SMEs Demand Banking, Payments, Software

In the great digital shift, for small and medium-sized businesses, payments have become a very ‘on the ground’ activity, carried out both on the spot and on demand.

Entrepreneurs want to pay their subcontractors. Construction companies have to pay for materials on the fly. Landscape designers and a number of companies in the apparel, hospitality and food industries support point-of-sale payments (sometimes on their devices) and make payments to vendors who maintain the inventory and labor. Meanwhile, the complexity of business has deepened, with SMEs selling through multiple channels while placing their own orders and paying people and bills remotely.

It’s no wonder these businesses need simplicity in their banking relationships, as well as visibility into how they track and manage all that money on the go. According to Thomas Priore, Executive Chairman and Chief Executive Officer of Priority technology holdings, this is exactly why we are seeing the convergence of banking services, payments and software. The old banking and payment processing systems simply cannot keep up with the pace of change.

“If you’re a small trader and like that you can do all of this from one place, eventually we can be your bank,” Priore told PYMNTS Karen Webster.

The desire to converge

This convergence is evident in recent merger and acquisition activity in the payments space, where Global Payments announced this month that it would buy MineralTree for $ 500 million with the aim of marrying commercial payments, the national and international acquisition and automation of accounts payable (AP). And Repay said in May it would buy BillingTree to improve accounts receivable (AR) management.

See also: Global Payments buys MineralTree for $ 500 million

As Priore noted, the platform model can help merchants (and the resellers who serve them) embrace basic payment processing and a continuum of other services spanning the operational workflow.

The company traces its origins back to 2005, when his work in investment banking led Priore to a revelation: As mortgage-backed securities have moved from paper to digital processes, “the same technology should be applied to payments, ”he said. Webster.

Generally speaking, getting a merchant account should be made easier through online channels, he said. And SMEs should be able to leverage their retail outlets to pay supplier bills using ACHs, checks, virtual cards, and other forms of digital payments.

Today, the company is the sixth largest acquirer of non-bank merchants in the United States. As Priore told Webster, last year he processed over $ 60 billion in payment volumes across a network of over 200,000 merchants. The emergence of the platform, with APIs and plug and play functionality, enables Priority to manage risk management, licensing requirements, compliance and money flow, thereby enabling vendors to monetize their merchant networks.

The current composition of Priority’s portfolio is focused on small and medium-sized businesses with approximately $ 18,000 in monthly credit card payments. Priore noted that the portfolio is large and representative of the US economy as a whole, with approximately 18% contribution from the hospitality sector.

“We do a lot of retail and wholesale, and have significant representation from healthcare professionals,” he said. Many of these clients, such as in construction and landscaping, require B2C and B2B payments.

B2B payments

Beyond the consumer-oriented business, the company also has a commercial payments division that offers automated payments, B2B payments and managed service solutions, supporting more than 350,000 accounts. More than 50,000 vendors are registered on virtual cards, Priore said. While card acceptance is a “tabletop issue,” he stressed that automated payments require further sales development, although scale and critical mass will continue to grow.

Priority itself has joined the M&A activity that has characterized B2C / B2B spaces. Earlier this year, the company acquired Finxera to expand its Banking-as-a-Service reach. The $ 425 million deal was closed on Friday, bringing Finxera’s API-based platform – which makes it easier to create accounts as well as collect, store and transmit funds for businesses and consumers alike. – in the bosom of Priority.

As the companies indicated when announcing the deal, Finxera has over 375,000 active deposit accounts and $ 500 million in average daily account balances, in addition to a full master account with the Fed. .

The acquisition of Finxera will give the combined company some semblance of PayPal-like functionality, Priore said, including “the ability to store money in a virtual wallet or virtual bank account structure, and account for all streams [in a closed loop] in and out of that wallet or ledger.

Through the use of a single platform as a conduit, the Priority / Finxera combination has the ability to collect money in any form – credit, debit, and ACH – and route it through credit rails. The company is in the process of finalizing its own back-end capabilities for processing settlements. And Priore predicts that in a few months the company will also be a visa issuer for commercial and debit cards.

What awaits us

Going forward, Priority will seek to offer instant settlement related to working capital solutions. The company will add automated banking and payment functionality in the very near future, with a launch by next year. Financial institutions (FIs) have the possibility to white label the Priority offer, by accessing the company’s tools via the API.

For now, with the smaller merchants and the resellers who serve them at the center of Priore’s attention, said Priore, “it doesn’t make sense for them to rebuild the payment functionality and compliance requirements that we have. already have and can provide. Let us handle the payments.