I have wondered about the technology that powers the economy through all of the electronic transactions we make every day. It seems to be transparent and behind the scenes until something goes wrong or a system goes offline, and then it is obvious. It has to be robust to correctly handle the millions of daily transactions. I know that the way I work with financial institutions is very different from what it was even just a few years ago. What exactly is powering all of this?
In the new world of crowdfunding there are millions of online credit card transactions involved, some for as little as $5. A number of startups have stepped in to process transactions using affordable technology. WePay works with small businesses, crowdsourcing companies, and acting as the payment processor between individual buyers and sellers. They charge a 2.9% transaction fee, which is competitive, and have turned a nice profit.
Square has made mobile payments easier through a device that connects to a cellphone and processes credit card payments without a traditional hard-wire connection to the bank. I first saw these devices at craft fairs and farmers’ markets but am now starting to see them in stores, especially small shops, in place of traditional credit card transaction machines. This technology allows small businesses and individuals to process payments offline, securely and affordably.
The New Lenders
Small business owners are sometimes locked out of conventional loans because large banks cannot always verify assets or income source. Online lenders like Kabbage verify income through a business’s electronic accounts such as PayPal or Quickbooks. The loan can be used to purchase inventory, meet payroll, or expand a business. The loans are generally small and the business owner can skip the traditional loan paperwork by verifying assets through existing electronic accounts.
Technology has provided great tools for small businesses and individuals who are often locked out of the standard transaction or loan process either because they are too small or they are not profitable for a bank. As more people start small web-based businesses, others are there to help them. Whether their goal is to grow and expand or to continue selling quality products to a few individuals, the infrastructure and processes are already in place to help them pursue their dream.
If you are a small business owner and you have used any electronic services to process payments for sales to individuals, let me know about your experience. Is technology powering future commerce? Will traditional banks and lenders join in on this innovation or will it pass them by? Let me know your thoughts.
Kelly Brown is an IT professional and assistant professor of practice for the UO Applied Information Management Master’s Degree Program. He writes about IT and business topics that keep him up at night.