Key takeaways:
- How the modernization of small business payments – including systems integration, advanced software capabilities, and omnichannel payments – is enhancing the merchant experience.
- Why an integrated payments ecosystem is vital for small business owners during economic uncertainty, as they look for increased speed of payments and less complexities in financial transactions.
- How advanced software capabilities allow POS technology to do much more than manage payments and why providing insights and customer data is now expected as a modern financial services partner.
Jackie (00:09):
I'm card payment for the sponsor for this track, and I just wanted to introduce it off. So Stu, is going to be the moderator and I'll let you introduce your background a little bit, Stu, and then each person will introduce themselves. But I wanted to say thank you for attending and alternative.
Juliana Berger (00:26):
Thank you, Jackie.
Stu Richards (00:28):
Yeah, Thank you so much Jackie. And thank you for hanging in there until the end of the day. Today, the beers are not far away, but we think you're going to like this session. So throughout the session today, you've heard little bits of conversation around small business, and we are here to take a deep dive into the needs and concerns of small businesses around payment. So to introduce myself, my name is Stu Richards. I'm the CEO of Braden. We're a market research firm that specializes in helping companies to understand the mindset of the small business owner, and I am very honored to be joined a very terrific panel today. And I'm actually going to introduce or ask each of my panelists to introduce themselves, specifically their role at their organization, what their offerings are to the small business, to the merchant, and especially how they define small businesses. So Juliana, take it away.
Juliana Berger (01:23):
Hello everyone. Very excited for the happy hour. Come find me afterwards. I am Juliana Berger, Director of Payments for Intuit and specifically QuickBook Payments. So what does that mean and what is our offering? QuickBooks serves 7 million small businesses worldwide. It's clearly as well as Intuit a leader in the small business space. And for us, we think about payments holistically. So we started with a really strong payment solution. Now we're looking at holistic financial services across capital term loans, checking accounts, and others as well. So happy to answer questions there. For us small businesses, we don't look at revenue, we actually look at the maturity of the business and where they are in terms of the complexity of what it looks like to run a business. So for us, that means number of employees. Any company less than 10 employees for us is a small business.
Bob Rohr (02:13):
Awesome, Thank you. My name is Bob Rohr and I work in Truist Enterprise Payment Strategy Group. If you're not familiar with the Truist brand name, we are the new bank that was formed out of the SunTrust and BB and T merger a few years ago. In that capacity, I lead retail payment strategy and under retail we group small business, which is defined for us as zero to 2 million in revenue. We are a very large financial institution. We're the seventh largest in the country, so we actually have solutions that span the entire spectrum of small business to middle market to corporate. But how we define small business is specifically more in the zero to 2 million. And in the product suite we offer deposit accounts, credit cards, loans, working capital solutions, and the like.
Stu Richards (03:06):
Great. So Bob, I'm actually going to keep it with you and start with focus on the merchant experience. And specifically I'd love you to discuss how the merchant experience is enhanced through the modernization of small business payments, by which I mean integration, advanced software capabilities and omnichannel payments.
Bob Rohr (03:29):
Yeah, it's a great question and I go to verticalized software, which has been a complete game changer for small businesses. We see more and more small businesses moving to adopt verticalized software because it is integrated and really the brains of how to run the business for the small business, which means that they can focus more time on selling their product or selling their services and less time on focusing on managing how they actually run the business.
Stu Richards (04:06):
That's great. Juliana?
Juliana Berger (04:08):
Yeah, so when we think about verticalization and embedded payments, we actually look at a very different way. So QuickBooks and the majority of payments for QuickBooks are for service based industries. And so what does that mean? These are invoice based industries. These are your lawn services, these are your monthly recurring services. And so these are invoice based industries. A lot of times they create invoices on QuickBooks and they send them, they print 'em and they send them the mail. We have $2 trillion, $2 trillion a year of invoices created on QuickBooks. And for us, the change that we've seen is actually going from printing those invoices, sending them in the mail and having folks pay by check to actually digital embedded payments within the invoicing experience. And so we measure that from what we call pay enabled invoicing. And as of today we have 125 billion in charge volume of actual payments that are happening digitally within those embedded invoices.
Stu Richards (05:11):
That is extraordinary. So right now it's obviously kind of a shaky economy and I'd love to get your take on how an integrated payments you could system can help small businesses manage through that. And Julian, I'll start with you on that one.
Juliana Berger (05:28):
Sure. And I'll share a story. So Ashley Rose. Ashley Rose is the owner and CEO of Trade Street Jams. She actually had a business that she started right before Covid and her direct to business blew up during Covid. She went from making jams in her kitchen to a shared kitchen in the city to actually full production. And halfway through 2020, she was hit with an $80,000 loss because of unplanned production issues. Now here's a problem. Ashley did not qualify for a loan anywhere. The good news is she was a QuickBooks customer. And because of the way that QuickBooks serves as an accounting tool, we actually see every dollar in and every dollar out. And that's the secret sauce of QuickBooks. You can actually see every dollar in and every dollar out for every business. And so we gave her a capital loan that she says today saved her life. And that's so many different. We hear so many different stories like that where the ability to have access to capital in times of uncertainty is a make or break for businesses. I mean, 82% of businesses fail because of cash flow. 82%, right? 50% of businesses go out of business in the first five years for Intuit QuickBooks customers. 69% of our businesses are still thriving after five years. Now obviously a lot of that has to do with the businesses themselves, but we'd like to claim that some of it is because we're able to have that targeted financial need at the point of need and be able to offer loans when others can't. In fact, 60% of QuickBooks capital loans are given to customers that did not qualify for loans anywhere else. And so that level of uncertainty and that level of access to capital is make or break for so many customers.
Bob Rohr (07:05):
Yeah, completely agree. I boil it down to insights. The software is able to provide actionable data based on the payments that are flowing in and out of the POS system or the software. With that data comes immense information and the software is able to produce actionable results that can actually help the small business target their customers and grow the revenue. And with that data, just as my esteemed panelist just said, you can actually loan against that. And that's where a lot of the FinTechs and big tech companies are leg ahead of some of the more traditional financial institutions because they can harness that data and they have risk policies and governance models that are a bit more flexible that they can provide their small business with that loan to cover the short term needs in the economic uncertainty.
Stu Richards (08:03):
And from the business owner standpoint, involve start with you on this question. How are you seeing advanced software capabilities enhance their own abilities to manage their business? For example, through better insights on their own customer behavior or their own customer payment patterns?
Bob Rohr (08:21):
Yeah, it really allows the small business to understand how their clients are using their service. So when are they buying the service? How frequently are they buying the service? How much are they using of the service? And with that data, you can make actionable insights and actually use that data for marketing and promotions and targeted offers to help increase the cart size or make the experience for the end client that much better to where they will use the small business over and over again.
Stu Richards (09:03):
Juliana?
Juliana Berger (09:05):
Yeah, I couldn't be more excited about the space. I mean, has anyone played with chat GPT yet? Oh my gosh, act as a luxury real estate agent and tell me where, what neighborhoods I should be buying X, Y, Z? For us, data used to always be what do I own? What do I see and how can I then action on what I own and what I see Data has fundamentally flipped on its head of the past couple of months. I mean fundamentally flipped on its head. The access to data, the action to insights, forecast, future forecasting is so strong now. And I think everyone in this room probably has some sort of way that they're trying to play with AI and generative AI to be able to drive that value going forward. But this is where I think we can really fundamentally change the industry in harnessing that data to be extraordinarily actionable. And that's the difference between a generated AI chat, GPT and a Google. Google is the same kind of data we've been operating in the past, which is I search for a specific need, it gives me that information, but there's no really action there. I have to take the action, right game changer. Now it's action oriented data. It tells you where to go, it tells you options of what based on what you're trying to optimize for. And that to me is like that's the game changer for small businesses because small businesses are moving faster than ever. The time value of money is a real thing. These guys are hustling and they're hustling hard. We're all hustling, but these guys are hustling hard. Lots of these people are solo entrepreneurs, gig workers. They have multiple jobs, multiple LLCs. So being able to have action data and being able to have that data be give choices for what they're optimizing for is to me the what's getting me excited about the industry going forward.
Stu Richards (10:52):
That's great. From the other side of the house in terms of their managing security and managing fraud, what do you see are the biggest things that you can do either from a product or an education standpoint to help with those stupid concerns?
Juliana Berger (11:08):
Yeah, really good question. Sometimes we build products for ourselves and we don't recognize that our customers don't really fundamentally understand how they work. And so what do I mean by that? A lot of times we ask our customers, Hey, why aren't you moving to digital payments? It seems like a no-brainer. And they're like, no, no, no, I don't trust it. There's a trust element to it, right? No, I trust cash, I trust check. I know how it works. Everyone in this room knows that checks are one of the biggest fraud instruments in the industry. And so there's an element of trust and understanding that trust in the payment method and the payment acceptance and how it works, and then shifting the culture based on education that is fundamental for our customers. So for us, the biggest hurdle for digital adoption is that trust element and understanding fraud and understanding how embedded payments, how 3D S secure, how the different worlds that are evolving today in terms of different payment methods are actually way more effective. We also offer value added service likes chargeback protection. A lot of companies offer that as well. So it takes away the pain or the fear of friendly fraud or fraud that certain customers that accept cards are always worried about.
Bob Rohr (12:23):
Yeah, it's a great question and I'm going to use an analogy to the consumer side and debit card fraud. You look at the persona of debit card fraud versus credit card fraud, and it's almost the complete opposite because with debit card fraud, it's my money with credit card fraud, it's the bank's money with a small business, it's my money. And on top of that, if there's a fraud incident, they may not be able to make a payment to their supplier because they don't have that cash flow anymore. So from Truist perspective, we let the small business know that we are there and we care for them. We have all the security protocols in place. Fosters move fast, there is fraud. But ultimately our small businesses know that we are there and we have their back, and if it is fraud, we are going to refund their money and make them whole.
Stu Richards (13:19):
So it sounds like you guys are doing a lot of the same things and taking similar, I'd love to hear how your two organizations, representatives of the industry cooperate and how you might compete in taking products to the small business market.
Juliana Berger (13:35):
I'm happy to kick this off. This question reminds when I worked at Citi and we kicked out of a group called Citi FinTech, and we always say like, oh, the fintechs are taking space and they're taking pieces of the pie from the banks. So like, oh my gosh, we all have to be really scared of the fintechs. Then you realize there's no way, shape, or form that we can all play without the help of each other. This is an ecosystem. This is what makes payments so exciting, but also so complex is that I mean, you swipe a car, there's at least five players involved to make that transaction happen. And so the ability for interoperability to come into place for the ability for us to play and continue to evolve our solutions to be holistic and symbiotic is the single biggest opportunity for all of us in the room to truly meet the customer needs. Because at the end of the day, that interoperability and having an all in one solution is who's going to be able to deliver ecosystem value and without ecosystem value. That's like your Formula one car and you've got the Porsche brakes, but you only got three wheels and that car's not going to move. You need ecosystem players, you need interoperability to get that car on the road to have it run seamlessly to be a winner. And so to me, that's the biggest play is how do we get interoperable holistic solutions that work together so that we have a winning car on the road.
Bob Rohr (14:50):
And I go to mutually beneficial partnership. The great thing about payments is that it's large and it's also growing at about seven to 9% a year. So it's large and the pie is expanding. And this historical notion of we're not going to partner with any FinTech because there are competition is just garbage and it's out the door. Partnerships evaluations is one of the hats I wear in my role. And what I really look at is buy use case, do our solutions together, make it better for the small business. And if that's a yes, then there typically it's going to be mutually beneficial relationship there for both of us to bring the small business forward because ultimately that's what we need to do in a partnership together.
Stu Richards (15:41):
Great. So I'd also love to hear one of the concerns we hear over and over from clients about going to market against small businesses, the cost of acquisition, the read of turnover, the read of churn. I know this is a marketing question, but would love to hear how you're going to market effectively to acquire lumbering merchants.
Juliana Berger (16:02):
So the absolute majority of our acquisition traditionally has been coming from QuickBooks already. So we say that new to the firm in QuickBooks is actually a switcher in payments. We do absolute majority of our attach in customers who are already QuickBooks customers. Now that has served us well because acquisition cost is low because they're already into IT customers. But there's a tipping point in how much we can grow there because at the end of the day, by sheer definition, if you're looking for an accounting solution, you probably already have a payment solution, right? Because you already have some way of getting money and money out. It might not be the best way, but at the end of the day, you've got a mechanism to receive money and get paid out if you're already looking for an accounting tool. And so that's been our biggest focus over the past three years is how do we expand to new channels and what we call new front doors for payments. We launched a product called QuickBooks Money, another one called Go Payment, which allows users, especially small businesses that are early, starts to sign up for our money solutions without needing a QuickBooks subscription. They can always link into QuickBooks at a later date, but they don't necessarily have to start with QuickBook subscription first before they can access the benefits of the solution. In addition, we've been looking beyond payments and looking at really like embedded financial solutions. We launched a B2B network, we launched term loans and capital and checking accounts and many other different financial solutions, which allows us to expand our reach based on what the customer needs are. So starting with QuickBooks, expanding beyond, and then looking at holistic embedded services as well.
Bob Rohr (17:35):
I'm going to say a potential dirty word, but we actually do a lot of work or production through branches. What are those? I know, what are those? We see a lot of production coming through our branch network, and that's a fixed cost for us. We're there to service the small business. And we find that more often than not, the small business feels comfortable knowing that they can walk into a branch and be serviced. We take an omnichannel servicing approach, and so we allow the small business or we encourage small business to use whatever channel that they feel most comfortable with in resolving their need. As a large financial institution, we are also very active in the community. We volunteer, we focus on small business as community heroes as a way to really invite them in the door because we don't focus on any specific vertical. We offer a breadth of financial solutions that can support the needs of any small business.
Stu Richards (18:38):
Great. Thank you. All right, we're starting to get to time. I'm going to ask one more question and then if you guys have any questions, feel free. So my last one is just looking forward what you see as the next stage of evolution and payments offerings. Do you want to start?
Bob Rohr (18:56):
Yeah. I see four areas on this. One, speed, optionality, Integration and certainty on speed. The small businesses want real time or faster payments, and that can come in the form of Visa Direct can come in the form of TCH or Fed now. On optionality, this gets really important during financial uncertainty, they want the ability to use credit where they see fit to extend their working capital needs. And on integration specifically with the vertical softwares, it's the data that they can provide to offer those specialized loans that also provide the optionality for them to increase their working capital needs and uncertainty. They want to know that they're going to get paid when they get paid.
Juliana Berger (19:49):
I love that. Yes. And because I agree with all that. I won't double down on it cause I think you explained it so well, but I'll add to it. Two areas for us are around expert advice and automation. And we're also really excited about the B2B space, and I'll give you a little insight as to why those two. When it comes to automation, a recent QuickBook study of our small businesses show that businesses are spending a staggering 14 hours a week on payments related administrative tasks 14 hours a week. Now let's call it a five day work week, nine hours a day, that's one third of your business week chasing payments. So like, Imagine if you make it easier, imagine if it was seamless to get paid. Imagine if all they had to do is click a button and then they never had to look back, they never had to chase down money. They never had to make sure that that bill or invoice was paid. One third of the energy that they put into growing their business could be redirected to getting new customers, new products, et cetera. So that opportunity for me is massive and I will die on the sword trying to get that automation out the door. Second is B2B payments. There is so much undertapped opportunity. Again, FinTech and innovation has really been driven by the consumer space. Consumer habits and optionality has been what's been driving innovation. And so there's much less innovation in the business space and a lot more business need in terms of automation and cash flow. And I'll give you an example. 38% of QuickBook B2C businesses get paid late 38%. That number is 52% for B2B, 52% of businesses have days paid outstanding over 60 days. So the ability for us to automate and accelerate access to capital and closing that gap as to when the service is complete and when the money is received, it's massive because these businesses have thirty, sixty, ninety, a hundred twenty net payment terms. Imagine if you go to the grocery store, you walk out with food, you're like, I'll pay you in 120 days. Cool. Be right back. Imagine the amount of money that you could reinvest in your business and pay payroll, buying new equipment, reinvesting in growth, opening up a new location. And so to me, the automation and the time spent chasing money and the shortening of the time between when the service is committed and when the payment is received, if we can all focus on those two things, the small business market will explode. So that to me is the biggest area of opportunity that I'm excited about.
Stu Richards (22:24):
As an entrepreneur, I wouldn't know anything about that. So this is great. Do you guys have any questions? Good, because I got a bunch. All right. So my first one is, so we just did some research around small business. So we saw really shocking plans to increase spending on payment solutions this year. Like 70% of companies with a hundred to 500 employees said they're going to increase spending this year. Are you seeing that kind of growth outlook? And if so, how are you going to capitalize on it?
Bob Rohr (22:57):
We absolutely see that need and that growth, and I'm not surprised that the percentages increase as the number of employees increase as well. Because as you have more employees in your business grows, your workflows get more complex. And that's where technology can really come into play and help with the vertical integration or integrations into larger ERP systems to make running the business easier and making the business run easier allows you to focus on converting revenue.
Juliana Berger (23:30):
Yeah, we are too. We're seeing double digit growth year over year for the past five years. Last year alone grew at 36% year over year. And we're not a small company. We already have 125 billion charge volume a year and 2 trillion of invoicing. So growing 36% year over year says there's still huge growth opportunity in this space. In my opinion. The reason why we're seeing that is we're because there's a mind shift from free to time value of money. There was a world back when we were brick and mortars and small businesses were focused on mom and pop shops and being in person where payments were paper based. And so there was no real desire to pay for credit card fees. A lot of business were like, I don't accept credit cards not going to pay the fee. They're charging me. I don't want to pay that fee. I want free money. Most businesses during covid had to move hybrid or digital. So they had no option but to go digital and embed payments so that they could actually stay and thrive. And what ended up happening is they realized, okay, yeah, I'm paying for a service, but time value of money is really important. And all of a sudden I see that embedded payments has an ROI and I'm getting the data and insights. To your point, I'm getting speed and access to capital. I'm getting all of these additional benefits that I wouldn't have gotten before if I had cash or check. And so that education, that awareness, that cultural shift from free to value to ROI to time value of money, is I think what's starting to really fuel this shift away from paper-based payments and into digital payments. And I think we're just really honestly just getting started there because checks are still a third of the way businesses make payments today. Third, 33% of payments are still check based. And so while we've seen the numbers and checks continue to decline over time, I think we're still very, very far away from having reached maximum here. And there's a lot of opportunity that's still untapped.
Audience Member 1 (25:17):
How do you see speed? So is being able to take something, the differentiator for small business versus going through being underwritten and going through, but how important is that in sales?
Juliana Berger (25:52):
Yeah, I'm happy to start and please jump in as level up. Yeah, huge. I think the ability for us to offer services instantaneously and get some sort of KYC or risk-based modeling within minutes versus hours or god forbid days is a game changer for the business. And by the way, we hear this a lot. People say, Hey, other, other companies are 45 minutes or 30 minutes to onboard and you guys take an hour or whatever might be, they hold us accountable to instant enablement. And I think where QuickBooks wins here is, again, most of our payments is through QuickBooks. So we see your end-to-end payments information already. So we can do risk-based modeling. That's pretty competitive and pretty sophisticated. So we don't need to go through a lot of loopholes here, but I still think there's a massive opportunity here for us to improve and specifically what I would call risk-based value added services. So what do I mean by that? We put most merchants and small businesses through the same loop to get in the door, whereas I think there's a huge opportunity for us to say, Hey, here's the minimum viable payments opportunity that to get you started. I can set you up with that instantaneously. And then as you evolve, as you grow, as you mature, as I see your behaviors and you interacting with your customers, I can unlock new payment methods, new values as you go, but start you off with the basics, start you off the basics instantaneously, and then be able to expand that offering so that you can start your business in the minute that you press that button. We definitely have opportunity there.
Bob Rohr (27:23):
I completely agree and I see it more in the size of the small business. So if you're a sole prop or have zero to five, then you're looking for that digital onboarding. You're looking not to necessarily have to go through the underwriting and allow the payment service provider to do that on your behalf because you want to get up and running and selling your goods as fast as possible. And so when you kind of move up the spectrum and as you grow, your needs will change. And that's the power of understanding from the software perspective, kind of how you can continue to meet the needs of the ever-growing small business because they may look at the fees that they're paying and say, I need something different. I don't want to now be underwritten. I want myself to be underwritten and take some more of the risk. Cause I want more of the payments revenue.
Audience Member 2 (28:22):
I work for the USDA Food and nutrition service on the retailer side of food stamps. I'm a weird place in this ecosystem right now. And I just have a question more of a advice if you could give it with working with smaller retailers as we're innovating EBT, we have now operationalized online purchasing, we're moving into mobile payments and towards EMV as well. What we've learned, especially through online, is that when it comes to new technology with working with smaller retailers, they lack resources, right? Or the knowledge behind it compared to the big guys like Walmarts and the Amazons. And so just in your experience, how do you support those smaller retailers that don't have that capacity and those resources?
Bob Rohr (29:25):
It's education and it's the hardest thing. So let me take a personal example. My wife is a sole prop. She uses multiple systems to cobble together her version of software. She doesn't use world class software because she doesn't really know about it. And when I bring it up, she doesn't want to listen because it's going to take too long for her in her mind to understand then which takes her away from selling. And so I think as a service provider to smaller merchants, you need that arm to educate on the power of integrated systems and better technology, which when they put in the time upfront, will reap benefits on the backend.
Juliana Berger (30:17):
Plus one, meet them where they are and show them why.
Stu Richards (30:21):
That's great. Okay, I think we're at time if you want to come up and grab these guys right after, but I know we have another panel coming right up, but what I want to say is thank you guys for your attendance. This is great and thanks.