One of the largest U.S. banks is expanding the digital tools it offers small businesses, a customer category whose needs are attracting the attention of a flurry of software developers.
PNC Bank, the sixth-largest bank by assets, announced Monday a partnership with Bill.com. The relationship has allowed the Pittsburgh bank to expand its tech offerings for small businesses to help them manage their cash flow management, in the hopes of deepening customer relationships and gaining fee income.
The announcement comes at a time when many banks are rethinking the way they serve small business clients. Industry analysts have identified the small business category as ripe for innovation, and suggest banks that create customized digital tools such as cash flow forecasting can better serve customers and decrease the risk of disintermediation from startups like Square and InDinero.
"Now is the time for banks to begin addressing their vulnerabilities in the small-business space," says Christine Barry, research director with Aite Group and author of a 2013 report on small-business banking, in a blog. "They must proactively offer the tools necessary to improve customer satisfaction, address customer inefficiencies and challenges, and increase the utility of their online banking platforms."
Bill.com, founded in 2006 in Palo Alto, Calif. as CashView, ties together finance and accounting programs, banks, customers, vendors, accounting professionals, and documents to automate small business' financial tasks, including handling payments.
"Cash flow is the life blood of all small businesses," says Tom Kunz, senior vice president and director of payments and e-Business for The PNC Financial Services Group, PNC Bank's parent company. "Most small business owners aren't finance professionals. Knowing their cash flow isn't intuitive or easy for them."
PNC's existing suite of digital tools, called Cash Flow Insight, is designed to tackle that challenge by helping small-business owners automate their financial pain points and offering them visuals of their anticipated incoming and outgoing funds.
PNC's partnership with Bill.com expands what Cash Flow Insight, launched in April 2013, lets customers do. The service served as a place to forecast cash flow based on small businesses' bank data, such as bill payments. Now, the suite includes digital invoicing capabilities and the ability to sync in data from popular accounting software like QuickBooks. The combined tools now let small business clients pay bills, manage contracts and receipts online, generate reports, and model their cash flow three ways: a shorter-term (90-day) view, an 18-month model and what-if scenarios of the user's choosing.
"To have all that [data] in real-time with a bank is what we think customers are after," says Kunz. Other cash-flow software products available for this market don't integrate with bank accounts, Kunz says.
PNC does not disclose its small business customer count. The updated tools, however, have been live with some customers for 30 days, Kunz says.
The enrollment is a one-click process for online banking customers. Then, of course, a business owner needs to enter data about vendors and other aspects of his business, to get a more accurate forecast. In turn, the length of the set-up process will depend on each small business' operations. The bank, then, gets access to a treasure trove of data and potentially more logins and more dedicated customers.
PNC used APIs from the Bill.com business payment network to integrate the service with existing tools. Bill.com announced in November it updated its platform to let banks offer its services.
PNC is the first large bank to announce offering the services. Mercantile Bank of Michigan was the first financial institution to partner with Bill.com in 2012.
To be sure, every small business is different and the features they will want or need to use will vary.
Unlike retail customers, small businesses are more likely to swallow fees for services, according to recent industry research.
The software's advantages for the end-user are positioned as time savings and a single place to manage money. Most invoicing customers are using simple software, such as Microsoft Word, to send out bills and a separate payment provider to collect, which requires double data entry, says Kunz. "It makes it easy for the small business owner to understand cash flow," he says.
Users can set up alerts and calculate what-if scenarios, too.
Historically, banks' digital tools have ignored small businesses. In some cases, banks don't understand the small business customer.
Small Business Payments Company is a newer startup designing software meant to help small businesses handle money matters, including forecasting their cash flow. Yodlee, meanwhile, is working to make such services available to banks.
The emerging technology is a direct shot at digitizing process for an audience pressed for time and that has yet to warm up to digital banking services the way retail customers have taken to them.
"Business owners are challenged with juggling numerous responsibilities, so finding time to focus on strategy and grow their business is more valuable than spending time on spreadsheets, payments, and forecasting," says John Schulte, senior vice president and chief information officer of Mercantile Bank of Michigan.
Translation: Expect more features to be integrated into banks' online banking platforms soon.
"We are at early stages of a secular trend of small businesses customers becoming more automated," says PNC's Kunz.