Many banking companies offer separate online services to small and large businesses, but companies like Bank of America Corp. and CashEdge Inc. are trying to bring large-business payment services to mom-and-pop shops.
In January, B of A began offering online business-to-business and employee payment services to small businesses. CashEdge, of New York, announced last week that it is also offering a small-business service. Both companies' services use the automated clearing house network to make account-to-account transfers.
Small businesses are "looking for ways for a bank to save them time," Peter Berbee, B of A's small-business e-commerce executive, said in an interview Wednesday. "They really view online banking as a fast and convenient way to keep up on their finances."
Owners of small businesses "were looking for ways so that they didn't have to cut a check" every time they wanted to pay employees or vendors, he said.
This year businesses have made over 100,000 payments - worth over $100 million - through the Charlotte company's service.
The payments settle in three days, but Mr. Berbee also said that small businesses want to be able to make some payments faster, and they will be willing to pay more to do so. His company plans to offer small businesses a next-day online payment service, for which they would pay a larger fee, in the first half of next year.
"Our large commercial customers use different payment speeds for different things," Mr. Berbee said. Large businesses can make next-day, two-day, and three-day payments. "Small businesses definitely have different payment-speed needs."
B of A uses CashEdge's transfer service for consumer accounts, but neither company would say whether CashEdge helped develop B of A's small-business service. CashEdge said that one of its bank customers, which it would not name, is using its small-business service.
Neil Platt, CashEdge's vice president for sales and business development, said its small-business service is similar to what B of A is offering. Last week CashEdge also started a service that lets small businesses send electronic invoices, which can be paid using the ACH system and can be used with the payment service.
The initial response from the bank using the small-business offering has been encouraging, Mr. Platt said. "It seems to be a very successful application. Small business is a very attractive segment for banks, but it's not very well served by the banks. Small business kind of gets caught in between retail and corporate banking."
Beth Robertson, a senior analyst at MasterCard International's TowerGroup Inc. research unit in Needham, Mass., said other banks and vendors allow online payments for small businesses, but CashEdge's invoicing function makes its offering stand out.
"It's very useful," she said. "What they try to do in designing these products is to enhance the functionality in ways that small businesses need … but not to be as full of complex features and functionality as would be offered in a cash management interface."
Dan Schatt, a senior analyst for the Boston market research firm Celent Communications LLC, said banks are not meeting the electronic-payment needs of small businesses. Only about 45% to 50% of consumers still use checks for most of their payments, but more than 80% of small businesses do so, he said.
"Payments is one of the most important functions that small businesses need in terms of financial services," Mr. Schatt said.
Online services such as the ones from CashEdge and B of A are "definitely needed in the market," he said. "A small business is very cognizant of its cash flow and wants to maximize it."
