Dale Laszig, payments journalist and Board Studios Inc.,  interviews Scott Goldthwaite, president at Aliaswire, on why issuing is the next stage in the evolution of merchant acquiring. Scott discusses the bold new PayVus small business card issuing platform that adds a new page in the merchant acquiring playbook, the residual stream multipliers of the program and impact it has on traditional merchant services.

Understanding How Millennials and Generation X Are Changing Bill Payment

Billers and their customers continue to switch from traditional paper methods for making and receiving payments, like cash and check, to digital methods, like online credit and ACH transactions. As this trend continues, businesses who invoice their customers, otherwise known as billers, in various industries are looking at mobile transactions and what they mean for the future of payment processing. Adoption of mobile payments is happening slowly but steadily. According to a forecast by eMarketer, the value of mobile transactions will increase by 128.3% in 2017. Additionally, the Federal Reserve reported that among smartphone owners who made mobile transactions in 2016, paying bills was the most common payment activity they performed, at 65%.

The emergence of mobile payments offers some encouraging incentives for Billers, including the opportunity to improve the way they communicate with their payers and the speed in which invoices are sent and payments are processed. Furthermore, offering multiple channels through which customers can pay increases the likelihood that Billers will receive funds accurately and on time. As more and more young people are growing up as technology natives, mobile payment methods for bills and general purchases are becoming more prominent. Younger smartphone users are much more willing to make payments through mobile billing sites and SMS services because of the convenience they offer. If mobile bill payment keeps progressing, we may see a future where every bill is paid with a text message, right when it is due, so it’s important to investigate what the rise of the mobile only customer means for Biller Direct.

Mobile Devices Outnumber Personal Computers

Today, mobile devices are used more frequently by the general population than ever before and more adults own a smartphone than a personal computer. This trend is expected to continue. The mobile innovation boom has lead to more applications and more uses for smartphones, including the enacting of banking transactions, stock trading, and online purchasing. While the millennial generation is comprised of digital natives and make up the highest percentage of mobile device users among the U.S. population, their immediate predecessors, Gen X, are close behind. A study released by market research company Kantar Millward Brown indicated that although 77% of Millennials use a smartphone on a daily basis, 60% of their Gen X counterparts do as well. Both generations have been receptive to new uses for their smartphones and tend to be more trustworthy of mobile’s security when making transactions and submitting payments.

One of the newest trends in mobile usage is the rise of the mobile only customer. These individuals either don’t own a personal computer or use them infrequently; instead, they turn to their smartphone for all of their computing needs, and their number is growing. In fact, the number of mobile-only internet users in the U.S. recently exceeded the number of desktop-only internet users, reaching 11.3% in 2015. This trend could lead to major changes for businesses that accept large quantities of bill payments.

What Does the Mobile Trend Mean for Biller Direct?

Electronic Bill Presentment and Payment (EBPP) is already an important solution for most Billers looking to streamline payment processing, so optimizing for mobile compatibility should be a logical step if they intend to offer their clients and customers more modern payment options. Through Biller direct, Billers already expect fast electronic delivery of payments and clear presentation of information. Payers expect the same ease of use when accessing invoices, receipts, and billing information. Many Billers have already implemented basic EBPP services, but these services don’t always support mobile payments or even payments by card. As a result, their most tech-savvy customers rely on mobile banking or another third party to post their bill payments, which can be inefficient. To keep up with the mobile-only trend and to accommodate payers’ habits and choices, Billers should enable their billing solutions to work seamlessly on mobile devices.

Payment channel switching has already become standard in the U.S. traditional methods of payment, like sending checks through the mail, are still used by payers across the country, but people are consistently switching to online methods for some or all of their bill payments because of the speed and convenience it offers. 62% of Americans reported paying their bills online at a Biller site in 2013 and 16% of Americans reported paying bills over a mobile phone. More recent estimates indicate that at over 45% of payers used mobile devices to pay bills.

Billers need to update payment portals and user interfaces to work directly with mobile devices across the board if they intend to capitalize on the mobile trend. Many of the costs, difficulties, and delays associated with implementing a mobile capable solution can be mitigated by partnering with an accomplished payment processing systems provider. The right provider will train the staff on its proper use and steer them toward all the cost-saving measures their new system provides.

Mobile Payments Benefit Billers

Billers who adopt mobile payment methods have a better chance of reducing day sales outstanding (DSO) and will enjoy fewer processing costs. With mobile payments, there are no paper checks to process and no receipts or invoices to mail. Mobile payments can be implemented using a browser-based system without the need to create a mobile app. Also, communication can be streamlined through email and SMS, decreasing the number of service calls the Biller needs to make in order to chase down delinquent payments.

Mobile payments give more power and transparency to payers in regards to their bills. This highlights the key benefit associated with mobile payments for both payer and Biller: the concept of self-service. Payers are more likely to use the most convenient solution for paying their bills, whether it is their bank who offers that solution or their Biller. When payments are made directly to the Biller through mobile devices, there is a better chance that payers will pay their bills immediately upon receiving an email or text instead of letting a paper invoice sit on their desk for days on end or waiting to schedule payments through a third party platform. If a problem arises, service and communication can be provided through electronic channels and routed directly to payers’ mobile devices.

Implementing mobile payment options are a good choice for companies that struggle with frequent billing errors, long DSO, and poor channels of communication with their customers. Before adopting mobile payments, it’s a good idea to do some internal and external research. In order to make this decision, Billers need to know that their customers will be willing to use mobile payments and that their payment platforms are compatible with mobile devices. Payers may also need to be educated about the benefits of mobile payments and reassured of their security before widespread adoption occurs.

Mobile devices are versatile tools. As the speed and processing power of our handheld devices continue to increase, new innovations for their application will follow. Billers will always benefit from technologies that allow them to connect more effectively with their customers and process payments faster and more accurately. The time it takes to implement those new technologies and the costs associated with operating them will always be offset by the benefits they provide. Mobile payments are similar to the online payment methods that many Billers are already familiar with, but mobile optimization benefits Billers by creating a direct line between them and their customers, faster payment processing times, and a better chance of being paid on time because of the availability of multiple payment options.

According to a study by the Federal Reserve, 64% of small businesses experienced financial challenges. These challenges were particularly acute for startups and those with smaller annual revenues. Half of small business applicants secured less than the full amount of credit requested, affecting their ability to meet expenses or grow.

“The challenge for many small businesses is that cash is the lifeblood of a company,” said G. Gerry Hays, professor of venture capital at the Indiana University Kelley School of Business.  “You have to have the money needed to pay rent, employees and to pay yourself, or you’re not going to be in business very long.”

However, merchant cash income will typically lag cash outflow because the company starts
paying rent, acquiring inventory, and incurring other start-up business expenses before making the first sale. Payroll is another expense that, at least in the early going, may need to be paid before enough revenue from sales covers the expense. And, as Hays mentioned, the business owner will want to be able to pay himself or herself as well.

Importance of Small Business Credit

Beyond the reasons mentioned above, credit is important to small businesses for several reasons.

• Better Purchasing Opportunities: Small businesses with access to credit can take advantage of opportunities when they become available. For example, a supplier might offer a temporary steep discount on products or services that you regularly use in a business. Of particular note is that merchants and other small businesses are more likely to do more business with whoever provides them with credit, helping to establish a long-term business relationship between creditor and borrower.A line of credit gives the ability to take advantage of such discounts when they occur, cutting the business expenses and enhancing cash flow.
• Better Opportunity for Growth: By reinvesting in the business, small companies can grow to a sustainable size. This is particularly important in the early years for the company to become established. According to ScaleFactor, 34 percent of the smallest SMBs (1-19 employees) and 43 percent of SMBs with 20-99 employees use credit cards as their top funding source, reinvesting profits to grow the company.
• Maintains separation between personal and business credit: Owners of very small businesses can be tempted to use personal credit cards and other personal forms of financing to keep their businesses running. While that might be unavoidable as a business starts, it’s important to separate personal and business finances. Doing so could put you at risk if your business is ever in trouble.
• Personal finances are not a good long-term source of funding, Hays points out. While some people use personal credit, including lines of credit on their homes, personal credit cards and other types of debt to fund a business, particularly in the beginning, it’s important that the business start building its own credit history and credit score.
• Establishes Credit History for Future Use: A business needs establish its own credit history and credit score not only to help protect a business owner’s personal
  assets but also to obtain better rates and have higher credit availability in the future. A business can start building a credit history by buying and paying off small amounts of credit at the beginning. Even if the business has cash on hand, the small borrowing amounts will incur little if any interest expense (depending on the credit vehicle used),and will establish the creditworthiness for when larger amounts are truly needed. The better the credit history, the better the interest rate the business will be able to obtain.
• Easy Access to Emergency Funding: In addition to giving the business the ability to take advantage of available discounts, the availability of credit on known terms helps businesses when they have unexpected expenses, such as a prime piece of equipment failing, late payment from a supplier or a myriad of other reasons. With ready credit, the business doesn’t need to scramble to pay to get the equipment fixed or handle other short-term emergencies.

Consider Form of Credit

Whereas with a small business loan a company needs to pay on the entire amount initially borrowed (minus any principal payments), with a business credit card, the business pays interest on only the unpaid balance on the due date. For example, a $10,000 business loan will provide the business with $10,000 at the start and a periodic payment schedule. Prepayments may or may not be allowed, based on the loan agreement. With a $10,000 available on a business credit card, however, the business can borrow just what it needs, when it needs it. The business may need only $9,000 for 20 days past the due date. As long as the business makes the minimum payment, it would pay interest on the outstanding amount. If paid on day 20, then another $5,000 is accessed later, it would borrow that and pay interest on that amount until repaid.

The PayVus Solution

PayVus® is a bundled business solution combining card acceptance and a business credit card into one single product— which helps you better manage cash flow and make accepting cards more cost-effective. By enrolling in the program, you will receive all the benefits of being issued a MasterCard World Business Credit Card.

The PayVus business credit card offers qualified merchants up to a $10,000 line of credit to increase capacity to pay for supplies, buy inventory, and manage everyday business expenses.

Additionally, you can designate a portion of your daily settlement to be split between the PayVus credit card and regular bank account. Funds deposited to the credit card are posted as a credit balance and are available for immediate use. Your merchant acquirer can sign you up, and it is quick and easy, and within 5 business days of signup, PayVus can help you achieve your business goals faster.