Sandra Horvath is a technology industry business development leader and consultant with a background in business software and payment systems; most recently with Central 1 as National Director & digital lead and as an executive MBA instructor for Simon Fraser University. She has worked for complex multinationals including Sage Software & American Express, managing payments expansion initiatives and promoting client-centric innovation to market.
In Canada, the banking infrastructure has focused on legacy systems and needs to start modernizing to support small businesses. “Reconciliation is a huge pain point for businesses,” said Horvath, but banks can begin to improve reconciliation through utilizing the ISO 20022 standard. The utilization of the ISO 20022 standard means full remittance data can accompany the payment and have the ability to flow into a business’s account software, which will save businesses time and money.
A recent report from EY disclosed that “current payments processing procedures give rise to operating costs to Canadian businesses ranging from $3 to $6.5 billion per year ($14 to $32 billion over a five year period).” It comes from various things, including a low rate auto-matching payments to invoices. “There’s limited visibility into what’s happening in the supply chain, limited predictability of cash coming in and also visibility in the cross border payments, and a lot of manual payment processing,” said Horvath.
“We could utilize the new technologies that we have available to us and tackle these things but we can't do that in a silo,” Horvath said. FI's can’t do that on their own, they need to share data with FinTechs and systems that small businesses choose to use.
“I think what we don't see enough is collaboration across the chain,” said Horvath, adding, “work with other partner organizations, hone in on use cases that are just above and beyond, and give businesses a top-notch experience.”
Businesses don’t see the same customer experience that individuals do with services like Interac or Venmo. That being said, banks and financial institutions have an opportunity to embed their banking capabilities into a business’s accounting software.
Digitize Lending for Small Businesses
Another pain point for businesses is lending, as the process can still be very manual. Horvath suggests a cross-organization process to get better visibility into the payments chain and business clients. With this process, Horvath thinks financial institutions could use a business’s information, like receivables, the health of the organization, and timing, to predict the loan amount and rate and potentially get pre-approved.
Historically, banks have almost always lent to small businesses on an asset basis. As businesses have become less asset-intensive, it's created this deeper financing gap. Horvath believes we need to make borrowing a lot easier for businesses. “Banks are wondering how they can increase their own revenues, they can do that through more lending, just by making the process frictionless and easier to access,” Horvath said.
“You have to mitigate risk, but the more pervasive data is through the payments networks and through the software that we use, as everything is moving to SaaS based, it's a matter of sharing that data to mitigate risks,” Horvath explained. “Provide the information that's needed and access to the lending that's needed, when it's needed.”
None of this new banking infrastructure or technology innovation is useful to a small business unless it’s something they can actually use.