SMBs payments are changing, but also staying the same

While startups and traditional financial institutions sprint to meet consumer demand and provide digital payment infrastructure, small and medium sized businesses (SMBs) have been slower to follow the trend away from paper checks.

This has begun to change, given the pandemic’s digital usage surge and overall movement in the payment sector, giving a boost to companies that provide SMB with payment solutions, such as Plastiq.

I spoke with Kerry Hatch, recently appointed President of Plastiq, about the company’s core products, path moving forward and trends in the SMB payment sector.

The company’s payment platform provides three core products: Pay, Accept and Connect. Pay and Accept are heritage products, available since Plastiq’s launch in 2012, and enable the two sides of paying and accepting payments. Their newest product, Connect, is an API-powered offering that leverages new payment technology to integrate payments into existing accounting and business infrastructure.

“The simple notion is, we focus on enabling SMBs to pay the way they want, when they want,” Hatch said about the core products and the businesses move to integrated products.

“We’re fine if we go to them so to speak, in their ecosystem, if that works for them. They don’t have to come to us, though, so we’ve enabled all the options,” she said.

Opposed to credit cards, these methods push fees onto payers instead of merchants, and can be embedded into existing invoicing systems. Another advantage Plastiq offers is improved cash flow, by reducing the amount of float time on payments and invoicing through traditional avenues.

“Starting with the digital component, it’s just simple, easy and quick. It also provides some cash flow. So if you choose, you could pay ACH or check. By the time the check gets there, maybe you get four or five days of float, but if you pay with Plastiq, the payment gets there immediately,” Hatch said.

“Interest doesn’t get charged until after a certain number of days, so it’s actually a great way to optimize your cash flow,” she said.

Hatch also touched on the importance of credit in the SMB arena, noting that risk with fraud and credit is one of the scariest aspects when it comes to innovation in the payment space.

After time as American Express OPEN President and serving as advisor to Plastiq, Hatch was announced as President of Plastiq in late September. She says that one of the main reasons she joined the company is the disruptive technology it provides, saying it is rare for a model to benefit all parties involved.

“It’s very unusual to have a disruptive technology or disruptive idea, where everybody in the ecosystem is a winner,” Hatch said. “And with Plastiq, the customer benefits, the small business, the merchant supplier benefits because they get something out of it. The networks benefit, and the issuing banks benefit tremendously.”

Hatch was sure to mention how issuing banks benefit from Plastiq, saying that it’s hard to build a business when you run an issuing card profit and loss (P&L), because there aren’t many methods that work in the sector.

“The one that always works like a charm and works best, is expanded coverage. But we focus on categories that merchants have voted, with their lack of acceptance, for years.”

These merchant categories she talks about have declined to adopt credit cards for years, prior to the digital push and still. They are however, according to Hatch, more open to Plastiq’s approach, which putting the power into pay and accept payments into individual business’ hands instead of the industry at large.

In other recent fintech news, the U.S. has fallen behind on adopting digital-only banks, with only 6% of U.S. adults having a digital bank account. Atomic also raised a $22 million Series A in an effort to bolster companies payroll APIs.

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