Welcome to the Wild West for Small Business Management Technology


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Today’s small businesses are empowered more than ever by technology. Start-ups and emerging technologies are colliding with established financial institutions to create a true Wild West for business and financial management in the small and medium business (SMB) sector. But what approaches are different finance and technology players taking—and how will they impact the way small businesses manage their finances?

There’s no doubt that business owners recognize the benefits of technology—one recent survey found that 29 percent of all SMBs say technology is critical to improving business outcomes. The result is a mad dash by incumbents to catch up, keep pace and partner with innovators in the right ways to earn the loyalty of business owners.

Here are four different ways that financial companies are battling it out to help small businesses manage their cash flow, start to finish.

Integrating POS with Financial Management
In a recent report by technology provider Wasp Barcode, a majority of small business owners said that their number one priority for technology investment this year is to replace hardware. For a great many SMBs, this includes front end equipment like cash registers and credit card processing devices. Square was the primary innovator of integrating credit card swiping with iPads, but today the bar is much higher in terms of payment hardware technology design, performance and accessibility.

Take Bank of America’s Clover Point-of-sale (POS) solution, for example. As opposed to Square, which only allows for card swiping, Clover is a fully integrated POS, cash drawer and receipt printer. BofA supplements the basic hardware and software with an app store, where businesses can add extra layers of functionality and customization based on their unique processes. The POS software is then able to communicate and send data back to financial management software, so that the two are seamlessly integrated.

Offering End-to-End Cash Flow Management
Other companies are approaching small business management technology with the goal of providing complete, end-to-end financial management. This means that everything from payments, checking, savings, credit, insurance and investments are all handled by one technology platform. This is the logic behind Capital One’s Spark Program for small business finance, that offers a different Capital One Spark product or service for each of those areas, all tailored towards entrepreneurs.

That isn’t to say businesses can pick and choose from different products within the Spark ecosystem (such as checking, corporate credit Cards and 401(k) account management), but the goal is to have everything tightly integrated so business owners can access everything in one place. The ancillary part of the pitch is that it makes customer service that much more convenient, as you only have one partner to contact if multiple issues arise. The challenge will be for a medium-sized mainstay like Capital One to innovate on a pace with both fintech start-ups and mega-bank competitors that acquire or partner with these new players.

Creating a Best of Breed Ecosystem
Having an all-in-one suite is great in theory, but there are certain small business tools that will always be known as being the best at what they do. Accounting and financial management is an area that Quickbooks has traditionally dominated; it still occupies 80 percent of total market share for SMB accounting. But rather than building additional features onto the Quickbooks product, companies like Intuit are building out tightly integrated ecosystems consisting of first-class applications across the breadth of business management needs.

Intuit is an interesting case also because it owns another hugely popular brand, TurboTax. It has been in Intuit’s best interest to keep these successful brands, and add others like the hugely successful personal finance app Mint.com. The intent is to not only make the business easier to manage, but to handle the business owner’s personal finances as well.

SalesForce.com’s strategy is another great illustration of building out a comprehensive ecosystem under one umbrella. Any business that uses SalesForce.com can purchase proprietary financial management apps on the firm’s cloud platform, and perform multiple functions without leaving the SalesForce interface. Businesses can utilize the Financial Force app for payroll, Accounting Seed for accounting and so forth. In these cases, SalesForce often provides resources and guidance to these start-ups to make the software on their platform as competitive as possible.

Innovating the right way
Fintech startups have the stated goal of disrupting a financial services sector that has become known as overly traditional and lacking in personalization. But as startup technologies for small business management begin to scale, like the example of Mint.com, these companies often face a crossroads in terms of how and where to expand. Some choose to be acquired, as in the case of Mint.com, while others seek partnerships with big banks to gain additional marketing exposure while retaining control of their product.

David Gibbons, managing director at Alvarez & Marshal financial consulting, recently told CNBC that “Banks are partnering to keep in the game and keep relevant. I think they’ve caught up fairly well.” On Deck Capital is one of the foremost innovators in small business lending, using technology to gauge creditworthiness based on the performance of an entrepreneur’s business instead of personal credit score. But rather than be acquired, On Deck has partnered with JP Morgan Chase to build a new lending product for small businesses, under the Chase brand. This is a great example of some “quick win” technology partnerships taking place in the small business space that combine the benefits of innovation with the security and scalability of big banking to better serve SMBs.

And these are just a few of the innovations, technologies and trends that are constantly emerging in the small business sector. The bottom line is big banks now realize that adopting new technologies is critical to retaining SMB clients. With so many startups and established players evolving to offer more services with less hassle, it’s a pretty good time to be a tech-savvy small business owner.