Mobile payment apps can’t serve only consumers
Consumers have fully entered the mobile payments revolution. Apps like Venmo, PayPal and Cash App have revolutionized the way consumers make payments. However, the same is not true for businesses.
There is a gap in the market when it comes to mobile payments tools that meet the unique needs of businesses and their industries.
Small and midsize businesses have a significant impact on the economy, making up nearly half of the GDP in the United States, according to the U.S. Small Business Administration. Construction, for example, is an industry consisting mostly of small and midsize businesses; however, it is the second-largest non-government-controlled industry in the world, responsible for $11.4 trillion in revenue in 2018, with $1.2 trillion of that coming from the United States alone.
Despite their size, industries like construction are largely underserved by financial institutions, especially when it comes to mobile options for payments.
These tools must give businesses the ability to pay their vendors, partners and employees. With construction, builders must pay their subcontractors, often relying on paper checks. This process takes extra manpower, is time-consuming and costly and leaves too much room for error. Mobile payments tools would allow these builders to pay their subs right when they need to, without taking up extra time or money.
Mobile payments tools created specifically for businesses and their specific industries would also help businesses keep more accurate records of their payments and track their budgets and available funds in real time. This keeps businesses organized and efficient, while creating new noninterest fee income for the financial institution and helping them attract deposits.
When financial institutions are able to provide their local businesses with these tools, it first creates peace of mind for the business. Instead of putting trust and money in the hands of a third-party payments app, businesses can entrust their payments to an institution they already know and trust.
This is the prime opportunity for banks and credit unions to use existing relationships to their advantage, which is something many third-party payments apps do not have. When businesses know they have their trusted local banker handling their payments, they can feel at ease, knowing their money is secure and that they have someone looking out for them. These community ties are crucial for financial institutions trying to attract the deposits that third-party payments apps are also vying for.
Providing mobile payments tools that suit the needs of businesses is a strategy financial institutions must adopt if they want to be successful in serving their local businesses. Combining existing relationships with innovative technology helps FIs build their business relationships and form new ones. The institutions that want to attract deposits, and ultimately grow, are the ones that will seek to meet the needs of the underserved industries and businesses around them.