At a time when surging coronavirus counts are once again muddying the outlook for consumers and business owners, MerchantE Chief Financial Officer Shim Steinmetz says the crisis has also provided a silver lining of sorts to nimble FinTechs that can solve merchantsâ cash crunch problems. He told Karen Webster recently that smart FinTechs will listen to customers, take the marketâs pulse and deliver the reasonably priced services that merchants need right now.
âAn analytic partnership with your FinTech and payments provider is going to be key â especially as weâre heading into the next couple months of darkness, with COVID spiking and customers staying indoors,â Steinmetz said. âTheir spend behavior â at least on-site â is going to change.â
Steinmetz said thereâs a big opportunity for FinTechs to provide analytics that make it easy for small- and medium-sized businesses (SMBs) to understand their businesses.
âBakers open bakeries because they like to bake â they donât like to do accounts receivables and accounts payable and balance their books,â he said. They might like making cakes and seeing happy customers, but few especially enjoy managing their businesses.
âSo as a FinTech, part of the value that we need to deliver is making the part of them being a business owner easier so that they can spend the time doing what they love to do,â Steinmetz said. The best way to do that is to get them their money faster, while also offering them daily, weekly and monthly business insights that reflect a true trendline rather than an anecdotal assumption, he said.
In the case of MerchantE, that includes a concept Steinmetz calls âmoney in, money out, money max.â He said that enables merchants to get their money faster and pay their employees and other bills quickly while helping them understand their business âso bakers can bake.â
Fast Payments Are Crucial Right Now
Steinmetz said itâs key to provide merchants with faster settlement, faster payouts and greater insight â especially right now, when the pandemic and the impending holiday shopping season are occurring at once. âThat is how we partner with merchants and help them be successful in this holiday season,â he said.
Steinmetz sees fast settlement of payments as a game-changer, even if companies donât really need the money right away. âWhether it be a personal loan or accounts receivable from credit cards, to get your money faster and control of your destiny means a ton,â he said.
Even when companies have plenty of cash in the bank, Steinmetz said, rapid settlement is about âpeace of mind and the comfort of knowingâ that funds have arrived.
âThat mental comfort of âI have the moneyâ changes the behavior of how merchants operate, how they push off bills, how they pay bills, how they pay their employees,â he said.
Donât Put Too Much Faith In Credit
And at a time when consumers are demanding flexibility in the form of more payment options and varying payback terms, Steinmetz doesnât see small business lending as a slam-dunk idea.
âCredit is phenomenal â itâs a lifeline when you donât have [money],â he said. âBut it can also be a death spiral if you canât pay it back.â
He cited American Expressâs acquisition three months ago of online lender Kabbage as an example. Steinmetz said Amex kept Kabbageâs payout infrastructure capabilities but halted its lending business âbecause itâs just not particularly profitable.â
And as much as there will always be demand for cash from small and middle-market lenders, Steinmetz said itâs important to remember that theyâre not charities supporting locally-owned businesses. Rather, theyâre companies that issue loans that need to be repaid.
And given the solvency issues plaguing many small, struggling businesses right now, Steinmetz said itâs important to remember that additional funds donât always represent a long-term fix.
âHaving a lot of money doesnât solve your efficiency or operational problems,â he said. âIt just masks them until you run out of money.â
Innovation Vs. Incumbency
Steinmetz said the unbalanced competitive dynamic that seems to exist between small upstarts and giant, deep-pocketed incumbents is a narrative thatâs often told, but is repeatedly being disproven thanks to innovation.
âIncumbents do what they do. They donât need to worry about the other stuff,â he said. âInnovation is a distraction and costs money, so they let the startups figure it out on somebody elseâs dime. If [a startup] is successful and proven in the market, then [incumbents] will either buy them or compete against them until they crush them. Weâve heard that a hundred times.â
He uses 1990s Walmart as an example of a dominant global incumbent that went about its business while a startup from Seattle called Amazon exploded into the online retailing scene. Although Walmart ultimately invested in its digital strategy, âit didnât crush Amazon by any means,â Steinmetz said.
Or consider Sears. Steinmetz said an entire generation of people alive today could have never imagined a brick-and-mortar retail scene that didnât include the formerly giant department store as a dominant player.
But he noted that even though Sears underwent all manner of innovation and expansion that any large incumbent should have done, it still got left behind because customer behavior no longer supported the companyâs business model.
The moral of the story â at least from Steinmetzâs view â is that there will always be room in the marketplace for small players to take on (or at least coexist) with their larger rivals.
âThatâs why youâre going to see incumbents are going to get more into this innovative space,â he said. âBut I donât think itâs going to push all of the other players out.â