The Last Payment Card Frontier?

1
The Last Payment Card Frontier? Small Business
and Electronic Payments
Highlights of the MPD Small Business Payment
Survey Karen L. Webster/President, Market
Platform Dynamics Jeff Gardner/President,
PaySimple May 20, 2008 NACHA
2
Payments Matter to Small Business Owners
More than half of all survey respondents 52
would give up coffee for a week if they could
collect payments from their customers faster and
less expensively.
3
Small Business Drives Economic Growth

• Countries have become increasingly aware that the
  entrepreneurial engine contributes to
  sustainable growth and social cohesion.
• Governments seek to transform their economies
  into entrepreneurial ones, driven by dynamic
  firms such as high-growth small and medium-sized
  enterprises.
• These new firms can be crucial in creating new
  jobs. They also help introduce new products,
  processes and business model innovations and
  develop new markets.
• Some of them have changed the rules of the game
  in their industries.

May 2008 Report on Small Business US Department
of Commerce and the OECD
4
Top Line Findings

• Collecting payments is a key strategic priority.
• Small businesses lag the general US economy in
  the adoption of electronic payments.
• Acceptance is driven by customers needs for more
  payment options
• Small businesses want better solutions and
  functionalityand will switch service providers
  to get it.
• Small business believes that electronic payments
  is in their future.

5
Survey Methodology

• Online Survey
• 30 questions covering six topics
• Demographic profile
• Banking relationships
• Payment acceptance
• Payment card acceptance
• Payment mix
• Receivables management
• Broad industry and geographic coverage

545 small businesses with annual revenues of up
to 5 million were surveyed between April 14 and
April 30, 2008
6
1. Collecting Payments is a Top Priority
Fact More than one third of small businesses
rank collecting payments as their top priority.
Behind the Research Delay is in the eye of the
beholder most survey respondents report a
payment cycle of lt45 days.
7
2. Small Business Lags in Adopting Electronic
Payments
Fact US non-cash payments increased 4.6/year
since 2003
Number of Non-Cash Transactions Small Business
(in Billions)
2003 2006 CAGR
Total 81.4 93.3

Checks 37.3 30.6 - 6.4
Debit 15.6 25.31 17.5
Credit 19.0 21.7 4.6
ACH 8.8 14.6 18.6
EBT .8 1.1 10.0
Behind the Research Paper checks remain the
dominant and preferred form of payment for small
business.
8
3. Customer Preference Drives Adoption
Fact More than one third of small businesses
rank collecting payments as their top priority.
Drivers of Acceptance Electronic Payments
Behind the Research Delay is in the eye of the
beholder most survey respondents report a
payment cycle of lt45 days.
9
4. Small Businesses Want More
Fact Small businesses that accept electronic
payments see the value and will switch banks for
a better set of services.
Willingness to Give Up Coffee for a Better
Payment Solution
ACCEPT DO NOT ACCEPT
Would 60 44
Would not 40 56
Behind the Research Those that dont accept
electronic payments report a higher typical
transaction size and no real issues with
delinquent accounts.
10
5. Electronic Payments are an Eventuality
Fact Less than half view electronic payments as
their most preferred method today.
Behind the Research Small businesses that accept
electronic payments prefer that method of
payment.
Small Business Use of Electronic Payments 2005
2010 (Projected)
11
Final Thoughts
Customers rule the roost They pull through
the demand for electronic payments. Fees dont
matter (much) Who doesnt want faster, better,
cheaper but small businesses will take better
for now. Loyalty only goes so far Small
businesses would switch banks to find a solution
that makes life easier in the payments arena.
Believers believe and want more Those who accept
cards want to accept more, even if they pay a
fee. Non-believers dont see the value They
dont see the business caseis it what they dont
know, they dont know?