New Visa, Fundbox Flex Debit Card Helps SMBs Manage Spend, Access Working Capital

At first glance, these are heady days to be a small or midsize business (SMB), striking out on your own or with a few and hitting the ground running.

The darkest days of the pandemic are in the rearview mirror. Economies are reopening. The great digital shift has spurred all manner of companies to move online and meet customers where they want to be met — in the channel of their choosing.

Indeed, Census data shows that 5.4 million new business applications were submitted last year, indicating a sanguine attitude toward throwing one’s hat in the proverbial ring.

But in an interview with PYMNTS’ Karen Webster, Visa’s head of innovation and digital partnerships, Vanessa Colella, said that getting off the ground and thriving remains no easy task. Although SMBs employ just under half of the U.S. workforce and drive overall gross domestic product (GDP), they tend to run into serious operational challenges.

Of the firms that don’t make it: “More than 80% of them fail because they are unable to manage cash,” Colella said.

Cash flow visibility, in turn, is critical for knowing the state of working capital, the cushion that helps operations hum. Increasingly, she told Webster, smaller companies are moving toward managing their payables and covering expenses digitally — beyond the traditional confines of automated clearing house (ACH) payments, credit cards and even checks.

To complement that digital shift, Visa said Thursday (May 26) that it has entered a strategic partnership with embedded working capital platform Fundbox. That relationship will bring digital debit payments to SMBs through the Fundbox Flex Visa Debit Card, issued by Pathward N.A.

Most Fundbox customers operate within a range of B2C and B2B verticals, and its embedded finance tools offer on-demand capital tied to customers’ systems and workflows, as well as virtual bank accounts that they embed in their business software. That financing helps SMBs bridge cash flow gaps, and as Colella said, “with the debit card we are taking the attributes of Fundbox but making that acceptance as ubiquitous as Visa’s acceptance has been.”

The Fundbox Flex Visa Debit Card leverages Fundbox’s Flex Pay spend-management solution and allows spending over Visa’s debit rails at merchants in the network, which helps SMBs manage their everyday spending more effectively using the available cash on hand. Fundbox, for its part, has said that Flex Pay has been seeing increased adoption among smaller companies, with payments volume soaring by 80% quarter over quarter.

For Visa, the strategic partnership represents the latest step in digitally enabling 50 million SMBs by next year.

“We’re about 60% of the way there,” Colella said — that translates to about 30 million firms.

Along with the visibility that comes with flexible spending, said Colella, there’s a more accurate sense of day-to-day working capital needs, which boosts efficiencies up and down supply chains.

“It’s a virtuous cycle,” she said.

Visa and Fundbox plan to introduce new B2B payment products, including buy now, pay later (BNPL). Because some of these firms are sole proprietorships, their economics operate in much the same way as an individual consumer’s might — but BNPL hasn’t historically been available to them, Colella said. Other eventual launches will include push-to-card transfer options for instant fund disbursements through Visa Direct.

That push to debit, as an instant settlement option, also has importance as a source of working capital. Cutting down the confirmation of payment, and settlement of cash in merchant accounts no longer needs to take days — now it happens in real time.

In a nod to the importance of real-time settlements, PYMNTS research earlier this year shows that roughly half of SMBs are “very interested” or “extremely interested” in real-time payments settlements, though only 8% of them have access to immediate settlement.

Read also:  21% of SMBs Are ‘Extremely Interested’ in Real-Time Payments Settlement

Separate research done in collaboration between Visa and PYMNTS shows that online marketplaces that offer real-time settlement are favored by smaller firms.  Some 62% of individual and microbusinesses would switch to platforms that offer those settlement options.

Read here: Visa: Real-Time Settlement, Online Marketplaces Help Put SMBs Back On The Road To Recovery

As Colella told Webster, being able to control cash inflows and outflows is crucial to SMBs’ success, as is broadening the spectrum and types of places that SMBs can make use of payments flexibility.

“Providing alternative forms of liquidity to small firms in order to enable them to make the purchases that will help them grow their businesses is the universal aim here,” she said.