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SMBs are looking for niche banking services to solve their problems

When a pizzeria’s oven goes out, the owner must replace it immediately. They can’t wait for their income to add up so they can make the purchase.

This is one of the ways the financial needs of small business owners, self-employed people and freelancers differ from those of salaried workers.

“These small businesses — especially if you look at the customer base we serve — their biggest challenge in general is cash flow management,” Deepesh Jainchief financial officer (CFO) and chief operating officer at Lily, said PYMNTS. “They have expenses at one time and their income comes in at another time.”

Lili serves this constituency with an all-in-one banking app designed for them. Jain joined the company in May with over 20 years of banking and FinTech experience. In addition to managing the day-to-day financial operations and management of the business, Jain is responsible for leading Lili’s growth in loans and payments.

Small businesses, big problems

Speaking as part of PYMNTS’ Day in the Life of a CFO series, Jain said that while consumers and medium and large businesses are well served by banks and FinTechs, small businesses have unique issues that are unresolved. by these organizations.

For example, a traditional bank would give a small business a bank account but not give them the ability to generate an invoice. Thus, the company should purchase an invoice generation tool. They should then understand how to enter their bank account details, how to transfer money between accounts, and how to keep track of everything.

Another example of how small businesses are underserved relates to expenses, Jain said. They can use their debit card at a traditional bank, but the bank won’t give them a detailed spreadsheet they can use to file their taxes and figure out which expenses are taxable and which aren’t. Here too, the small business owner has to use another software to transfer their transactions from the bank to the software.

A third example concerns cash flow problems such as those encountered by the owner of a pizzeria. Traditional banks charge a fee if the customer fails to maintain a minimum balance or has an overdraft.

“As I mentioned before, these small businesses are having cash flow issues due to the mismatch of lead times,” Jain said. “So they don’t want to have a minimum balance, they don’t want to pay for the account – they want to have some flexibility in how they manage their overdraft and not pay $29 every time.”

Respond to a growing demand for solutions

Lili brings together in a single application the ability for small business owners to manage their Accounts Payable (AP) and Accounts Receivable (AR). That way, they don’t have to use different tools to do different things, have those tools talk to each other, and move data from one point to another.

“We believe that on average, we’re helping small businesses save up to 60 hours and over $1,500 per year by simply switching from their usual processes to using our app,” Jain said.

Lili also offers a feature that deposits a certain percentage of the small business owner’s earnings into a savings account so that it earns interest. Another similar feature saves money for tax returns that small businesses have to file quarterly.

“A large majority of them don’t know they have to if they’re self-employed or a small business,” Jain said. “So we have a feature that allows you to automatically set aside a percentage of your incoming income as a tax payment, and it goes into a tax basket that’s hidden from you so you don’t spend it.”

Jain said Lili expects to see growing demand for solutions for small business owners, freelancers and freelancers. Jain said that by 2028 there will be 90 million freelancers, 30 million of whom will be genuine small business owners running their lives as businesses.