End parties in the Four Corner Model – Small and Medium-sized Businesses

In this post, we continue to explore the question who and what actually are the end parties in the Four Corner Model presented in a previous article. It is an important question because if we know these end parties and understand their needs, we can better understand the payment business. In fact, end parties are all customers of banks. Banks do have many types of customers: The private customers, the small and medium-sized business (SMB), the associations and non-governmental organizations (NGO) and the large companies. The previous article was about private customers. In the following we will look at small and medium-sized businesses (SMB) and consider their needs particularly in relation with (SEPA) credit transfers that they may initiate or receive.

The small and medium-sized businesses (SMB) are companies with one to few dozens of employees. In many countries they represent over 90% of businesses. For that reason, SMB are seen as the backbone of the economy.

SMB have different needs than private customers, already by the high number of payments to be made or received. They make transfers to their suppliers and employees and receive payments from their customers. The size of the business and the number of employees influence their needs and must be well-considered to better serve them. When the number of employees is very limited (less than 10 for example), the SMB can use the e-Banking portal of their bank to manually input payment orders like a private customer does for instance. For a company with few dozen of employees, it is cumbersome to manually input all accounts and employee information to initiate payments at the end of each month. Solutions to avoid inputting the same information every time are really appreciated. For example, templates for multi-beneficiaries payment orders where all the information is kept are very useful. At the end of each month, no need to input everything again. Only the date, amounts and few references need to be updated to make the payments. So the templates provide an important service to the SMB by allowing to save precious time and effort.

After a payment order is validated, the SMB wants to be informed rapidly in case an exception occurs during its processing. In business, delayed payments can have drastic consequences. Therefore SMB may request to get one notification per mail and another one per SMS or even to be called directly so that they can handle the issue as quickly as possible.

Picture of Small to Medium-sized Businesses

As creditors, SMB may receive many payments during the day. It is very important for them to closely follow their financial situation. For young companies, it is a question of survival. That is the reason why they request and read account statements more often than a private customer. Many SMB receive account statements on a weekly or even daily basis.

SMB are dynamic structures. The number of employees will increase or decrease with the time. And so their needs will evolve with the changing structure. SMB may start the business with one current account, but with the time they will open many other accounts to better organize and easily follow their financials. A consolidated report including all accounts will be of great value in this case. Because of these reasons, the banks must build a closer relationship to their SMB customers to identify and respond to their evolving needs. And the solutions offered to SMB should be easily scalable and adaptable.

Like private customers, SMB fear to become victims of payment fraud which in their case may be caused by employees (internal fraud) or by external third parties (external fraud). Studies show that they are more vulnerable to fraud and yet fraud can have more devastating consequences on them, and may even mean the end of their business. Therefore SMB look to banks for suitable solutions and support. And security is clearly a topic to be taken very seriously for them.

The table below contains a summary of the SMB needs in relation to (SEPA) credit transfer.

SMB as Debtor SMB as Beneficiary
  • Makes periodic salary and supplier payments
  • Receives payments from customers.
  • Must in general open many accounts to better manage the business finances
  • Wants to have access to payment and account reporting whenever and wherever needed; hardly spends a day without reading account statements.
  • Is very concerned with security and appreciates solutions to fight against internal and external fraud.

The next article is about Associations and Non Governmental Organizations.


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