Here are four interesting stories from the financial world that happened this past month and how they affect you. Did you catch them?
1. Forrester study: only 26% of companies are B2B e-commerce ‘masters’.
What does it take to be a B2B e-Commerce “master?” According to a recent Forrester Research study it’s having a dedicated e-Commerce team or department, e-Commerce leader and technology team supporting your commerce efforts. You should also have cross-functional alignment and agreement on the company’s e-Commerce strategy as well as a dedicated profit and loss for e-Commerce sales. The June study revealed that, among 302 surveyed organizations in five countries (the U.S., UK, Germany, China and Australia), only 26% are “Masters,” meaning they have four or all five organizational best practices in place. The majority, 55%, are “Explorers,” with an average of two best practices in place. (Source: Retail TouchPoints, Forrester)
So are you a “Master” or just an “Explorer?” If you want to succeed on line, the criteria for being a Master is something you should seriously consider. Selling online is a different model then selling direct, particularly when businesses are selling to businesses. It takes dedicated resources, investment and technology. It’s hard for me to argue with the recommendations made in the Forrester report (which was commissioned by e-Commerce provider Magento). These recommendations include building a dedicated and comprehensive team, ensuring that the teams share common goals and investing in flexible and scalable technology.
2. PwC report predicts significant growth in acceptance of “Open Banking” in the UK.
According to Computerworld UK: “A report by PwC and the Open Data Institute into the first six months of open banking found that by 2022 the market could be generating £7.2 billion in value. The research, which includes interviews with executives at the big banks, technology vendors and payment providers, as well as 1034 consumers and 213 SMEs across the UK, also found that while only 18 percent of consumers are currently aware of what open banking means for them, this should reach 64 percent by 2022.
The report found that SMEs had a better grasp of open banking and the benefits it can bring them, such as integrated accounting and tax services and fast access to capital by giving providers real time access to account information, instead of filing paperwork. (Source: Computerworld UK, PwC)
Legislation like this in the U.S. is still far from happening due to the size and complexities of our financial systems. However, as consumers and business owners in countries around the world see the benefits of an open banking system’s data sharing, it’s likely more business customers here will benefit from a greater access to their data and profit from opportunities that will be created for startups and other tech firms.
What kind of opportunities? With Open Banking “companies have access to building blocks that they didn’t have access to before, which is the ability to pull data or do transactions on behalf of customers wherever that customer is,” Ed Maslaveckas, CEO of fintech startup Bud told Business Insider. According to the report, “Bud is working with HSBC to build an app based on open banking that will scan customer accounts to make sure they’re on the best phone and energy tariffs — just one potential application of the technology.”
3. Small business credit card trends and their future.
According to recent data from CreditCards.com, 31 percent of businesses seeking credit applied for a credit card, and 86 percent sought a loan or line of credit. About 67 percent of small-business owners currently have a business credit card, but only 24 percent use it as the primary method of business spending. And, as of December 2017, 31 percent of business owners said they used credit cards to meet their capital needs in the past 12 months. (Source: Mercator Advisory Group)
Chart: Mercator Advisory Group credit card predictions for 2018.
These results aren’t surprising. Credit cards are a very important source of financing for small businesses and many of my clients like to link their business and personal credit cards so that they can maximize points, cashback rewards, miles, etc. As long as you’re paying off your balances currently then this type of financing is good for a small business. But that still doesn’t preclude the need for a credit line as a backup source of capital, which is why so many business owners (86 percent per above) apply for one. Remember that the more credit you have available for your business, the better your company’s credit score will be.
4. The battle for small business customers is spurring an arms race among banks.
As small business optimism soars, banks are clamoring to get a piece of the small business action. Both larger, community and independent banks are investing in technology to help make faster loan decisions and are hiring more lenders to serve the market. The Small Business Administration’s 7(a) loan guarantee program is on track for yet another record year. The program has guaranteed more than $18 billion of loans so far this fiscal year and the program is gaining momentum.
“We don’t see the underlying demand slowing down in this space at all,” said Jim Fliss, national SBA manager at the $138 billion-asset KeyCorp. “When we look at the overall 7(a) volume, we’ve seen record levels for three straight years and 2018 is on pace for another solid year. Our pipelines are good, our applications are strong, and businesses are moving through the process. (Source: American Banker)
Now is a great time for small businesses to seek out capital. Remember that the SBA doesn’t give loans (except in disaster situations), but instead guarantees loans made by qualified banks. If you’re running a startup or do not have a long financial history, ask your banker about SBA guarantees—obviously there are many small business owners who are doing the same!
Want to learn more about SBA loans and whether they’re a good choice for you? Check out the Fundbox guide to everything you ever wanted to know about SBA loans.