Power of Payments Ep. 22: ‘Frankly, the most important asset for SMB owners is time’ – Chase’s Brad Brodigan

Welcome back to the Power of Payments podcast. I’m your host Ismail Umar, and today, I’m joined by Brad Brodigan, managing director and global head of SMB payments at Chase.

Brad says he has a passion for working at the intersection of payments, technology, and small business. He’s spent the last 15 years using innovations in payments technology to provide SMB owners with more efficient ways of running their business. Over the last decade, Brad has held a variety of roles at firms including PayPal, Dosh, and BlueVine.

In our conversation today, Brad discusses the most important trends he’s seeing in SMB payments right now, the kinds of attributes that SMBs look for in a payment processor, and how their needs differ from those of enterprises and retail customers. He also talks about how current macroeconomic challenges are affecting the demands and expectations that small business owners have from their financial providers.

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The following excerpts were edited for clarity.

I have a long background in technology, mostly working with small and medium business owners, and for the last 15 years, largely in the payments industry. I'm very passionate about the intersection of both, meaning, I'm passionate about understanding the needs of small business owners and how they are very different than large corporates, understanding that the lines between their personal and professional lives are blurry. Frankly, the most important thing for SMB owners is time – even more than money, because they're very busy. So, I have a deep understanding of small business owners and what their needs are. But I'm also passionate about technology. And so, for the last 15 years, I've been focusing on payments technology and how we can use innovation to provide small business owners a better way of running their business. And I spent a long time at PayPal, I've worked with other small, medium, and now large organizations, almost always in payments technology. So I have a passion for technology, payments, and small business.

Based on your long-term experience with SMBs, and considering your current role as the global head of SMB payments, what are the most important trends that you're seeing in small business payments right now?

Small business owners are busier than ever. And they need a financial service provider who gives them the flexibility to get paid, to make payments, and access their financial accounts, whenever and wherever they are. And so, you know, if you think about a small business owner, they don't generally have a finance department or an IT department, it's usually them at different hours of the day. And so, 11 o'clock at night, when they’ve put the kids to bed, they go back to running their business. And they need a financial service provider that gives them technology-based tools that allow them to access their merchant account, or their bank account or their credit card statement in one fast, easy-to-access place. And that's why at Chase, we’ve really focused on account integrations, so that our customers can get access to their merchant account 24/7, they can actually transfer funds from their merchant account to their bank account at any time of the day, and then they can access things like their credit card balance as well. And so, we find that it's really important to provide small business owners tools that will help them save time, save money, and make their lives easier, because they're so busy focusing on running their business. And they really want to take advantage of new technology-based innovations that allow them a better way of running their business than was historically possible.

How do the needs of SMB owners differ from those of enterprises, and also from retail customers, when it comes to payments?

As I mentioned before, the most important asset for a small business owner is their time. They certainly need access to money and capital, but if they don't have enough hours in the day to run their business, their business stops. In a large enterprise, you have multiple departments, you have lots of expertise. And so, small business owners want technology that helps them be more efficient. They want to be able to accept payments on the go, they want to be able to accept payments online, they want to be able to accept payments in-store, but they also need the ability to manage the flow of funds. We have a product called QuickAccept, which allows a Chase customer to sign up for a payment account in just a few simple steps. But more importantly, when they do accept credit card payments, whether it's on the go, online, or in-store, they can deposit those funds into their bank account the same day. Years ago, it would take three or four days for a merchant to get access to those funds, but now with Chase QuickAccept, they can get access to those funds the same day, for no additional fee, which is a great advantage.

But we also find that small business owners want access to information, and we find that unlike large enterprise customers, they don't have a lot of data on their customers, and they're really looking for information. So we're able to provide them with a new product called Chase Customer Insights, information using acquiring and issuing data that they don't normally get. For example, what percentage of their customers over the last seven days were new, and what percentage were repeat? It sounds like a very simple piece of information, but most small business owners don't have integrated CRM databases, they don't have the data that large enterprise customers have. And so, we're able to provide them those types of insights, to give them information about what their average order size is compared to their competitors, or what zip codes their customers live in. So we give them these types of data to help them run their business and provide more information for them to be smarter, better, and faster at running their business. And we find that's a really popular feature for them.

How has the current macroeconomic environment impacted the demands and expectations that small business owners have from their payment processors, or generally from their financial providers?

You know, the last two years have been really challenging for small businesses globally, and certainly in the US. What we’ve found is that small business owners who were able to be agile and innovative found new ways to run their business. And it's been great to see. Some small businesses struggled, but those who were able to innovate and be more agile found new ways of running their business. One example I love is a yoga studio. Obviously, it was very hard during the pandemic to have in-person classes. And so they started doing online yoga classes, and they had a subscription model, and they actually found a way to grow their business during the pandemic. So, all of that is important background as we go into what a lot of people are thinking will be a period of economic headwinds in 2023. We’ve found that small business owners who were resilient, who found ways to adapt, will likely continue to be successful through this period of economic headwinds. But we're finding, again, that they want to leverage technology to help them be more efficient to run their business. So small businesses who used to just be offline are now using online ordering platforms, so that people can buy online and pick up curbside or pick up in-store. I do think the last two years have been really important to have small business owners find ways of being innovative, being able to run their business through tough times. And I think that will help them through the next period of economic headwinds. What we hear small business owners talk mostly about is a couple of areas. They certainly have concerns over the cost of supply, and all of their supplies are becoming more expensive. They certainly have had challenges with supply chain management and the time to get products, but products are more expensive. So the whole concept around supply chain is an area of concern. And the second area of concern is labor – both cost and consistency of quality labor. Those are the two areas that we hear small businesses talk a lot about. They want information that can help them staff their stores or their businesses more efficiently. They want to make sure that they also have information on what products are selling more than others, so that they can be more efficient in their buying. But the whole idea around cost and timeliness of supply chain, and cost and quality of labor are the two issues we hear most about small businesses.

Large retailers or large merchants generally have teams of people who focus on crunching data and providing them analytics on their business. And obviously, it makes them smarter every day, because they understand who their customers are, where their customers are, what they're buying. As a small business, you generally don't have that level of information. Maybe you have general sales data. If you have an ecommerce platform, you might have some additional information, but it's still fairly limited. At Chase, we're in a unique position, because we obviously provide merchants with data about their acquiring or credit card payments. But we're also one of the largest issuers of credit and debit cards in the world. And we can actually bring both sets of data – issuing and acquiring data – together in one format, to provide our small business customers a product called Customer Insights, that effectively is a dashboard with tremendous information that they can use to understand how their business is performing. We provide them insights on things like traditional sales trends, for example, what day of the week or hour of the day they’re seeing spikes in their sales. And they can use that to make sure that they're staffing appropriately, or not overstaffing for days or times when they're not selling as much.

We can also provide them benchmark data about their peer groups: what are their sales like compared to their competitors? What's the average order size? How much volume are they doing? And how do they compare to their peer group of other merchants that are similar to them? And then, we provide them information about their customers. Obviously, we don't share any personal information about their customers, but we do provide them with blinded demographic data – things like household income, geographic location, proximity to their store, how many of their customers are within one mile, five miles, and more. We can also tell them whether or not those customers have shopped at their store recently. We give them tremendous information, and when we launched it, what we found was, customers were calling us and telling us they'd never had access to that amount of information in such a quick, easy format. They really liked the fact that we're able to give them information that helps them staff their store more efficiently, or do marketing campaigns for their customers, because now they know where they are, and where they can put their advertising dollars in a particular zip code, and not in another. And also, it's really great for them to have peer data to understand the health of their business versus their competition. So, it's been a terrific product, we've heard great response from it. And we're going to continue to innovate with new features and functionality in our Customer Insights product.

From the perspective of a small business owner, what are the advantages of having an integrated financial solution that supports a range of capabilities like banking, payment processing, and analytics, instead of having to deal with multiple providers?

I've been in the payments space a while, and so it's not hard for me to remember a time when a small business used to collect card or cash payments, they would go to their bank at the end of the day, deposit those funds, and it would take them days to get access to the funds. And they generally had a point-of-sale system that did one thing, and that was, you know, ring up a sale. Innovation in technology has really changed that quite a bit. At Chase, we're investing heavily in modernizing our point-of-sale hardware and software, so that it does more for small business owners. Because small business owners, again, are expecting to be able to use their point-of-sale system to do far more than just accept payments. They want the ability to gain insights out of their business in real time from their point-of-sale system. They want to be able to transfer funds from their merchant account to their Chase bank account, or be able to see their balance on their Chase credit card through our Chase business online application. They want integrated accounts for a couple of reasons. One, as I mentioned, they don't have a finance department. So it's generally the business owner, who's on the go, who may need to be able to access their financial accounts through a mobile app, or through a web application as well. And they want to be able to access all of their financial accounts with one password, an integrated system where they can look at the balance in their bank account, they can see how much money they've collected in their merchant account, and they can see the balance or available credit on their Chase credit card, all in one easy-to-use place. So it's fast, easy, simple. But there's another practical answer, which is, they want to be able to move their money quickly, and not wait three days for that to settle or clear. And they also want to make sure that they're not paying extra fees for moving their money from one account to the other on the same day. So it's really all about ease, simplicity, speed, as well as having a frictionless way to move and manage their money on the go, or at home late at night. 24/7 is the way that they like to operate.

How does Chase view competition from fintechs that offer similar services for SMBs? And what's your view on partnerships with fintechs?

The payments ecosystem is an interesting landscape. We often do business with people we compete with, and at JPMorgan Chase, we're no different. I spent most of my career working at fintechs that served the small business segment. And you know, they've developed new technology that has helped modernize payments and created a lot of innovation, which is terrific. However, banking, payments, credit cards, and lending are very complicated businesses. They're highly scrutinized for good reasons. They require significant investments and expertise in risk, fraud monitoring, and data protection. We're really fortunate that small businesses know and trust Chase for a full set of financial service needs. They know that we will protect the information of their business as well as their customers. They appreciate our focus on making sure that we help protect and defend them, both in their personal and their professional life. If they bank with us on the personal side, as well as keep their business accounts with us, we can help protect their information as well. They also really want the flexibility of having multiple channels, to be able to gain service and support. And many fintechs have a kind of digital-first servicing model, where you can only get access to their support through either chat or email. We're fortunate at Chase that we certainly have a digital-first servicing model. But if, as a small business owner, you prefer to talk to a live person, you can call one of our thousands of agents to ask about your financial service needs. Or you can visit one of our 4000 branches in the local communities. We actually live in the communities that our small businesses operate. And so, we're fortunate to have that multi-channel service model that really is a benefit to small business owners, who in some cases are looking for a live person to provide them advice, or help them solve a problem. But we think the innovations that fintechs have brought to the market are a benefit. And again, we're continuing to invest heavily in technology, and make sure that we continue to always focus on expanding the offering that we're providing to our small business owners, in addition to the fact that we want to provide good old-fashioned human support when needed.

Looking ahead, how do you see the future of SMB payments? What are some of the things we can expect in the space going forward?

I always remind myself, we talk about small and medium businesses as one thing, but the reality is, there are more than 30 million small businesses in the US alone. All of them have very, very different needs, and they provide very different buying experiences. What we're seeing in payments innovation, modernization of point-of-sale hardware and software terminals, we're seeing new sets of buying experiences, unlike things we'd seen before. The whole concept of buy online, pick up in store is just one small example. What we've seen through the COVID pandemic is that buyers and sellers are finding new ways to connect, like through virtual services, where you actually don't have to go into the store. We're finding new ways of creating payment methods where you don't actually need to be physically in-store, you can order at a restaurant now through a kiosk. And what that does is, it provides merchants the opportunities to provide all kinds of new service offerings.

I think we will continue to see more tailored payment experiences across unique industries. Service-based businesses will find new subscription models, and the payment method will effectively go away, because we'll use your digital identity and your payment tokenization to make the payment experience essentially frictionless. I think we'll also find that payments are going to be less of the experience. They'll be behind the scenes, because buyers and sellers will have a stored, secure, digital identity. And the payment token will be behind the scenes. I think we'll continue to see new ways of payment. We know merchants are always wanting to make sure that they accept the broadest methods of payment possible. I think we'll also see new innovations around safety and security – things like, can we use biometrics to make the payment or the digital identity even more secure? Multifactor authorization will continue to find new ways of making the payment and digital identity more safe, more secure, not only for large merchants, but for small merchants as well, which is really important.

And now, talking specifically about Chase, what does the future strategy at Chase look like for SMB payments?

We are making significant investments in modernizing our technology, so that we have best-in-class point-of-sale systems for our customers, including hardware and software. But we also recognize that there are industries where there are terrific partners that we can work with, who are doing incredible things in a specific industry. For example, we work with a company called Buildertrend, which provides fantastic software for the building industry. That's not something that Chase is going to do. So, we partner with partners like Buildertrend, and many, many others to provide best-in-class services that fit the unique needs of that industry. Our job is to provide safe and secure payments, banking, and access to credit to those partners and the customers that they serve. So, we have a direct model, where you can come through one of our 4000 Chase branches, or through one of our online portals. And you can do business with us directly. Or you can work with one of our best-in-class partners to make sure that we have a tailored solution that meets your unique needs. We'll continue to invest in payments technology that will allow us to create new payment innovation, new payment capabilities far beyond what we've had historically. And that includes things like value added services beyond payments. So we want to make sure that, for example, we have fast and easy-to-access 401(k) plans for small business owners who want to provide that to their merchants. We’ll continue to invest in things like digital invoicing to make it faster and easier to issue an invoice. And we'll continue to invest in our Customer Insights product to provide data and information to allow small business owners to make faster, easier decisions about how to run their business and compete more effectively with their competitors, small or large.