While small businesses can occasionally be unpredictable customers, gone are the days when banks should turn away from these opportunities. When partnered with and executed successfully, SMB customers can turn into lucrative, long-term portfolios with big potential. The key is to understand what makes small business customers stick – and part of that is providing them with the right solutions that reduce costs, increase efficiencies and overall simplify their financial needs.
In this on-demand video, Chris Ward, EVP, Head of Enterprise Payments at Truist, Jo Jagadish, EVP, Head of US Digital Banking and Contact Centers at TD Bank, Fiona Roach Canning, Co-founder and CEO at Pollinate, and Mark Barnett, Global Head of Small and Medium Enterprises at Mastercard join the LEADERS channel to discuss this topic in the first of three episodes in our SMB Banking & Payments series. Viewers can expect to hear insight on:
- The importance of small businesses and what they bring to the economy and financial services.
- What small businesses need from their banking partners, specifically payment services.
- What banks are doing to help SMBs discover their services and become sticky customers.
- How fintech partnerships can uplevel the already positive SMB and banking opportunity.
- The benefits banks, small businesses, and merchants see from their partnerships.
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Michael Moeser (00:25):
Hello, and thank you for joining us. I'm Michael Moeser, senior content strategist at American Banker, and I'll be your host for today's Leaders episode. I'm excited to kick off this conversation as part of our SMB Banking and Payments Series and delve deeper into the opportunity small and medium-sized businesses, presents to banks, as well as how FinTech partnerships can take this opportunity to the next level. Throughout this series and for our discussion today, we will not focus on micro businesses, but instead the small and medium-sized businesses that generate between five and 25 million or even 50 million in revenue. We all know that there's work and some infrastructure investment associated with working with SMBs, but if partnered with and executed successfully, these customers can turn into a lucrative long-term portfolio. Or as we like to say at American Banker Big Business, the key is to understand what makes small business customers stick.
(01:23):
And part of that is providing them with the right solutions that support their growth, reduce costs, increase efficiencies, and overall simplify their financial needs. Joining me today to talk about this timely topic is Chris Ward, EVP, head of Enterprise Payments at Truist. Jo Jagadish, EVP, head of US Digital Banking and contact centers at TD Bank, Fiona Roach, canning co-founder, and CEO at Pollinate. And Mark Barnett, global Head, small and medium Enterprises at MasterCard. Welcome everyone. Thank you. Good to be here. Well, Chris, let's start things off. Can you share with us why small and medium sized businesses are so important to the economy? Can you share or touch on what it means? From a payments perspective, especially
Chris Ward (02:10):
Small businesses have had a long history of providing job growth. If you think about, a lot of the companies that we use today were innovators that have grown up to be large companies and they drive a lot of jobs in the economy. So if you just think about the lifeblood of the economy, while a lot of times we hear about these big companies, the bagels and the coffee that we have here this morning are from a small business. So it's really critical to the health of any economy. And then from a payments perspective, they're a source of a lot of payments that are going on in the economy. And if you just think about all the changes that have occurred from the economy, becoming more digital to that, we actually buy things at a micro level. We used to buy albums, now we buy songs and small businesses are really providing certain services. And think about the food truck economy. I mean, I joke about that a lot, but you can have a great dining experience at a food truck that used to not exist a long time ago. So it's a huge generator of transactions and GDP for the economy.
Michael Moeser (03:18):
Understanding that, I'm curious, it's still often thought of as an underserved population, even though it's such a large part of our economy. Any thoughts on that?
Chris Ward (03:29):
Yeah, I think, I don't know, there's a lot of puts and takes there, but those clients, they do get service. They get it in a different way sometimes, but I think one of the things that we really pride ourselves on is trying to marry the technology with the touch of the human touch of experience for our clients. And it really does make a difference when you bring that together for a small business client. Mark, anything you'd like to add here?
Mark Barnett (03:58):
Well, just one thing to emphasize those points, until recently, I used to run MasterCard's operations in Europe, and so I spent a lot of time with senior politicians, with policymakers, with finance ministers, central bank governors, and SMB is the number one topic for them because it's so important not just for the economy but for society as a whole. So a really big and important topic.
Michael Moeser (04:22):
Joe, what does the small medium size business segment mean for your organization? Yeah,
Jyotsana Jagadish (04:28):
Just to maybe echo a lot of what Chris and Mark have said, it is the lifeblood of the US economy and the global economy in the us. 99% of businesses are all SMBs. In the last five years, 70% of all net new jobs that have been generated in the US have come from the small and medium sized enterprises. But I think what's also really critical is that these are businesses that really, they're so embedded in our local communities, they're a reflection of what is going on with the consumer base. So any trend that we start to see in consumer activity actually originates in the, you get the first indicators of those trends from serving those businesses because they are hearing it first from the communities and the clients that they're serving at td, this segment is incredibly important to us. We serve over half a million small businesses in the us.
(05:30):
We pride ourselves as being the number one SBA lender in our footprint number two nationally over the last eight years. But what I think is really critical and maybe addresses the point that you made around being able to serve this segment, they're very unique, both in terms of the industries and the size and the needs of a micro or a small end of SMB looks very different from the needs of the large end of the SMB segment. And so where we've been really focused on at TD has been how do we make sure that we can aid, really understand and deepen expertise in some of the verticals that are very nuanced from one another. So you think about a healthcare practice group of vet or a doctor's office versus a franchise organization, which probably has slightly different needs and restaurants is another great example. You think about the spectrum of industries that this segment covers, that bankers specialization becomes incredibly important. And what we've spent a lot of time doing is augmenting our banker specialization, our store hours and convenient locations, serving these communities with the right digital tools that enable us to become the back office for these SMB customers. And that's really been what has underpinned a lot of our strategy here at td.
Michael Moeser (06:55):
Mark, I want to turn to you, Joe mentioned a few things in terms of needs and digital journey and in our earlier conversations you had mentioned that there were three things that are key or key needs for small businesses. The first was this access to capital, the second being help on that digital journey. And Joe touched on the digital journey part, especially since they have a large TD has a large footprint with store branches, et cetera. So digital journey clearly being important. And then third is cyber and data security. Can you talk more about these needs?
Mark Barnett (07:29):
Yeah, sure. And Joe also said there's no such thing as an SME. It depends on how big they are and what, but when we do our research, what really does pop is those three things. And in that order, maybe the cyber one's coming up up the order a little bit now, but access to capital, I think that's pretty clear that the number one hindrance to growth globally for SMBs is the ability to raise capital, especially scale up type capital. The other end of the spectrum, the smaller end, just the concern that if something goes wrong, you don't have enough cash to last to the end of the month. So both those things, it's two different ends of the spectrum, but they're both in the access to capital bucket. The second one, the help on the digital journey, well, this is what Fiona's company does in terms of helping small businesses have a one-stop shop for their digital needs.
(08:25):
And there's lots of other ERP players in that space and expense management and other things we can talk about later. I think cyber, we did some research recently, and this is why I said it might be coming up the list a little bit because cyber, nearly half of all SMBs that we surveyed said they'd had some sort of cyber attack, 46%. And of those that had had a cyber attack, one in five shot their business in the following year. Now it might've been for other reasons, but that is a mind blowing statistic. So protection against cyber I think is going to be climbing up that little hierarchy that I talked about that.
Chris Ward (09:02):
And if you think about what businesses start today that don't have a digital presence, so maybe back in the day you just had a physical presence, but ordering the bagels and coffee online or whatever, so that digital and that cyber experience and being able to create digital solutions for your SMBs to help them navigate the world and process payments are really critical. Yeah,
Fiona Roach Canning (09:29):
I'd echo that. I think it's incredibly hard to run a small business today. 30 years ago, if you wanted to start a business, you would go down the high street, you would sit with your bank manager with your business plan, you'd find a store and you'd start trading. I mean, today it's hard to know where you even start. Are you doing an online business? Are you social media selling? Are you doing a physical business? But then you need your online ordering capability and then the plethora of horizontal tools you need to run your business, whether it's your accounting or your payroll that's relevant to all SMBs and then your vertical specific ones. So inventory management and drop shipping. You're not running a small business anymore, you're a systems integrator, and that's really hard.
Michael Moeser (10:15):
Can you talk to us about, you mentioned the different horizontal capabilities, vertical capabilities, and perhaps echo on what Chris and what Mark have talked about in terms of how do FinTech partnerships like pollinate help banks with these three challenges? And then are there other areas that you'd like to touch on specific to SMB clients?
Fiona Roach Canning (10:36):
Yeah, of course. I mean access to capital, I agree with you. For a small business, I think two thirds of small businesses seek capital during any year, and the majority there, it's working capital, literally how am I going to meet payroll? And one of the things that really bothers me is if nobody has that single view of the small business anymore, which the bank used to have, it's much harder to get that capital when you need it because your online business transactions are in a different place to your face-to-face. And nobody can quickly look at that business and say, yeah, they're credit worthy and we can lend to them. So the ability to bring the data all into a single place and ensure banks have that payments data and that transactional data that allows them to make more informed lending decisions, make sure the capital comes to the small businesses when they need it. And then on fintechs, banks and fintechs are different animals, and a partnership works really well when you recognize that banks are trusted, they are proven custodians of SMBs, financial information and data, they have scale and they have a real breadth of financial products that an SMB will need if not at the start of the journey. Then as they grow over time,
(11:59):
Fintech's, when they start, and I think there's 14,000 of them in the us, they tend to obsess about the customer and about a specific customer problem they're trying to solve. They tend to be digitally native and they tend to want to move at pace. And so you can see how that fits together beautifully, the access to a lot of customers, the trust that a bank brings and that product breadth with an organization moving at pace with digitally native, easy to use experiences and a real obsession with the customer. So bank and FinTech partnerships can be a beautiful partnership when those differences are really respected and understood and everybody gets around the same side of the table like we have together Chris at Juris to really focus on that end customer goal of making life better for SMB.
Michael Moeser (12:50):
Sounds like you guys bring the innovation where banks may be hindered because of some of the challenges that they face due to scale compliance. It sounds like fintechs can provide that innovation, the product innovation, the service innovation that banks may need.
Fiona Roach Canning (13:07):
I think banks can be very innovative and are very innovative as well. I think that the problem that we are solving as pollinates and working with banks to do so is make sure that the bank is that single pane of glass that an SMB can go to. There's, as I said, 14,000 fintechs out there. If you mentioned restaurants, Joe, I think there's 150 different point of sale software at least that you can choose as a small business to run your restaurant. Most small businesses don't have the ability and the cash to experiment. So if you get that wrong, that's a really difficult choice for your business barbershops. There's 50 different point of sale software you can choose as a barbershop. And so what your bank can be is that trusted single place that says, we know there's a whole set of tools you need to run your business, and we know that the payment data actually needs to flow interoperably between them to make them work. And you don't want to spend all of your Saturday trying to make your payment provider talk to your accountancy provider and run your payroll or do your table ordering. You want to have dinner with your family or you want to sell some extra stuff in your shop. And that bank can ensure that all of the services you need integrate smoothly through that single pane of glass. And that's what we do.
Jyotsana Jagadish (14:25):
I think just to echo what you're saying, like small business owners or SMB owners, practitioners and operators, they want to run their business and they want to grow their business. That's what they're focused on, accounting business, but then they wear multiple hats and we recognize that. And I think when you think about what the client or these customers are trying to do, and you look at just where the ecosystem of partnerships is evolving as an industry, I think it's a really great time to be in this space to serve SMBs because you are seeing more ecosystem plays between banks and fintechs and payment providers and just creating an ecosystem play to serve the needs of the SMB segment that is quite fragmented today. And to what Fiona was saying, the data exists in various different places, but to make effective underwriting decisions, to make effective cashflow decisions, you sort of need to aggregate that experience. And it goes back to what I said in the beginning, which is the more that we as financial institutions can become the back office of these SMBs and take that burden of managing payroll, vendor payments, supplier payments, we marketing capabilities, how do you create websites, ordering systems, the more we can take that complexity away from these SMDs, the more effective we become in serving them and giving them time back to do what they really want to do, which is grow their business.
Chris Ward (15:57):
And I could just stitch that together in what I call the three Ss of the economy and three Ss of the way things are going. So the first thing is simplicity. So SMBs want simplicity in how they're running their business and working with their banks and with that simplicity, they also want speed
(16:17):
And they want things to happen in a fast way at the rate that they need it to happen. Not everything needs to be immediate, but with speed comes information and knowing where things are occurring. So if you think about all that we're doing in terms of trying to make it easy for the small business to do business, doing it at the speed that they need it to happen, but also wrapping it with safety because they need to make sure that they're transacting in a safe, sound and secure manner. So all of what we just talked through is really the strategy behind how I always describe what we're doing with our clients and bringing things to life for them is making sure that we've created simple products. No one came to our house to teach us how to order something online. Small businesses have the same thing when they're working with the banks. It's got to be simple. It's got to be timely in the manner and the speed that they want, and they want to know that it's safe.
Michael Moeser (17:13):
I'd like to talk about product roadmap, and one of the things that I want to really address, Jo, you talked earlier about how you've got these vertical focus channels, the veterinary, the healthcare, but then you also talked about some of the horizontal capability and Fiona touched on that as well. And one of the things I want to ask really is you mentioned earlier when we chatted earlier about invoicing as an example of the extension of that small business checking account evolving. And so could you maybe touch on that and then we'll ask Mark in terms of thoughts on product roadmap?
Jyotsana Jagadish (17:49):
Absolutely. So every product manager, we kind of obsess about what are the jobs to be done for small businesses, and I think the primary job is they're trying to sell something and they got to get paid for it, hopefully in a very timely fashion. And so that's the job, right? It's kind of making sure that they can sell inventory and get paid for it simply and in quick fashion. And so we thought about this problem statement and said again, there are hundreds if not thousands of tools out there in the industry that give SMBs the ability to invoice and then collect payments on those invoices. But what if those invoices were just part of your checking account? There were just a standard feature of your checking account and when you opened a checking account, this was available to all SMBs. And so those are some of the things that we've started to, a couple of years ago we started to innovate on and think about is how do we really allow the SMB customer to do more with us and take away another application that they have to go out and find or another system that they have to integrate.
(18:56):
And so we were one of the very first large banks in the US to actually offer invoicing as a standard part of your checking account. We offer accounting services and capabilities. We've integrated payments in a way that is natural, it's mobile first in their experience. We know a lot of SMBs are on the go. And so what we're really focused on in terms of a product experience standpoint and a roadmap is how do we look 12, 18, 36 months out and build a roadmap that is meeting their needs today and tomorrow? Integrating that experience into the channels that we offer today, which is really our branches, our financial advisors, integrating our wealth offerings into that digital ecosystem. That's been a lot of where we're focused on and have seen some really great progress. And early success.
Michael Moeser (19:48):
Sounds like really building on what Chris talked about, the simply, safely, securely, and then what Fiona was mentioning in terms of all the different point of sales systems that you might have at a restaurant or a barbershop. I didn't realize that there were that many, but yeah, I guess Mark, could you talk to us about the roadmap?
Mark Barnett (20:07):
Yeah, sure. So I think there's some still very basic blocking and tackling that can be done in this space because there are some SMBs who don't have SMB accounts and don't have SMB cards, and obviously we think that's probably a good idea that they do. I think bundling that then with acceptance so they can get paid pay and get paid. So both sides of the equation. And obviously as MasterCard, we don't distribute directly to SMBs. We do it via our banking partners on both the merchant and the issuing side. But then beyond that, it's exactly what Joe was just talking about. So you're going to want to take the stress out of team spending. If you've got a team and you're a small business and they need to spend, you want to take the stress out of that. So you need an expense management system.
(20:49):
How are you going to get one of those? Well, if your partner bank is able to offer that, we partner with a number of providers around the world that our partner banks can then use from us. If you're a little bit bigger, you might want to think about cashflow management again via our partner banks. We have partnerships here in the US to do exactly that so that you can manage your liquidity and your cashflow in a more organized way. Finally, I think we're getting up to AI assistance to help with the, so people can get on with their lives, get out and have that dinner with their family and not be worried about running the business. And I do think at the top of this, this is a bit that MasterCard thinks about very, very hard is the cyber bit because we just bought a company called Recorded Future, which goes onto the data.
(21:35):
It's a threat scanning company. It's on the dark web, it's looking out for accounts that may be compromised, retailers that may be fake so that we can get to our bank partners and help them take actions to protect the SMB. We've got lots of other offerings in the cyber space that again, we distribute via our bank partners. So I think there's a whole load of things there and we're just going to keep adding to the list. But yeah, if you can take the paint out, if you can allow the SMB to run their business and get on with what they want to do with their business and grow their business, that's exactly what they need from their partners.
Fiona Roach Canning (22:10):
And just building on your point mark, that there's so much kind of basic things that still need to be done for SMBs, the problem that Pollinates was formed to solve was the fact that payment processing is often disconnected from the business bank just because of the structure of the industry. Payment processing tends to be done by one of a small number of large companies because processing is a volume game. But what that means for an SMB is you log into your business bank and you can see your settlement has come in and you're like, oh, that's great. I've got some money into my account. What transactions was it for? Oh, I know. Let me log out of that and log back into a separate portal and try and make the link between this list of transactions and then this settlement that's come into my account. That can take apparently 15 hours a month for an SMB to do 15 hours a month. So the problem that Pollinate was formed to solve was how can we still let the big payment processes who process very well process, but how can we create that joined up experience for an SMB that takes the data from the payment processor and then allows the reconciliation to happen automatically within your business banking account? And something as simple as that is a massive time saving for an SMB.
Michael Moeser (23:27):
Let's talk about merchant acquiring for a moment because as you mentioned, and as Joe mentioned Chris Mark, I mean it's a significant part of the SMB. They're creating the bagels, they're brewing the coffee, but it's that getting paid so you can also pay the employees, pay the people. Talk to me about the merchant acquiring Fiona in terms of the core bank offering, because we talked about invoicing a little earlier, but how does that change the dynamic of the bank SMB relationship? For example, does it help a bank to better underwrite an SMB?
Fiona Roach Canning (24:03):
Absolutely. Again, 20 years ago, I think a lot of banks, and I don't want to speak for you guys, you're much more qualified to talk about this than me, but a lot of banks thought that payment processing was perhaps non-core and we're happy to outsource it to a partner. And then what's happened, and you've seen this with Bank of America exiting its joint Venture Wells has done the same. It is actually incredibly core to understanding that small business customer to be able to make better underwriting decisions. If you think about merchant acquiring data, and it's a hundred times richer probably than banking data because you're seeing every transaction linked to every tokenized card. You can understand seasonality, days of the week, weeks of the month, you can understand consolidation of customers versus is it actually just a very fragmented business. So having that data as core to the business is now really important to banks to make better lending decisions. And what we've seen is, again, over the last 20 years, we've seen fintechs come into that space, start with the merchant acquiring. So a square for example, start with the merchant acquiring and then move on to offering access to capital because they can use that payment data to underwrite the loans. It's
Michael Moeser (25:22):
Visibility.
Fiona Roach Canning (25:23):
Yeah, it's the visibility. And that becomes a real threat to banks because it's not just the acquiring that they're losing, it's then also being the lender of first resort. You see deposits go down because they start to go elsewhere. So banks are now moving back to saying, actually acquiring is so core to what we do as a bank and how can we bring that together into a really beautiful experience for our SMB customers that simplify their lives. And
Mark Barnett (25:50):
The data's incredibly important for underwriting, as you say, to see that transaction flow. It's also incredibly important for building your fraud models, and that is a vector that is permanently coming at us and having a global dataset as we do, and then working with our partner banks to build models that can detect fraud, I think is absolutely fundamental for having the data too.
Chris Ward (26:14):
If I take you back to what I said earlier in terms of no business starts today, that isn't digital.
Chris Ward (26:21):
Digital also implies
Michael Moeser (26:23):
The big,
Chris Ward (26:23):
Right? Exactly. It implies 24 hours, seven days a week. So your business in essence, whether you're open or not, your business is always on. There's also new payment factors that are occurring today. So not everything is card-based. If you look around the globe and including in the US there's now faster payment schemas. There's all kinds of different concepts that are happening today, like work today get paid today. There's all kinds of things that have just changed the way in which commerce and the speed in which commerce is happening. And so as a financial institution, bringing that together for the SMB so that they can manage all aspects of the business, it's not only just collecting the sale, but it's also managing, paying the employees and paying suppliers, invoicing and AP and bringing that all together and having a vision of bringing that data together and one-stop shop and a portal for an SMB to manage from is really critical to how you bring the story together. But it's also back to what Joe said earlier, also having the wealth advisor and all of the stuff that you actually still need to talk to somebody about. And so bringing that technology with the touch is super important.
Fiona Roach Canning (27:47):
It's making sure you're having the right conversations. Right, exactly. Because the trouble with the smaller end of SMB, if they call you twice a year, then they're unprofitable. But there are definitely some conversations you want to have the conversations about the lending about the business growth, but using the digital tools to make sure that the admin tasks the, can I change my business address or can I add another terminal or can I add an admin user that happens digitally. And then the high value, high touch conversations happen for when you want to have them.
Jyotsana Jagadish (28:18):
I'd say just to share my perspective, I agree with everything, the panelists and I'd say payment information and just the actual payment itself, whether it's through merchant acquiring or other capabilities, traditional ar, accounts receivable solutions, et cetera, it is so core and fundamental to banking, and as I'm sure Chris will agree, is a strong indicator of primacy.
(28:46):
And I'd say we do want to lead with payments as in offering for customers because we know that the data is rich and we are able to understand the customer better. It's great risk management in being able to understand the customers being able to provide them solutions that are effective for them. And fundamentally, it does come down to the underlying data play. So whether or not we use third party one or multiple third party payment providers, I think the essence is can we harness the data and information in a way that creates a richer experience for the customer in the digital channel? And where I see this going next is in addition to the high touch advisory based discussions that this will lead to, I think about what AI is going to be able to do and is doing today and will continue to be able to do, is to become more predictive in being able to serve the needs of these SMBs through digital first advice and then connect them to the banker when these customers have capital needs and liquidity requirements. But I think the predictability of this information is going to be so critical, and that's I think the frontier that's really exciting and it's not too far away.
Michael Moeser (30:05):
Chris, can you talk to us about the Truist Merchant Engage and new product you folks have recently launched? I think it speaks to that data rich, the merchant acquiring the capabilities that it brings.
Chris Ward (30:25):
Yeah, we're really excited about launching these capabilities of bringing together, as everybody's been talking about on the panel, we started with the Merchant insights and being able to actually see all your activity that's going on, and we're going to continue down the journey of self enrollment, self adding a terminal, all of those things that'll eventually get to automated underwriting, et cetera. So it's really taking the three S's of making it simple for the SMB to engage with us,
(31:03):
Being able to do it at the speed that they need and doing it in a safe way. And all of that's going to come together across our products and our properties to create one portal for our clients to be able to do business with us. So it's huge undertaking, but we've done it quickly from the time we thought to do it less than nine months from the time we said we were going to do it, we're in market. And that's a testament to the technology and the way in which you can do development now in an agile way.
Michael Moeser (31:38):
Fiona, how does Pollinates platform unify merchant acquiring with business banking? What does that mean?
Fiona Roach Canning (31:45):
As I touched on earlier, it's a very disconnected experience for an SMB in a lot of cases, logging into a business banking portal and then flipping to log into your portal from your merchant acquirer. What Pollinate does is we integrate with the big payment processes and we ingest that data, we clean it, we match it with the unique identifiers that sit in the business banking data, and then we work with the banks to be inside their authentication system. So you log onto your business banking portal, it's one logger and it's one credential. And then what you're seeing is you're seeing your business bank information, you are seeing your settlements, and that's all matched with all of your payment data, all of the insights that come like
Michael Moeser (32:30):
A dashboard, right?
Fiona Roach Canning (32:31):
Yes. And it does the reconciliation automatically for you. It provides you the information on your customers automatically for you. And to Joe's point, as we move into AI and agen ai, it will enable banks to provide that information across a much broader set of information, which gives that greater depth of insight to the SMB, which allows them to make smarter business decisions, run their businesses more efficiently, understand their cashflow when they might have a need for capital. And we are not far off getting to the point that all of that data is used for seeing a need for capital. The bank can automatically understand whether it's a lending risk they wish to take, and then the bank is flagging to the merchant. We think you might have a working capital need. We'd be delighted to offer you this if you're open to it
Michael Moeser (33:26):
Being proactive.
Fiona Roach Canning (33:27):
Exactly. Exactly.
Michael Moeser (33:28):
Jo, thoughts, what does that mean for your organization?
Jyotsana Jagadish (33:32):
It's huge. We recently launched a small business insights dashboard, which was really to be able to provide the SMB, the ability to view real-time cash position to be able to predict their cashflow needs to scenario plan. If I'm going to hire five people,
(33:51):
What does that mean to my cash flow? Will I have a capital need that I'm going to have to talk to my bank for? It has rich payment information, it really aggregates, it integrates with your accounting software, so it creates that 360 view of all of your relationships across multiple places where your data may have been stored. And what we found is the adoption, we put very little marketing when we initially piloted and the adoption and the organic adoption was pretty significant, which told us that there's a need for this type of capability where customers want to get insights. They want to know if I run a pizzeria and if I am operating in a specific geography, how's my pizzeria doing relative to every other pizzeria in that zip code? How does seasonality and weather patterns and all of that impact sales? And so the predictability and the insights that businesses need, they're not paying a lot of money today to get that information.
(34:57):
And so how can we serve that up in a way that feels organic and enhances the advisory position that we as banks do and easy to find? We've found one of our business customers actually said they used this tool for one of their board meetings. They used the benchmarking to help prepare them for an upcoming meeting with their board. And I thought that was really remarkable because in the absence of something like this, they're scrambling to get their sales and projections and benchmarks, et cetera. And so it all goes back to say that there's a real need in this ecosystem for technology and predictive insights for our business customers. We're incredibly proud of the work we're doing to serve this segment because it is so critical to the GDP to our economy and the vibrancy of our communities, and we're going to continue to innovate through partnerships and looking at solutions in-house to really serve this segment.
Michael Moeser (35:56):
Mark, could you talk to us about partnerships? Maybe share some examples where you guys have
Mark Barnett (36:01):
Worked with Yeah, sure. Partnerships, I mean, MasterCard is a partnership model. We have 3.3 billion consumers on one side of the franchise. We have 150 million merchants on the other and then 20,000 financial partners in the middle. So it is entirely a partnership model. But to serve this sector, we have partnered with Cashflow Management Services. Again, we distribute via our banking partners, not directly expense management. We do, we have VCN, so virtual card solutions that can help. The one thing I guess I'm talking about partnerships. We've got two banks, a FinTech and a global payments network sitting on the same panel, which I think is kind of cool. And in the future, we're going to have to go to where the SMB goes and they're going to go to your portal or they're going to go to their very vertical piece of business software or their horizontal piece of business software that in developed markets, 80% of SMBs. Our research tells us, look at a piece of soft business software every day. We're going to have to embed what we do and go to them rather than expect them to come to us. And that's going to happen through a series of partnerships with banks, fintechs, people, players like us and other software providers.
Fiona Roach Canning (37:19):
No, I think it is great that we've got banks and a payment network and a FinTech sitting on the same panel. I think there is increasingly partnership between fintechs and banks and MasterCard's obviously a shareholder in pollinate as well. And we don't want SMBs to come to our portal. We want SMBs to go to their bank. Our portal is a technology that banks can deploy to provide that single pane of glass for their SMBs. I don't want the SMB ever to know the word pollinate. I want every banker listening to this to know the word pollinate, but we are there to partner with banks because we believe that banks should be at the heart of every small and midsize business.
Michael Moeser (38:01):
So as we come to close in this conversation, could each of you maybe spend a few seconds or minute or so and talk to the viewers in terms of what you think it's going to take to address this SMB opportunity?
Chris Ward (38:19):
Look, I think what we've said today is on the journey, there's always going to be opportunities to serve clients in unique ways. And I think that what is really important is bringing the technology together to make it easier for our clients to do business, provide insights, and do it in a safe way. And I think that if you bring that together, I think that's the winning combination of the technology and the touch, as I've said, and continuing to focus on that with bringing, as Joe said, the insights that are relevant to that business. If you think about everything that's going on in today's economy and almost marketing down to one person, you want to feel that whoever you're dealing with on the other side knows you. And what do you need for that? You need information. You need technology, but you also need the insights to be able to bring that to the client. And I think we're focused on doing that. If you see what we're trying to do and what we're delivering here is bringing that together for the s and b, and I think that's going to be a winning combination.
Jyotsana Jagadish (39:29):
Yep. I agree with everything Chris has said. I think we have this philosophy at TD, which is human first and digital always. So we put our businesses and our customers at the center of everything that we do. We understand the unique challenges that they have in growing and scaling their businesses, but we want to be able to offer them the convenience of engaging with us and knowing the confidence of the tools that we provide them is really enabling them to grow their business and focus more time on that and letting us do a lot of the automation and reconciliation. And I just think that the pace of all of this is just going to continue to increase significantly, and we're going to see a J curve, I think, in terms of the outcomes that data technology powered by AI is going to be providing to this space. So stay tuned, and I think this is going to be a really, really interesting space to watch.
Michael Moeser (40:27):
Fiona, thoughts?
Fiona Roach Canning (40:29):
I want to pick up on a word that Chris used earlier, which is simplify the pace of technological change is speeding up the world is getting more complicated. SMBs have neither the cashflow runway or frankly the Headspace to deal with that complexity and that increase in pace. And we have a responsibility as an industry to provide that simplification that allows them to do what is so important for communities and the economy. And we must focus on that.
Mark Barnett (41:02):
Mark thoughts? Yeah, I'm going to come back to something we talked about earlier, which is there is no such thing as an SMB. There's a segmentation which is based on size and it's based on industry verticals, what you do and how big you are. And I think as time progresses through partnerships, we're going to have to address each one of those segments almost individually because there is not going to be a one size fits all for a segment called SMD. So getting that segmentation right I think is something that's going to happen over time, but is then going to bring so much value and commodity to SMBs that it'll be a transformative part of the journey.
Jyotsana Jagadish (41:40):
I'm going to trademark that comment I made,
Chris Ward (41:45):
And if you trademark the three s,
Michael Moeser (41:49):
I want to thank our panel today for great conversation, and I want to thank our audience for listening in.
