Christopher Johnson, president of Global Financial Services at Pitney Bowes, speaks about global small business lending and the goals for PB’s Chartered Bank and Financial Services division.
Global Finance: Is there a global market for small-business lending?
Christopher Johnson: Small-business finance is a fragmented market. Traditionally, banks in the US and elsewhere have been rewarded for lending to large, safe companies. Businesses with less than $25 million in revenue, which are the workhorses of most economies, are less likely to be well served. It is tough for them to access critical capital around the world, and they often must seek alternative and expensive forms of finance. We think it’s a space ripe for reinvention.
GF: What is the outlook for small businesses and for their financial service providers?
Johnson: There is no doubt 2022 is going to be trickier than last year. Costs are rising, growth is slowing globally, and [accommodative] monetary policies are about to change. With higher costs, more volatility and rising interest rates, traditional capital sources will become more conservative with respect to lending. They’re trained to do that. The capital needs of small businesses will continue to grow; and it’s going to require smaller, more regional financial players to do more for their customers. I see opportunity.
GF: What is Pitney Bowes’ comparative advantage in this end of the lending market?
Johnson: The hardest thing for financial service providers to deal with is the high cost of acquiring new customers. We interact with 750,000 clients across 13 different markets. The easiest way for us to grow is to focus on those existing customers. Postage is currency and we have a lot of excess deposits from postage customers that we want to put to work. We have balance sheet capacity, customers that we’ve worked with for decades, and we have a great view on the small-business lending market. We are rapidly innovating to build more value for customers, going forward.
GF: What kinds of opportunities are you looking to finance?
Johnson: The big opportunity for small businesses today is to use technology and automation processes to become more efficient. The pandemic has accelerated the shift to a digital environment, and there is tremendous growth potential in the logistics space across global markets. We want to build relationships that help companies grow over time with lines of credit, working capital and loans for critical capital expenditures they need to thrive in this new environment.
For us, financial services represent a horizontal opportunity where we can increase our share of the customer wallet. We can help businesses acquire technology they need on their logistics spend, aspects of payments, and financing inventories. Pitney Bowes is moving from a monolithic opportunity [in the mailroom] to something that is multifaceted and appeals to small and midsize businesses around the world.
GF: With small businesses often most vulnerable to volatility and rising risks, do you worry about defaults in your business increasing in a more difficult environment?
Johnson: Pitney Bowes starts from a good place. We have a long history with a lot of our clients, and through that experience we’ve come to understand them and understand where we can lend to them. Historically, we have outperformed the market. We saw increases in defaults in the 2008 crisis, but they came back down. That gives us confidence that we can support small businesses across the globe in a safe and sound manner.