 2020 MPC Visionary Award at the Mobile Payments Conference. Founded by The Green Sheet Inc. in 2019 to recognize payments leaders, the award recognizes innovators that disrupt the status quo.

“Aliaswire reflects the payments industry’s ability to remain relevant and vibrant by constantly refreshing and reinventing its service models,” said Kate Gillespie, CEO of The Green Sheet.

Marla Ellerman, executive director of the Mobile Payments Conference, agreed, stating, “Making card issuing available to the merchant acquiring channel was a bold and innovative step by Aliaswire that has delivered dividends to the entire payments value chain.”

“Thank you, Mobile Payments Conference and The Green Sheet for this very prestigious award,” Scott Goldthwaite, Aliaswire president, said. “I am honored to accept this award on behalf of the entire Aliaswire team, especially for our founder, Hoss Mohsenzadeh.”

Goldthwaite added that Mohsenzadeh, who recently passed away, instilled his relentless pursuit of innovation within the company; his heritage lives on in the lives and work of Aliaswire employees, partners and customers.

The MPC Visionary Award recognizes ingenuity in the financial technology industry that represents a leap forward or reimagination of the payments process. Winners are among the few that can be legitimately described as “game-changers.”

Recipients of the MPC Visionary Award are identified and nominated by The Green Sheet and the Mobile Payments Conference executive team led by Executive Director Marla Ellerman and the MPC Board of Advisors, which includes payments industry experts, analysts and journalists. Nomination and selection are based solely on their discretion.

Candidates are nominated based on one or more of the following criteria:

  • Focusing on future impact
  • Designing new technology
  • Disrupting accepted processes
  • Shrinking investment or costs
  • Accelerating time to market

About MPC Mobile & Digital Commerce Event:

MPC Mobile & Digital Commerce Event is the premier annual conference and exhibition on the future of alternative payments worldwide. MPC is known for bringing together thought leaders, innovators and decision-makers from financial, technology, government, retail, marketing, and mobile industries to discuss the evolution of the payments industry. Attendees benefit from access to the world’s foremost experts in emerging payments and commerce, blockchain and digital currencies, cybersecurity and consumer privacy, customer experience and loyalty, and customer engagement and marketing.

About MPC20:

MPC20, which marks the 10th year of the Mobile & Digital Commerce Event, is set for August 24-26, 2020, as a virtual conference. This year’s theme, “The Future of Mobile & Digital Commerce is Here,” will focus on the current and future applications of alternative payment technologies in established economies and emerging markets. For more information or to register, visit www.mobilepaymentconference.com

About The Green Sheet Inc.

The Green Sheet, established in 1983, is a payments industry trade publication and online resource that empowers and connects today’s payments professionals. Our suite of print and digital resources and trade publications has continuously evolved in response to the ever-changing payments industry. Throughout this journey, we have provided our readers with the requisite knowledge, talent and resources to grow, diversify and build profitable business relationships. For more information, visit www.greensheet.com

About Aliaswire Inc.

Aliaswire is a leading payments technology provider of highly advanced, secure and reliable transaction processing solutions. Aliaswire’s unparalleled intelligent processing platforms and intellectual property continuously evolve and scale to meet changing market demands across multiple verticals. An industry-recognized innovator, Aliaswire provides multi-tenant payment processing capabilities to the market through our growing network of channel partners and resellers. Aliaswire’s network includes leading financial institutions, Fortune 500 companies, and multiple payment networks. Core products include DirectBiller®, the industry’s first, fast onboarding channel-centric electronic bill present and payments (EBPP) platform in the US.; PayVus®, the only turnkey bill settlement to cards platform that enables ISOs and Acquirers to offer merchants a business credit card; Transcentive®, a tender-type steering and interchange management solution for merchants and PayVox®, a consumer bill payment platform for prepaid program managers and financial services providers. For more information, visit www.aliaswire.com

Small Business Credit Cards Present a Unique Revenue Approach for Card Issuers

 

The small business market in the United States is vast, yet a lot of these businesses struggle to access the financial services they need. In response to cash flow issues and other financial challenges, small business owners are forced to make decisions that directly, negatively impact not only the businesses themselves, but the owners’ personal financial situations.

Many of these challenges could be fixed with improved access to small business credit cards. However, card issuers are understandably hesitant to approve card applications from potentially risky merchants. Even so, the small business card market presents unique revenue opportunities for issuers—and these opportunities should not be ignored.

To dig deeper into how organizations can run a successful small business issuance program and a risk-free way to do just that, Mercator Advisory Group and Aliaswire teamed up to host a webinar: Small Business Card Opportunities: A Unique Revenue Approach. The presenters were Brian Riley, Director of the Credit Advisory Service at Mercator Advisory Group, and Eugene DeSilva, PayVus Head of Product at Aliaswire.

Read Full Article at PaymentsJournal.com

View recorded Mercator Advisory Group / Aliaswire Webinar on Topic