In an interview with PYMNTS, BankiFi Founder and CEO Mark Hartley said open banking — and specifically, Request to Pay (RtP) — can help SMBs get paid on time, manage cash flow more efficiently and ultimately grow.
The company said earlier this month that it had partnered with The Co-operative Bank, based in the U.K., to launch Incomeing, billed as a platform geared toward easing and streamlining collections workflows.
The urgency is there, noted Hartley, as the smallest firms, which comprise 60 percent of the workforce in the U.K., are struggling more than ever with late payments amid the pandemic’s lingering impact.
“In the U.K., most companies are invoicing terms of 30 days,” he said. “But, prior to COVID, it was taking about 50 days to receive the money, and then post-COVID, it was taking about another 20 days. So, the average payment time is now … 71 days on invoice in terms of 30 days.”
In terms of mechanics, the platform leverages the open banking RtP functionality to help get firms paid more quickly and sidestep the need to obtain additional financing. The Co-operative Bank is the first provider to offer the service, but the app is available to customers of any U.K. bank.
Hartley told PYMNTS the application is co-branded with The Co-Operative Bank and “solves the late payments problem by building a collection service through our technology” for more than two dozen banks and their microbusiness and SMB clients.
The essence of the serviceis to generate invoices and send an RtP via SMS, email, WhatsApp and QR codes to enable SMBs to get paid on time, he said. There’s an element of data security and privacy embedded in the process, as paper invoices typically list account details. Payors sometimes may make mistakes keying in erroneous information when getting ready to pay, which in turn has a negative ripple effect on companies’ cash flows.
He said Incomeing acts “as a collection service to solve that real pain point of getting paid on time, rather than saying, ‘You just need to borrow some money [because] some customers aren’t paying you.’”
In addition, companies reduce administrative time tied to the end-to-end accounts payable (AP) continuum, from preparing invoices to reconciliation in the back office, as the service integrates with major accounting applications.
“You can actually create your invoice, create your request, send the request — all from the mobile app — and then press the button,” said Hartley. “And the rest of it takes care of itself. It’s all automated and straight through.”
Helping Banks, Too
The RtP service fills a gap in financial institutions (FIs) offerings to SMBs, he contended, as late payments have yet to be effectively addressed by banks. Traditionally, banking services and technology extended to SMBs have been siloed, with one solution geared toward accounting, another for banking.
Such fragmentation has made it difficult for SMBs and sole proprietorships to manage their activities and get paid in an efficient manner, he said. SMBs are not homogenous. Electricians are not the same as hairdressers, and neither are the same as osteopaths.
Many of these companies do not take credit cards and cannot obtain acquiring relationships with providers; roughly 3 million of the 5 million SMBs in the U.K. (with fewer than 10 employees) don’t have traditional banking accounts and instead use their personal accounts for daily financial activities. Direct debits are expensive for sole traders, he said.
“These people generally don’t borrow money [from banks],” Hartley told PYMNTS, and when they do tap additional funding sources, they tend to go to friends and family. “They’ve never been looked at by the bank because they’ve not been viewed as profitable customers.”
“It’s been well-documented that financial institutions have come under an awful lot of pressure over the last 10 years from FinTechs,” he said. “Regulatory changes and technology made it easier for new entrants to come in and start chipping away at financial institutions.”
Incomeing can help banks acquire a customer with the tools they need when they start their business rather than when that business is established, he said.
Looking ahead, he said BankiFi is creating a subscription model that leverages an application programming interface (API)-first strategy to help banks offer a “menu of services” to enterprise clients that includes, for example, tax-related options and virtual accounts.
“We’re trying to change the mindset,” of FIs, he told PYMNTS. “We’re saying, ‘Don’t have a siloed product strategy; have a subscription model and a continuum of business services that your customer can choose to subscribe to, when it’s right for them at the right stage of their business lives.’”