Online lender Kabbage makes payments play

Kabbage, the online lender that has been building a business in small-business financing, now wants a slice of the payment processing pie, and in particular business-to-business transactions. The company’s new Kabbage Payments aims to make getting invoices paid faster “as simple as sending a text message.” It’s being offered, at least initially, to Kabbage borrowers.

“Since 2011, we’ve helped hundreds of thousands of small businesses access over $8 billion in funding,” said Kabbage CEO Rob Frohwein. “We know first-hand a primary need is to cover cash-flow gaps while waiting to be paid. Kabbage Payments not only expands our suite of products, but the very definition of our company.”

Kabbage said that over two-thirds of its 200,000-plus customers rely on invoicing to get paid, and often wait as long as 90 days for those payments to arrive. Leveraging its lending platform technology, Kabbage claims, it can slash that lag time to just a day.

Offering speed, ease of use

With Kabbage Payments, a customer creates a unique URL for their business and sends payment requests through texts, emails or the web. The custom pay link eliminates the need to manually create new accounts, open new payment orders, and duplicate work for recurring invoices, the company stated.

Other features of Kabage Payments include free processing of check payments, credit card processing priced at 2.9 percent plus 25 cents, and next-day funding on transactions processed by 5 p.m. Eastern.

Robert Misasi, CEO of Mercator Advisory Group, said the market is ready for a payment solution that helps businesses get paid faster. He noted that 65 percent of small businesses surveyed by Mercator prioritize ease of use when selecting payments solutions.

“The ability to receive funds through a simple URL matches the digital-first way most business owners operate today,” Misasi said. “Small businesses have a wide set of payment options today and Kabbage’s data connections and leadership in automating funding create a strong pairing to provide small businesses a unique cash flow management solution.”

“My clients receive dozens, if not hundreds, of invoices a month, so it’s easy for them to pile up and be paid out all at once,” said Lee Brewer, owner of Lee Brewer Enterprise, a New York ad agency. “For years, I’ve waited anywhere from 15 to 30 days to get paid for my work. Now, I send clients my Kabbage custom pay link through email or WhatsApp and get paid the next day.”

Going toe-to-toe with PayPal, Square

Kabbage got its start primarily lending money to eBay sellers and eventually expanded its reach to small businesses internationally. Small businesses can request loans of up to $250,000 and receive approvals within minutes, according to the company’s website. The repayment period on these loans can be up to six months.

The move by Kabbage into payment processing services for small businesses is seen as a direct assault on two other big-name financial technology firms: PayPal and Square. Both started out as payments companies but have since branched out into small business lending.

Kabbage reported that it has lent more than $4.5 billion to small businesses over the past seven years. According to published reports, Square, which has been lending to small businesses since 2014, has a loan portfolio roughly the same size. PayPal reports about $10 billion in outstanding loans to 225,000 small businesses worldwide.

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.