SMALL BUSINESS ONLINE BANKING REACHES TIPPING POINT; USAGE FULFILLS SURVEY FINDINGS
CashEdge, Inc., the pre-eminent provider of online fund transfers and the pioneer behind opening and funding accounts online, today announced strong small business usage data, echoing the findings of several recent small business surveys. CashEdge usage data for online payment, invoicing and collections during 2006 and through the first quarter of 2007, reflects the growth in adoption that was predicted by BAI’s Small Business Payment Strategies research study in 2006, Aite Group’s April 2006 survey of small businesses, and CashEdge’s 2006 Small Business Survey. In June 2006, Bank of America became the first U.S. bank to offer electronic invoicing presentment and payment (EIPP) to small-business customers (through its Online Business Suite) and reports that the service has been extremely successful.
Corroborating the growing usage of online banking solutions by small businesses, Online Banking Report Editor Jim Bruene wrote for netbanker on April 20, 2007 that “Wells Fargo has 150,000 ‘very active’ small business online banking users according to Eskander Matta, SVP Internet Services Group; businesses are making $45 million in payments per month with the bank's DirectPay service launched just a year ago.”
BAI’s research study further illustrates the demand for online banking with it’s finding that fifty-seven percent of small business customers say they’d move providers for the right products and services. The study finds that small businesses feel they are underserved by banks in payments products and services and that bankers tend to underestimate the opportunities available to them.
Looking at the future of small business online banking, Aite Group estimates that 40% of all U.S. small businesses are currently banking online and that 65% will be doing so by year-end 2010. According to Aite Group, by 2010 the service could potentially generate US$705 million in additional fee-based revenues for banks.
“CashEdge developed its Small Business Suite based on the expectation that small business owners would increasingly adopt online banking services for their business finances,” said Sanjeev Dheer, CEO of CashEdge. “Last year when we conducted a survey of 185 small businesses we predicted that we would see online banking adoption accelerate as businesses realized how the cost and time savings compare with historical payment and delivery methods.” According to CashEdge’s survey, seventy-two percent of small businesses reported a medium to high interest in using an online payment system. Dheer continued, “We are pleased to now report the actual usage numbers that confirm those expectations.”
The most significant survey findings, which have been reinforced by actual small business online banking behavior, include:
- The Decline of Checking
CashEdge’s Small Business survey found that eighty-seven percent of small businesses handle accounts payable by writing checks, but most small businesses would rather make these payments online (72 percent reported a medium to high interest in online payments). Additionally, BAI’s Small Business Payment Strategies study found that almost 80% of businesses with revenues between $5 and $10 million expressed strong interest in a technology-based electronic payment platform. Both findings have been validated by CashEdge’s usage data, which proves that increasingly small businesses are making payments online. Online payments made to vendors and employees by small businesses have increased by 61% during the past 12 months.
- FedEx is Dandy but Online is Easier
Sixty-seven percent of respondents to the CashEdge 2006 survey reported making outbound payments via FedEx. According to CashEdge usage statistics in 2007, 13% of small business payments are next-day payments at a fee of $10 to the bank. This lucrative business banking tool eases cash flow for the business by speeding payment times and provides more convenience than FedEx.
- Small Business Sees Online Payroll Benefits Across the Board
Fifty-seven percent of CashEdge survey respondents in 2006 indicated a medium to high interest in managing payroll online. Not surprisingly, from March, 2006 to March, 2007, the number of electronic employee payments made by small businesses grew 41%.
- Online Invoicing: Out with the Old, In with the New
Aite Group’s April 2006 Survey of 278 U.S. small businesses reported interest in electronic invoicing expressed by most (67 percent) of the respondents. CashEdge’s survey found that more than half (57 percent) of all survey respondents reported a medium to high interest in replacing their existing invoicing process with an online invoicing solution. The actual number of small business invoices sent electronically has grown by 20% per month over the last year.