Among the things you'll learn:
- How spend management tools can help simplify operations and protect cash flow for small businesses.
- The importance of designing seamless and easy-to-use tools to meet business clients where they are.
- The role banks can play in delivering these tools to business clients at scale.
Transcription:
John Adams (00:09):
First of all, thank you for doing the panel and could you each discuss your role and what you do in your position?
Sarah Steele (00:16):
Sure, I'll jump in. Great. So again, I'm Sarah Steele, really delighted to be here. I'm responsible for small business and middle market products at Visa. So what does that mean? It's a North America role, so I'm actually responsible for Canada and US, and it's really all about taking the best of what Visa has to offer in terms of our card solutions and our digital platforms, and wrapping that up and packaging it for US and Canadian markets and really bringing the best for small business issuers such as yourselves to help you succeed in supporting small businesses.
Jonathan Su (00:57):
That's wonderful. It's great to be here with you all today. Appreciate the opportunity. I'm Jonathan. So I am part of a Business Banking Group at US Bank, and we do digital products in particular. So we're really focused on providing modern financial tools for our small business clients, and we're also focused on creating integrated experience because we offer a ton of different products and services as US Bank, so we want to bring a cohesive solution to our customers.
John Adams (01:30):
What are some of the challenges that small businesses face in managing their balance sheets and managing their money or their financials?
Sarah Steele (01:39):
I'll jump in. Yeah, so small businesses are so unique. Many of them are wearing multiple hats. So I think one of the biggest challenges that business owners face is that they're trying to do it all. They are the head of marketing, the head of finance, the head of funding, the head of product, all of those things. And managing those multiple streams actually it means that they have tremendous strain on their time, their energy, they can't be an expert in everything. And so from a financial perspective, what we often see is that business owners sometimes lack financial acumen, so they need more education, and the fact that they're time starved means that they're just trying to make it all happen. And then finally, I would say that a couple of the biggest foundational challenges that all businesses face is especially small businesses, access to capital and funding. That remains a big challenge as well as managing their cashflow because money comes in and money goes out at different times and making that all happen seamlessly is a really big challenge. So that's what I see day in and day out and it's pretty consistent.
Jonathan Su (02:56):
Yeah, couldn't agree more. I think we all know cashflow is one of the biggest challenges that small business face. I'll just maybe add on to a specific point around small businesses today don't really have a lot of control or visibility on their cash position. Many of them are still using a patchwork of manual processes that includes email, phone, texts or spreadsheets and paper receipts even so they don't have the visibility to understand their true cash position at any given time and they don't have a lot of runway. So it's a real challenge that they face.
John Adams (03:35):
How do these challenges differ from larger enterprises?
Sarah Steele (03:42):
As the business gets bigger? So do sometimes their complexities in what they're managing. So on the plus side, they may have more resources, more history, more financial history to have better access to capital or funding or loans. They may have personnel to help them manage their finances, somebody who's dedicated, for example, to their finances. And so what I see is they're also able to maybe take on more to with that added focus and those tools need to handle more complexity because maybe they have, instead of 10, 20 employees, they're going 50, a hundred, a hundred plus. That's when you start needing a lot more financial tools that handle that complexity and those layers of hierarchy and so forth.
Jonathan Su (04:33):
Yeah, absolutely. I think enterprise fundamentally have a ton more resources in ways that small business and so they can afford to have a dedicated financial team that really manages the operation. They can afford the enterprise tools and a lot of which to your point, requires complex implementation or maybe a team to manage Small businesses can't afford that, they can't afford the people, they can't afford the cost and they also don't have the time. So some big differences between the two.
John Adams (05:08):
What are some of the concerns that you're hearing from your clients? What are they telling you?
Sarah Steele (05:13):
So here's where we're going to diverge because my clients are Jonathan and others, so I'm B2B, we're serving the banks. And what I hear in terms of challenges are how do I effectively invest in the right technologies for small businesses? They're competing, you in the room are competing with your consumer counterparts for resources and investment, so how do you make those balances? And also there's a lot of fintechs out there who are doing really innovative focused things and providing great solutions. So they're also competing with fintechs who are being very aggressive to serve this space. So it's a really interesting time. I think that's what I hear from banks. And how about you, Jonathan?
Jonathan Su (06:02):
Yeah, so I mean we work at US Bank really closely with our clients and we serve a wide range of customers. Obviously we have consumers and small business and commercial, and I think in the small business space, what we see and hear is that they're fundamentally really stretched very, very thin. We know many of our clients have less than a month of cash reserve, and in fact, we spoke to a construction company owner recently and they told us that there's been multiple times where they didn't win a new project, they would have to shut their business down. And even when they're more secure, they don't really feel secure, and with the macro environment going the way, some uncertainty there, I think they will continue to be stretched thin there. So that's one challenge. I think the other challenge is to your point earlier, they just have a lot on their plate. They're incredibly busy. If you try to visit a client, you'll see them in action, right? They are running around all day at their store or their company. They're very busy managing their operations and they really don't have the time to even listen to you to pitch, and they just need something that works out of the box.
John Adams (07:21):
I mean, it goes without saying, small businesses have been through quite a bit over the past five years or so, given I'm not going to run through all the crises. But given all that they've gone through, how much time, how many resources, how much resources do they have to manage their cashflow given the response they've had to make to all of the things that they've had going on over the past few years?
Sarah Steele (07:47):
I mean, they figure it out. That's the tremendously motivating thing about businesses and small businesses in particular. They're scrappy and the ones who have made it through the financial or sorry COVID, and all of the financial challenges that entailed this shift towards more e-commerce businesses have been pivoting and changing their business models and really succeeding. So I think the businesses who are still surviving and thriving are very resilient and they continue to just make it work. So again, to Jonathan's point, they need, they have their solutions, it's working their head's down. In order to break through, you have to have something that's going to actually add value, be simple to understand and simple to implement. So those are some of the things that I think about in the context of how businesses have been resilient through challenge.
Jonathan Su (08:43):
Well said.
John Adams (08:50):
What are some of the technology advancements that have come up over the past couple of years that are making it easier for small businesses to deal with some of these issues and issues of their cash management and related subjects?
Sarah Steele (09:03):
Do you want to start with this one? Yeah, yeah,
Jonathan Su (09:04):
Happy to. I think we've all seen a ton of technological investments in the past few years. Certainly there's AI, gen, AI and embedded finance cloud and digital experiences, but in my view, fundamentally they deliver real values for small business. When they deliver automation, how do they save time, money, and effort for the clients so they can scale and grow and run their operations without having to hire a big staff and they need solutions that can deliver that. And I think a lot of the technological advancements really brings value that way.
Sarah Steele (09:46):
I think about simple things like having integrations within their accounting software. So if you can take away manual processes like having to upload your transactions and making that seamless and streamlined, that's a really simple thing that's saving the business owner real time or there's a lot of innovation in embedded payments, so bringing payments into other digital experiences and really just making the commerce part of it seamless. It's no different from what's happening on the consumer side for businesses too, they need those experiences, so being able to pay within your accounting software, things like that are really going to be transformational because they save the business time in the places where they already are.
John Adams (10:35):
How do you approach small businesses in terms of communication and then I guess this is a learning curve question. You're probably dealing with a lot of businesses with limited staff that don't have a ton of technology. What are some tips for approaching businesses in terms of just pitching from an educational perspective?
Sarah Steele (10:55):
I always think of can we explain it in the way that grandma would understand really just trying to make it as intuitive as possible. So it goes from how you're building your user interface and then how you can explain how that works. Also thinking about different media and form factors to deliver the messages. Some business owners, maybe they like to consume videos, and so being able to have a variety of different ways for business owners to consume the information in the ways that are convenient for them is really important. I dunno, Jonathan, if you want to add on to that,
Jonathan Su (11:36):
That's pretty good.
John Adams (11:40):
There are some tips I think you've already answered. Are there tips in terms of managing this communication? Are there certain tricks of the trade that you have?
Sarah Steele (11:53):
I always like to say that a customer, any customer needs to hear a message at least five times before it really sinks in. So repetition one and done doesn't really work for when you're trying to introduce something new. So let's say you want to introduce a new feature or capability. Of course there's the introduction to it, but then a reminder and then you incorporate it into your ongoing engagement touch points and those sorts of things. A marketing person, but I do know just working with clients, repetition for it to really sink in.
Jonathan Su (12:33):
Absolutely. I think we see that as well. And I would just add that it's also important to speak their language. It's very easy for product folks to be in their own world and they have all these lingo and they think people will get it, but you do actual user testing and you're surprised and shocked that people completely interpret it differently, and so it's really important to be close to your users and customers.
Sarah Steele (12:57):
Yeah, that's great advice.
John Adams (13:00):
In terms of scale, one of the things I've always run into in writing about small business finances isn't companies want to grow with their business. What are some tips that you have for allowing small or helping small businesses to scale either the money management part of their business and how that may relate to other areas where they're trying to grow?
Sarah Steele (13:24):
I mean, I think it's getting the fundamentals right and having scalable platforms, ones that are versatile because of course you have businesses who are wanting to grow from A to B or maybe they want to grow geographically, but other businesses are already bigger. I think as service providers for small business, we're already trying to serve a very wide variety of businesses, and so trying to have broad solutions that are scalable themselves is really helpful because they can grow with the business.
Jonathan Su (14:01):
And US Bank obviously have a wide variety of products and services for companies in all stages. I think we really look at the life cycle of a business and be their growth partner as they scale. Obviously when they're starting out, they're looking for capital support, but we design experiences and products that makes it easy for them to use while they're getting started and have the capability built in so that when they're ready to grow that we are there with them and we can grow with them.
Sarah Steele (14:34):
Yeah, it's interesting that lifecycle management really important and we see too though that businesses have preferences just like consumers. I'll put this in the context of credit cards, obviously that's what I think about all day long, but we have those who prefer cashback versus rewards. We have those who are fee averse, they will never pay an annual fee for a card, and so you need to have a little bit for everyone. And we find, I actually find that the middle market, so the larger small businesses going into the middle market is a really hot space as well. It's very competitive and you see characteristics of businesses where they still love rewards. They're still kind of consumer-like in that way, but they also need more sophisticated tools and capabilities that are seamless to help them keep getting to that next stage.
John Adams (15:33):
Do you have examples of some of the work that you've been doing in this area? Some recent projects or recent deployments?
Sarah Steele (15:41):
I could start. So obviously Visa facilitates card payments all day long, but from a small business perspective, in terms of the platforms that we try to add to our card products, we've been making some really big investments in capabilities. So we have a newly refreshed savings program, so this is something that is an online tool that allows business owners to have business focused savings. And so we just completely redesigned that web experience and used a lot of the principles that Jonathan was talking about in terms of upgrading that user experience to make it more delightful for businesses. So whether that's time alerts so they can have moments of delight when they're receiving those savings. It's a small thing, but it actually ties that savings to the program and reminds them of it and so that they can have that feeling of connection to the program.
(16:41):
And as well, we've been doing a lot of work in the expense management space, so there's a small business focused expense management platform that we have called Spend Clarity for business, and it's really all about the controls, so payment controls that are easy for our business owner to put on their employee cards, virtual cards, so allow them to very easily send a virtual card to their contractor so that they can use it while they're at the home improvement store. Simple digital tools that are intuitive, but really help digitize the day-to-day of the business owner and really digitize their payment experience.
Jonathan Su (17:27):
Those are great. I think US Bank is unique. We have of course our core banking franchise and we have payments business as well, and we kind of play across the board. We're on both the card issuance side and we're also on the merchant side, so we are rolling out new things constantly. We do actually have a point of sale product, it's called aic, and there's a Taik terminal that we rolled out recently that is getting really great reviews in terms of ease of use and just really helping merchants with payment acceptance.
Sarah Steele (17:59):
Awesome. Yeah.
John Adams (18:01):
What are some of the lessons that you've learned through developing these products or bringing them to market that will inform what you do next?
Sarah Steele (18:11):
I think it's really some of the things that we've already talked about, seamless experiences built into where the user is already spending their time, intuitive interface, that sort of thing. I don't know, Jonathan, if you want to build further.
Jonathan Su (18:31):
I think you covered it.
John Adams (18:35):
Is a bank or a card network, how do you work with third party technology providers to the deliveries improvements that you're, you're trying to bring to your clients?
Sarah Steele (18:47):
Recently, we do a lot of work with fintechs actually, where there are places that Visa plays all day long and we build amazing solutions, but there are also places where fintechs can be nimble and they can help our customers. And so I'll give an example of the onboarding and origination part of the lifecycle. So how do we get a bank account or a card in the hands of a small business owner and that hard KYB business validation stage? We've been working with fintechs to help curate a set of providers who can actually really help in this space nimbly quickly, and that's not a place that we typically play. So that's how we're thinking about FinTech providers and leveraging that a little bit from Visa's perspective
Jonathan Su (19:37):
Makes sense. I think from product perspective, velocity obviously is really important. So for us, we greatly value time to market and if there is a vendor that fulfills a need or it could be a specialized processing need or a specific functionality, or maybe they play in a specific space, oftentimes they're actually best in class because that's all they do. And so we look for those opportunities to form a good partnership with them, which then actually frees up our team's time to focus on the areas of differentiation and areas where we want to play in. So that's one aspect. I think the other aspect we look at in partners is of course ease of integration, developer friendliness, and it's also important for us to have a good engagement model with our product development teams so that we can form an effective long-term partnership.
John Adams (20:38):
What are banks missing in this market in terms of what they could be doing to improve how small businesses are managing their finances? Is there a blind spot in there or an opportunity where banks can make progress?
Sarah Steele (20:52):
I think just doing more small businesses are hard. They're harder to underwrite, they're harder to serve, they're a little more complex and consumers, but they have a lot of consumer like needs, and so putting more focus there I guess, and more investment is really what I would say. It's not that banks aren't trying because they definitely are and they have come a long way. I've been supporting small business for six-ish years and just the strides and the focus and the recognition of how important they are to the bank and the bank's relationship where they drive deposits, they're very profitable card customers. Then there's hopefully the virtuous cross-sell where you can serve them as a business, as a person. So I think they're really important and I would just urge banks to put more focus there because there's still more that can be done in terms of products and solutions.
Jonathan Su (21:50):
Yeah, there's definitely a lot of opportunity. I think we all recognize that SMB is a hugely underserved market. I know we've been talking about that for a long time, but it still is. And if you think about why, it's because traditionally they're faced with two types of solutions. If they're on the market, they either have the consumer solutions and maybe it's consumer plus they slightly modified it, but at the end of the day, it's not really designed with their needs in mind or on the other end of the spectrum, they have the enterprise solutions that's overly complicated or expensive. And so the fact that we've seen these growth in fintechs, I think is speaking to the fact that they are addressing some real unmet needs there. So at US Bank, we're very focused on this as a growth opportunity and we're focused on designing solutions that are tailor made for this audience, and we're focused on bringing solutions that integrates nicely into the banking products that they already have so that it's an easier ramp for them to adopt.
John Adams (22:53):
Yeah, awesome. I've written a lot of articles over the years, but more looking back a few years about how a lot of small businesses, particularly the owners kind of mix their consumer banking products with the business banking products, is that a trend that's easing where there's more of a separation there or maybe perhaps ask another way? Is there some benefit in that? Is there some benefit in certainly having a consumer and business relationship, but that where there might be something that's transferable between the two?
Sarah Steele (23:28):
Yeah, I think it's a good starting point to think about it from that approach. Like you want to serve your small business customers by giving them lending for their business and not just tied to their personal credit worthiness, because that is a strain on their own personal lives. And it's a good approach to say, okay, my business products need to be as good as my personal products because you're never going to get a business take a product if it's not as good as what they can get on the consumer side. They'll just take that consumer product all day long. But I think to what we've been talking about, you need to do a little bit more if you're going to really delight that business owner, which is providing a few business focused tools and platforms which are readily available, but providing just a little bit more to actually speak to the needs of the business, that's how you're going to take it to the next level.
(24:27):
I do think there has been a lot of great investment in business products in the past five to 10 years for sure, because if you think back, I just know that there were often business cards sitting out there that were so much worse and more expensive than the consumer one. So obviously why would a business want to take that product when they can get great rewards and great flexibility on a consumer product? I think we've progressed past that, but now it's time to take it to the next level from a capability, a digital capability perspective.
Jonathan Su (25:01):
Yeah, I agree with that. I think we certainly see both. We see folks that wants to have that consumer plus business. We see folks that wants to separate it either way. I think our focus is just making sure they have a good experience with us, and they usually start with one product, and oftentimes for banks, that's deposits, but if we have a good business experience for them, then they're actually willing to check out your other products and your offerings. So I think that's what we focus on first and foremost
John Adams (25:38):
In terms of let's say very cutting edge or emerging technology, whether it's a new form of AI or even if it's realtime processing, which isn't really new, it's been around for a couple of years. Is the approach different for, in other words, would a small business' gen AI payments needs be that could be addressed specifically for that audience?
Sarah Steele (26:04):
I think that there's a lot of potential. I don't think we've seen a lot of gen AI yet dedicated to payments specifically, but I think just focusing on the basics, I think I, there's a ton of opportunity for small businesses across the board, whether it's just leveraging ChatGPT to help you with your marketing because you're doing that amongst your many jobs or whether it's some very sophisticated tool that maybe is going to help with your cashflow forecasting. I see tremendous potential in the small business space to take AI and really amp up all of the aspects of a business's life. I dunno. Jonathan, what are your thoughts on that one?
Jonathan Su (26:51):
I think those are great examples, and I think first and foremost, it's important to solve a real unmet need or find ways to save your customers time, money, or effort. And that there's a lot of opportunities that where you can leverage gen AI to do that. And if you think about a lot of the back office financial operations that they have to do on a daily basis, some of it might be done by a financial team or CFO controllers. If you can find ways to leverage new technologies like Gen AI to automate that, I think there's a lot of opportunities there as well.
Sarah Steele (27:27):
Reconciliation, all kinds of boring stuff to just really cross things off the list. Right? Yeah.
John Adams (27:34):
Okay. We've got about two minutes left. Are there any questions, anything, anybody the way? Yes, Michael, I see you, Mike.
Audience Member Michael (27:47):
We talked a lot about the consumer banking experience. You hear that all the time. And Jonathan, you mentioned SMDs are underserved completely. Have you done much research on the small business owner experience, the customer experience, and if so, what has resonated the most in terms of their needs?
Jonathan Su (28:07):
That's a great question. Yes, we do a lot of research in the small business space and it's ease of use. I think that's one they're usually coming in. You first and foremost want to make sure what they're getting into do. You're meeting that needs really quickly and it's usually some mundane stuff. I want to see my balance or I'm trying to find out what happened. I want to look up a transaction. So first and foremost, you got to do the basics right. Above and beyond that then you can start to offer these additional tools like cashflow, like spend, management, like point of sale, and we see increasing adoption on a lot of these digital tools on the day-to-day financial operations side of things.
John Adams (28:58):
Okay. Well, I think we are at time. I want to thank Sarah and Jonathan both for joining us and for the conversation. And again, thank you everybody for attending and enjoy the rest of the show.