Payment is extraordinarily important to small businesses, who often cannot take the risks of large corporations in terms of financing or credit for customers. Further, payment information becomes data which is useful for analysis regarding sales, products and other information which can form the basis of business intelligence. For the typical, traditional small business owner the requirements to reconcile accounts, pay suppliers and wait for payment are a challenge that takes away from a focus on the core business. Bradbury’s article in the Financial Post provides good news for these entrepreneurs with regard to upcoming trends that will change the way they do this part of their business.
The technology for making payments has for the most part become digital for retail business and individuals, but many small businesses in North America still use checks despite these advances. This article by Bradbury described five trends that small businesses could expect to see over the next few years regarding making and receiving payments. The first trend is understandably a decrease in non-digital payments such as checks (Bradbury, np). The others are the rise of new electronic payment mechanisms that serve businesses, faster payment transfer and reporting, opening of digital software used in banking to allow for secure innovation to drive new processes and an increasing focus on data analytics from banking and transactions that will be available to drive other decision making (Bradbury, np).
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The big news according to this article is the launch of the ISO 20022 messaging standard for electronic payments (Bradbury, np). This will allow for banking to work similarly to the automated transactions which already occur using digital transfer mechanisms, but small business will also be able to do this using their traditional banking infrastructure including the payment of suppliers, business to business invoicing and payments and similar everyday payment needs (Bradbury, np).
The article provided a sample of what might be different in the future. For example, APIs and other technologies which broker securities between organizations and applications will make it possible to make payments without even logging into one’s bank, such as paying directly from the business financial management software (Bradbury, np). This would facilitate and automate reconciliation, as well as providing all necessary financial data about the business in one place. In fact, the article points out that these could be automated to support inventory and ordering of supplies, much like a just-in-time approach (Bradbury, np). In combination with affordable software that helps with interpreting this information for small business owners. The result would be a greater level of innovation in payments available to traditional small business owners, who would have the benefits of tools and information similar to an online company which did everything electronically.
This article relates to several topics in the class including globalization of markets and business, challenges faced by entrepreneurs, and using financial management and analysis as a basis for strategy formation and decision making. The chapter of the Nickels, McHugh and McHugh textbook which it relates to most closely are Chapters 15 through 18 which describe the importance of accounting, data capture, regulations regarding the reporting and legal requirements of transactions and the use of transaction data for more refined analysis of what is driving sales and revenue. It also relates to the changes which have occurred due to the connectedness of businesses in terms of the globalization of society and finances.
While the article was interesting, it seemed to be talking about a very specific type of traditional small business, rather than the many startups of the past decade. A strong online component to many of these businesses has ensured that these businesses have none of the concerns that are raised in the article. Platforms such as PayPal and Apple Wallet provide near real time functionality for payment and integration with accounting software now. Even though the article was written in 2017, it is describing the trends that have already happened as trends of the future. Bradbury was stating that brick and mortar businesses who operated using older business models would soon be able to benefit from supports and processes like an online startup, however this idea was not referenced in the auricle, nor was it mentioned that all of this was already possible for the many small businesses which used online platforms for payment. This makes some aspects of Bradbury’s assumptions and predictions suspect, as the piece does not mention that perhaps the traditional position of banks has already been disrupted by readily available services for small business that operate online. To that end, it may be that small businesses turn away from banks and towards virtual wallets and payments, making the need for open APIs that allow for the integration of banking and near real-time payments redundant. This would be a more practical approach.
Banking has certainly fallen behind in comparison to automated and online payment solutions which use virtual wallets, however according to the Financial Post article this will be slowly changing, providing a benefit to small business owners. This is true only to the extent that small businesses cling to traditional banking, and this may prove to be an error of Bradbury’s analysis. Much of what he predicts for the future already exists, just not through banks. It may be that the future is more innovative and goes farther and faster as Bradbury lays out in his article if in fact small business turns to alternative means of making and receiving payments.
- Bradbury, Danny. “Five emerging payments trends for small businesses”. Financial Post, (2017). Available from: http://business.financialpost.com/
- Nickels, William, James McHugh, and Susan McHugh. Business: Connecting principles to practice. McGraw-Hill Higher Education, (2013).
