This tight correlation highlights that any interruption in consistently bringing in cash can have a catastrophic impact on the health of a small business. Detailed in the report is the tight correlation between daily inflows and outflows of cash for small businesses. Institute, the median small business owner only had 27 days of cash in reserve. Indeed, money is the lifeblood of any small business, and without an easy way to receive it and manage it, the reason why most fail.Īccording to a 2016 report from the JPMorgan Chase & Co. And secondly, to be able to manage their cash flow.
The primary need of a small business (SMB) is much more straightforward: to get paid. And for obvious reasons, these varied services can be effective when it comes to helping larger enterprises and corporate entities boost operating efficiencies. Historically, treasury management services like payment integration, disbursement solutions, payroll, and reconcilement have held an important place in an FI’s business lineup. By the time they take notice of disruptors, it is usually too late.įinancial institutions continue to prioritize products built for commercial clients, as they abandon small and micro-businesses. Established companies (incumbents) often ignore these competitors as they continue to move upmarket in a bid to capture higher profits. Once entrants gain a foothold at the bottom of the market, their product(s) will often undergo refinement and improvement, until they can meet the needs of the majority of customers in the mainstream. However, these disruptive offerings provide other desirable benefits, such as convenience, ease-of-use, affordability, and simplicity. Importantly, disruptive innovation takes time, as entrants introduce products to the market that are never as good as the current products and services - at least not initially. The following definition comes from the Clayton Christensen Institute, founded on the theories of Harvard professor Clayton Christensen:ĭisruptive Innovation describes a process by which a product or service initially takes root in simple applications at the bottom of a market - typically by being less expensive and more accessible - and then relentlessly moves upmarket, eventually displacing established competitors. How disruptive innovation helps us to better understand the current competitive landscapeĪt its core, the theory of disruptive innovation is intended to help established companies identify and mitigate disruption - ideally before it takes hold - so that the incumbent can continue to operate and grow. To better understand what that is, we can turn to a concept that is widely recognized, but often misinterpreted: the theory of disruptive innovation.
And 2021 has shaped up to be another busy year, with a seemingly endless procession of disruptive neobanks entering the market - many explicitly targeting specific small business niches (e.g., freelancers, entrepreneurs, creatives, barbers!).ĭespite their inherent diversity, all of these companies share a strikingly similar strategy when it comes to growth. Traditional financial institutions (FIs) must contend with first movers - big tech players and fintech challengers - along with a wide range of business-focused neobanks.Ĭase in point: In 2020, we saw Square become a bank, Stripe Treasury offer embedded banking to a number of platforms, and Quickbooks unveil a small business deposit account. In the last ten years, we’ve seen an onslaught of new competitors in the small business banking space.
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