[This is just one of my
series of posts from the NACHA Payments 2008 conference in
Business-to-Business Payments Strategy [NACHA
Banking Services, Celent, LLC
Julie Hedlund AAP
Business Payments, NACHA – The Electronic Payments Association
year, the majority of B2B payments are still made by check. NACHA has
defined a business payments strategy and is moving forward with
proposed solutions to increase B2B payments via the ACH Network. This
session presents the solutions under development and those that are
contemplated to make the ACH Network a more viable consideration for
NACHA is working with Celent to conduct market research focused on the
small business market. Phase 1 consisted of four focus groups, Phase II
was a qualitative survey of small businesses, and Phase III will be a
market demand assessment (later this summer). This session
featured small business payment research (from Phase II) that
was literally hot of the press — NACHA didn't see the data until the
afternoon before because Celent had just finished tabulating the
results of the survey. As yet, NACHA and Celent haven't digested the
findings but for now they shared the high level results. It was very
NACHA B2B Payments Vision
Hedlund advised that as yet NACHA has not formulated a B2B strategy –
they are in the midst of gathering data to inform the future strategy –
but they have formulated a vision, as follows:
- Buyers and sellers to have ready access to the payment
requirements of thiner trading partners;
- Sellers to specify remittance information to accompany
- End-to-end processing of invoices and related electronic
NACHA B2B Initiatives
Ultimately, the objective of the B2B market research effort is to
understand the market demand for NACHA B2B initiatives
currently underway and proposed (listed below) and determine how and
where to apply NACHA resources:
- BIZ (Invoice
Flipping) – Seller sends a payment request to buyer via
ACH network with specified remittance. Buyer sends corresponding ACH
Buyer views summary data from online banking site, pays via ACH credit.
- Secure Vault Payments (SVP) -Buyer views
invoice at seller's website, routed to their bank to initiate ACH
Directory – an enabler of the other payments initiatives
Over all, small businesses have a lukewarm
opinion of their bank. They do not associate the bank with
improving business processes. Small businesses are receptive to electronic payment,
especially if it is integrated into their accounting software (overwhelming
QuickBooks) in a turn key fashion.
Small business are
preoccupied with getting paid, not how they get paid. They
are open to ACH credits (as distinct from ACH debits, once they
understood the difference) and are not as concerned with security when
dealing with ACH.
The largest source of payment pain is in reconciling the incoming
payments with open invoices. Business
people surveyed indicated unwillingness to pay for ACH payment but they
are willing to pay for a solution that eases the reconciliation effort.
The challenge is for banks (and other providers of payment
solutions) to prove the ROI to the small business owner.
Impressions of specific
BIZ – As
long as the solution is streamlined, and simple they like it. Like
electronic payments, prefer an open network where they can pay anyone.
Convenient, once some changes are made to support complex invoices and
the ability to view and select multiple invoices for one payment.
Sellers are not interested
in hosting/archiving eInvoices.
SVP – This
was perceived as a niche solution. Viable for online payment in
situations where a credit card is not accepted.
Demand is largely convenience driven, 10% of small businesses are
consistently interested in process improvement. Financial institutions
that can capture the attention of this segment of the market can retain
them for life as long as they, too, continuously improve their
products. Sellers are moderately challenged when it comes
to eInvoicing delivery. Buyers are much less challenged (it's easier to
receive than to send).
Interest in electronic payment is lacking – although sellers are more
interested in buyers (it's all about facilitating incoming cash). Financial institutions and
payment providers haven't made a compelling enough business case to
overcome the status quo – checks work,. why fix something that is not
broken? One third of business people perceive that it is
easy to switch to electronic payments, they do not perceive float s a
big deal. Some increased concern re: security, but not much. The major
concerns are around the cost of changing their accounting process and
the time/effort involved in entering data into the system. This
underscores the importance of turn key solutions and a sales story
focused on efficiency and streamlining back office tasks.
Q&A and Audience
The study did not address trading partner size, although one can assume
that small business electronic payment is often driven by the
preference of their larger trading partners.
Standards must be as open as possible – without proprietary solutions
from banks or software providers – in order to migrate large numbers of
small business transactions from electronic to paper. Hedlund
underscored that "NACHA is not interested in developing proprietary
One unsolicited finding from the market research is that AmEx is held
out by small businesses for their dispute resolution services – they
purposefully choose to use their AmEx card to protect themselves. Small
businesses are very happy with AmEx and it was noteworthy that they do
not view their bank(s) with the same degree of satisfaction.
NACHA is working with QuickBooks and its competitors to address small
business payment needs. Indicated that QuickBooks is "interested and
willing to listen, recognize that we are on the cusp of a significant
change of behavior and want to drive it."
I missed the session, but PaySimple also presented market research on
small business payments. You can download the slides here.