We all know that time is money, and in the world of small and medium enterprises, time is intrinsically tied to cash flow. When business owners have sufficient cash on hand, things have a great chance of going smoothly. Once the cash flow is drastically reduced or even depleted, operations suffer even if the promise of a cash injection is somewhere between one to seven days away. We have all heard about American families living from one paycheck to the next; a similar situation is endured by many small business owners, but the time frames tend to be tighter.
A recent survey conducted by MasterCard illustrates the importance of quick settlements, and providers of merchant services should be paying close attention to what American business owners are going through. More than 60% of small companies start feeling the deleterious effects of waiting around for money to arrive. Imagine a convenience store owner who is left with less than $20 in the register; he may be waiting for a nice $900 transfer from his payment processing provider, but this could take another day or two. The same thing goes for an architect who is stuck waiting for an ACH transaction to switch from pending to available in her bank account.
The reality of access to capital these days is that more than half of all small business owners, particularly retailers, are more than willing to switch to a merchant services provider who offers who offers quick payouts. The bigger names in the payment processing sector are offering faster delivery of funds, and they are hardly alone in this regard. We have already seen credit card processing firms such as Square speed up their payments considerably, and their clients have been signing up for instant payments, which generally cost them more, at a healthy pace. Big financial institutions such as JPMorgan Chase are taking advantage of their status as established financial institutions to speed up payment processing to completion almost in real-time.
Analysts who cover the merchant services and credit card processing sector have been warning about the rise of digital currencies and their potential for instant settlements. In emerging markets, small business owners skip payment processors and deal directly with shoppers who wish to settle purchases from one digital wallet to another. What merchants do in this case is tap the cryptocurrency exchanges to convert their funds into fiat, but this is sometimes faster than waiting on credit card payments to be deposited. In the United States, automated clearing houses are in danger of becoming a relic because even the most nimble providers can take up to 24 hours to complete transactions.