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By Steve Cocheo, Executive Editor at The Financial Brand
When Intuit began offering primary checking accounts to small businesses using its QuickBooks accounting software in 2020, the move looked like both a coup and also a natural evolution as it built out its financial ecosystem. It has proved to be both, and the technology company has now pivoted off the original strategy by launching a banking app.
Over eight million U.S. small firms, many of them Mom and Pop businesses with under 20 employees, use the market-dominating Quickbooks accounting software. Offering primary checking through a banking-as-a-service partnership with Green Dot Bank opened a new front for Intuit.
Typically companies either had to link existing business checking accounts to their QuickBooks accounts, or, for the smallest and youngest firms, had to rely on personal transaction accounts, in order to run their businesses’ finances from inside Intuit’s ecosystem.
Having the “in” of being many small firms’ accounting package, with multiple add-on services available as they grow larger, put Intuit and Green Dot in a good spot . About two-thirds of the firms opening checking accounts (about 150,000 in late 2021) were existing customers. But on the flip side, the remainder began subscribing to QuickBooks in order to qualify for the checking accounts, which feature no opening fees, no minimum balance requirements and no monthly maintenance fees.
This made the accounts, initially called QuickBooks Cash, a good two-way cross-sell, and Intuit has been adding more features to the Green Dot account to add appeal. A notable one is mobile capture, which the small firms that still get paid by check. In late 2021 the name was shifted to QuickBooks Checking, to better separate the business account offering from the growing ranks of consumer accounts that feature “cash” in their names.
But more recently Intuit saw another opportunity that comes initially from outside of its ecosystem.
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While the base of QuickBooks users is huge, says Rob Daniel, Director of Product Management for Intuit QuickBooks Money Offerings, the ranks of fledgling small businesses is even bigger. In the wake of the pandemic’s impact on certain industries, the Great Resignation and other trends, more people are starting small businesses.
“There are anywhere from 20 to 30 million freelancers and other small business owners today who could use a robust business checking account before they need an accounting or bookkeeping solution like QuickBooks,” says Daniel. In fall 2021 the company introduced the free app “Money by QuickBooks.” The app offers some basic financial aids, including the ability to accept various types of payments and to execute bill payment, on top of a free Money by QuickBooks business checking account and a Visa business debit card, both from Green Dot.
Daniel says Intuit sees the new offering as a entrée to its offerings, which can grow the ranks of QuickBooks users in time.
“Small businesses tell us they want fintech to help them feel in control of their money and cash flow, whether that’s getting paid quickly or having great visibility into their finances,” according to Daniel.
Pulling small firms into the fold nearly from gestation is not a strategy followed by most traditional financial institutions, which typically approach companies further along in their development. Yet Intuit’s program could be a clear warning sign to business banks, who may miss out on today’s new small firms from the get go. The data generated by QuickBooks accounts gives Intuit insights into how the small business market is changing.
— Rob Daniel, Intuit
“We are very excited about where we are, but our growth trajectory is only getting started,” says Daniel. What the company sees distinguishing its accounts from traditional offerings is their being built to work with the company’s accounting and business management tools. (He says customers who use QuickBooks Checking are nearly seven times as active in using QuickBooks and ancillary services as users who haven’t opened checking accounts.)
The Money by QuickBooks app provides a good step towards eventual “graduation” into QuickBooks and becoming a full-fledged business rather than a side hustle. “We have been surprised at how many customers come to QuickBooks and yet they don’t have a business banking account yet,” says Daniel. Over $90 billion in payments is processed through the QuickBooks system, which also includes available payroll processing for small firms and QuickBooks Capital, which offers business loans keyed to firms’ activity in the software.
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When what is now QuickBooks Checking launched there was no means of directly using mobile capture to deposit checks into the accounts. Users had to have another account that offered remote capture in order to get those funds into the system. That has been remedied.
“We spent a lot of time building remote check deposit nearly from the ground up, and did not go with an off-the-shelf solution,” says Daniel.
Intuit wanted to have control of, and faith in, the accurate reading and processing of scanned checks. This was especially important because an emphasis of QuickBooks Checking increasingly is giving account holders as rapid access to the proceeds of their business as possible. Being able to deliver that capability meant taking the risk of fraud onto QuickBooks, rather than onto Green Dot, and so developing a tool that both Intuit and customers could rely on was critical.
“We think it’s going to be a game changer for many of our customers,” says Daniel. QuickBooks Checking already provides nearly instantaneous access to incoming payments made via debit card, credit card or ACH transfer and this move is of a piece with that.
Daniel says that the company is actively beginning to work on fitting Real Time Payments, a service of The Clearing House, will fit into its ecosystem.
“RTP has not had significant enough adoption among enough banks to be hyper-relevant to our customer base,” says Daniel. “But it feels like in 2022 the threshold is being reached. So, for our customers, we want to enable more ways for them to move money instantly between their accounts, including our own checking account.”
He adds that the company is watching FedNow, the Federal Reserve’s project, which is slated for implementation in 2023. “I fully expect us to go through the same process with FedNow when it’s ready.”
While Daniel speaks of the company having pulled together many of the core capabilities of a complete small business bank for the foreseeable future he does not see the company attempting to obtain its own banking license. More likely, given the spread of QuickBooks internationally, is Intuit’s seeking additional banking partner relationships in priority markets, such as the U.K. and Canada.
“Getting our own license would take an incredible investment and would create a lot of overhead from compliance and regulatory maintenance,” says Daniel.
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This article was originally published on January 4, 2022. All content © 2022 by The Financial Brand and may not be reproduced by any means without permission.
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