Fintechs tell small businesses they’ll ‘make the headache go away’

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Several new fintechs have begun offering financial services to small businesses over the past year. They say they offer basic banking that is more convenient and less expensive than what traditional banks provide.

NorthOne, Joust, BlueVine and Rho Technologies are four of those companies. Here is a sampling of what they are offering that they say banks cannot or will not provide this customer segment.

Fast onboarding, loaded dashboards, low fees

Only eight U.S. banks offer digital onboarding to small businesses, according to Jacob Jegher, president of Javelin Strategy & Research.

Most of the new challenger banks say they can sign up small-business customers digitally in minutes.

BlueVine, in Redwood, Calif., opens business checking accounts within 60 seconds, according to CEO Eyal Lifshitz.

“In the U.S., 300,000 small businesses start every year,” he said. "One of the first few things they need is a bank account, because they need to separate their personal and business finance. Why do they have to go to a branch for that? As a consumer, you don’t go to the bank anymore.”

Many of these fintechs say they are building a consolidated view of a small business’s entire financial picture, including accounts or services provided by other fintechs and banks.

“We think about [financing] as part of the overall needs of small businesses,” Lifshitz said. “We are developing an end-to-end banking platform.”

So far, BlueVine offers invoice factoring, loans through partner Celtic Bank and checking accounts through The Bancorp Bank.

It aims to give small businesses access to the level of financial services that large corporations get from banks. It plans to offer a checking account integrated with lending, so that if small-business owners want to draw from their lines of credit, the money will arrive instantly in their business checking accounts.

BlueVine is pursuing restaurants, wholesalers, manufacturers, doctors, dentists and such with $500,000 to $5 million in revenue.

“We serve that small business that is in our eyes very underserved today,” Lifshitz said.

So far BlueVine says it has made $2.5 billion in loans to 20,000 businesses.

NorthOne gives small businesses views of their cash flow over different time periods.

“The one thing I'd want to solve more than anything is to help that business owner see that in two weeks you will have a cash crunch and now's the time to go look for that working capital, not 72 hours before D-Day, when you'll take anything someone will throw at you,” said Eytan Bensoussan, CEO of NorthOne, which has joint headquarters in New York and Toronto.

The challengers also say they can integrate accounts with accounting software packages like QuickBooks and Xero to let small-business owners manage all their cash management and other financial activities in one place.

Banks do this, too. Wells Fargo and JPMorgan Chase were among the first to do so.

Rho Technologies, which caters to tech entrepreneurs, offers integrations into communications tools like Slack as well as accounting software.

“That saves a login to the website, a trip to the bank,” said Alex Wheldon, co-founder of Rho. Slack notifications let business owners immediately spot dubious transactions.

Rho, which launched in October and is based in New York, offers a checking account through Evolve Bank & Trust that pays 1% interest. It also offers a treasury management account through a network of banks that offers 1.61% interest.

According to Lifshitz, the average small business pays $400 a year in standard banking fees.

“Which is incredible because most consumers do not pay for banking, but I guess the banks think that for small businesses, it’s OK,” he said. “And part of that is because they’re so underserved, they don’t have a choice.”

BlueVine charges “a small fee” for outgoing wires but makes everything else free, according to Lifshitz. It provides 1% interest on checking.

Been there, trying to avoid that

Fintech founders often have an origin story that involves a horrible experience at a bank.

“The first interaction we had with a bank was as small-business owners,” said Everett Cook, another co-founder of Rho. “I have yet to open a small-business account in one visit — there’s always something that makes it challenging. Banks still don’t facilitate digital account opening. That’s the first thing you experience as a small-business account owner.”

Cook further said that once small firms become clients, the bank typically does not understand their business because they are not focused on the space.

“To an institution that’s been around for 100 years, what’s happening in the tech and startup community is new to them, whereas we’re in it,” Cook said. “That is second nature to us.”

Bensoussan was inspired to create NorthOne by working in Europe as a consultant and seeing what challenger banks like N26 and Monzo were doing there.

Small businesses have more difficulties with banks than consumers do, he said.

“I've never heard of someone waking up in the middle of the night crying because their personal bank account is frustrating to use,” Bensoussan said. “But I have seen small-business owners just drop into tears because they can't get insight into where their wires are or for some reason their payroll is blocked and they are concerned. I can't tell you how many business owners have told me, if you can just get this right, I will pay you 10 times what I'm paying my bank today. Just make the headache go away.”

Conducting a wire transfer at a large bank takes about 18 steps, he said.

“I was just trying to send 100 bucks to prove to myself how it works, and I was convinced I made a mistake,” Bensoussan said. “You feel intimidated. We made it three steps. Just send your wire. It's really easy. You don't have to complicate it.”

Service with ... an emoji

Joust, a challenger bank and invoice financing company, launched iOS and Android apps this year and has been streamlining its onboarding process and making adjustments. One stumbling block the team encountered: People didn’t want to type in their Social Security numbers.

“Every banking app out there faces this challenge,” said Lamine Zarard, Joust's CEO. “But when we offer an explanation of why we need it and how the data is protected, that reduces the friction.”

The app has a built-in options for creating and sending detailed invoices to customers.

The small business can opt for financing on the invoice. They can choose a form of “insurance” for a fee of 1% of the invoice amount — if the customer doesn’t pay in 30 days, Joust will. Or, for a 6% fee, the small business can choose to be paid immediately.

Some small-business customers work out of a truck, and having to anchor themselves to a branch in a town is inconvenient, Bensoussan pointed out.

NorthOne, which started a private beta test in June, became available in the Apple Store in August and launched an Android app in November. So far, 20,000 businesses have applied for an account. Account fees are on a sliding scale that varies with the company’s cash flow.

NorthOne uses emojis liberally in its app.

“It’s a little more human, a little more relatable,” Bensoussan said. “Even if people question the use of emojis by a bank, I'd rather have that than seem very faceless.”

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