In the great digital transformation, payments have become an “on-site” activity for small and medium-sized businesses, both on-site and on-demand.
Contractors want to pay their subcontractors. Construction companies have to pay for materials on the fly. Landscapers and any number of companies in the clothing, hospitality, and food industries take payments at the point of sale (sometimes on their equipment) and make payments to the suppliers who keep inventory and workers running. Meanwhile, business has become more complex as SMBs sell across multiple channels while placing their own orders and paying employees and bills remotely.
It’s no wonder these companies need simplicity in their banking relationships, as well as transparency about how they track and manage all that money on the go. Corresponding Thomas Priore, Executive Chairman and CEO of Priority technology holdings, that is precisely why we are seeing the convergence of banking, payments and software. Legacy banking and payment processing systems are simply unable to keep up with the pace of change.
“If you’re a small retailer and like the fact that you can do all of this from one place, eventually we’ll be your bank,” Priore told PYMNTS Karen Webster.
The urge to converge
That convergence is manifested in recent merger and acquisition activity in the payments space, where Global Payments said this month it would buy MineralTree for $ 500 million to provide commercial payments, domestic and international acquiring and accounts payable (AP) automation marry. And Repay announced in May that it would buy BillingTree to strengthen accounts receivable (AR) management.
See also: Global payments for the purchase of MineralTree for $ 500 million
As Priore noted, the platform model can help merchants (and the resellers who serve them) take advantage of centralized payment processing and a continuum of other services related to operational workflow.
The company traces its history back to 2005, when Priore’s investment banking work led him to realize that when mortgage-backed securities made the leap from paper-based to digital, “the same technology should be applied to payments,” he said to Webster.
In general, setting up a merchant account should be streamlined through online channels, he said. And SMBs should be able to leverage their retail locations to pay supplier bills using ACH, checks, virtual cards, and other forms of digital payments.
Today the company is the sixth largest non-bank merchant acquirer in the United States. As Priore told Webster, the company processed a payment volume of more than 60 billion US dollars over a network of more than 200,000 merchants last year. The advent of the platform with APIs and “plug-and-play” functionality enables Priority to manage risk management, licensing requirements, compliance, and money submission – allowing vendors to monetize their dealer networks.
The current composition of Priority’s portfolio focuses on small to medium-sized businesses with monthly bank card payments of approximately $ 18,000. Priore found the portfolio to be broad and representative of the US economy as a whole, with about 18% contributing from the hospitality industry.
“We do a lot of retail and wholesale business and have a remarkable performance from medical professionals,” he said. Many of these customers, for example in the contracting and landscape sectors, require both B2C and B2B payments.
In addition to its consumer-centric business, the company also has a commercial payments division that offers automated payments, B2B payments and managed service solutions and supports more than 350,000 accounts. Over 50,000 suppliers are registered on virtual cards, said Priore. While card adoption is table stakes, he pointed out that automated payment processing requires more revenue development, although the scope and critical mass will continue to grow.
Priority itself has joined the M&A activity that is a hallmark of the B2C / B2B sectors. The company acquired Finxera earlier this year to expand its banking-as-a-service reach. The $ 425 million deal, closed on Friday, brings Finxera’s API-driven platform – which makes it easy for businesses and consumers to create accounts, collect, store, and transfer funds – into Priority.
As the companies announced when announcing the deal, Finxera has 375,000 active deposit accounts and average daily account balances of $ 500 million, in addition to a full master account with the Fed.
The Finxera acquisition will give the combined company a semblance of PayPal-like functionality, Priore said, including the “ability to store money in a virtual wallet or bank account structure and settle all flows”. [in a closed loop] in and out of this wallet or this ledger. “
By using a single platform as a conduit, the Priority / Finxera combination has the ability to collect money in any form – from credit, direct debit and ACH – and channel it through the credit rails. The company is completing its own back-end settlement processing capabilities. And Priore predicts that in a few months the company will also be a Visa issuer for business and debit cards.
What is still ahead of us
Looking ahead, Priority will seek to offer immediate settlement in conjunction with working capital solutions. The company will add automated accounts payable and banking functionality in the near future and will launch it in the next year. Financial institutions (FIs) have the option of white-labeling the Priority offering and accessing the company’s tools via the API.
Since the smaller merchants and the resellers who serve them are the focus of Priority, it makes no sense for them to rebuild the payment functions and compliance requirements that we already have and can provide. Let us handle the payments. “