PayPal COO: Technology is faster but money is slower

Small businesses are struggling to access funds in the digital era, even though technological advances would suggest the opposite should be the case.

That’s according to PayPal chief operating officer (COO) Bill Ready, who was speaking at this year’s Money20/20.

“There’s a major issue to address in how small businesses get their money in the digital economy. Although technology has made access to customers faster, its making access to money slower,” he said.

Prior to digitisation, when custom relied primarily on cash, funds transferred instantly – but that’s not how it works now, said Ready.

“Today, money is tied up in the digital world. SMBs often get their money from sales several days or weeks later. It doesn’t make any sense. The technology should make it easier to get your money, not harder.

Having quick access to money for small businesses is crucial, said Ready, “and they’re already trying to figure out how to compete with big online retailers, and shifting digital preferences. The digital economy often has money held hostage. That creates problems for inventory, how to pay employees.”

“We need to make it so small businesses receive their money the same way they receive cash.”

Ready said PayPal’s Funds Now program, which aims to help small organisations receive money quickly is aiming to overcome that problem, and has done so for more than one million small businesses.

“It gives them access to their money within seconds, regardless of how the customer pays,” he said.

Launched in September, Funds Now is available to select sellers, and aims to complete sales within seconds – and process the payment even if a dispute is raised. Applicants must have had a PayPal account for more than six months, hold a strong selling record, and operate with a “legal and ethical business model”, according to the company’s website.

“We can make sure small businesses have better and faster access to their money, which means more job creation, more innovation, and a more diverse ecosystem,” said Ready.

The need for faster access to funds has increased significantly in recent years, especially as the banking sector has changed, said Ready.

“Normally when a small business needs access to more capital they go to the bank for it. But the context has changed,” he said. “Thirty years ago, a loan would have been secured against physical assets. Now in the digital world, there aren’t always physical assets for lending purposes – especially if we’re talking about a service business. It’s tough for entrepreneurial businesses.”

The number of traditional bank loans declined 15 percent between 2005 and 2016, he pointed out. “And it’s not that the banks don’t want to lend – they’re in the business of lending, it’s what they want to do. The problem is that the type of information they need to make lending decisions is different than it used to be. The context has changed.”

Ready suggested that the wider paytech industry has much to do to support small businesses, which would, in turn, create jobs and economic growth.

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