What do consumers want from mobile banking?

August 18, 2016
/   Insights

In the last couple of years, mobile banking has grown from being a fairly niche channel adopted by only the tech-savvy to one of the most common ways for people all across the world...

UK prepares to launch new polymer £5 note

August 4, 2016
/   Insights

Britain will soon become the latest country to release polymer banknotes into circulation, joining nations such as Australia, New Zealand, Canada and Vietnam in the shift to plastic currency.

Cause and Effect: If you build it, will they come?

July 23, 2014
/   Spotlight

Many financial institutions assume that digital banking is lucrative because the most valuable customers happen to bank online. While there is certainly a correlation between online bankers and higher profitability, quantitative evidence suggests that...

Intuit 2020 Report: The Future of Financial Services

April 11, 2011
/   Insights

Today, Intuit released the latest edition of the Intuit 2020 report, Intuit 2020 Report: The Future of Financial Services, which identifies and examines four key trend areas that will  transform the financial services industry...

Fast Facts: Student Loans

January 22, 2013
/   Insights

The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more.  Below are some updated Fast...

The Top 10 Trends in the Digital Banking Industry

December 18, 2013
/   Spotlight

2014 is rapidly approaching and as the year wraps, the Digital Insight team has pulled together the top 10 trends in the digital banking industry based on data and trends from studying financial institutions....

Making Banking Fun: Gamification in Financial Services

August 5, 2013
/   Insights

Recently, the Banking.com team sat in on American Banker’s webinar, “Gamification in Financial Services: Five Proven Ways to Get an Edge,” which shared how leading brands in financial services have applied gamification to reach...

Technology M&As: The Beats Go On

May 29, 2014
/   Insights

The ongoing fascination with Apple’s $3 billion purchase of Beats Electronics is entirely understandable, because it’s a cool story. However, it also says a lot about what’s going on between finance and tech.

What We’re Reading

May 5, 2011
/   Spotlight

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below. Virtual Banking Worlds Provide Tangible Lessons American...

Small Business: Perception vs. Reality

November 21, 2012
/   Insights

In the most recent election cycle, like most others before it, the one sector of the economy that got the most attention was small business.  This is the future, we were told by every...

What We’re Reading: Thanksgiving Edition

November 22, 2012
/   Spotlight

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom. Mobile Thursday? Plans for Thanksgiving...

2015 was a banner year for FinTech companies, with a record amount of investment flowing into innovative companies. Banks are taking notice, and some have even started looking around for FinTech partners. Back in April of this year, Chase Bank CEO Jamie Dimon made headlines with his letter to shareholders. “Silicon Valley is coming,” he wrote. “There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking . . . We are going to work hard to make our services as seamless and competitive as theirs. And we are also completely comfortable partnering where it makes sense.”

One area where it makes sense is B2B payments, and we’re starting to see banks express interest. It’s a win-win-win –for banks, FinTechs and most of all for customers.

We’ll just do the easy part
Banks have never done B2B payments well. That’s why so many companies are still writing paper checks. Electronic payments — ACH and card–are separate programs within the bank, requiring a separate accounts payable workflow for batching and transmitting each. Cross-border payments are another animal altogether, literally requiring payments to be made one at a time.

Banks have not innovated in this area for decades. For ACH payments, they typically contract with white-labeled service providers who provide a portal where a customer can submit an ACH file that transmits payment information through the bank’s pipe. It’s a very rigid pipe that can only handle this specific type of file.

If a customer wants a card program, that’s a different program and a different workflow and file. There are little or no services tied to any of these payment programs; the bank’s role is mainly to move the money.

That leaves accounts payable with a lot of manual work to administer electronic payments. On the front end, they’re constantly chasing down supplier payment preferences and bank account information, taking on the responsibility for handling it in a secure manner. On the back end, they’re saddled with a never-ending process of reconciliation, payment follow up and error correction.

Moving the money is arguably the easiest part of B2B payments. It’s all the manual work that has to happen before and after that eats up the most resources. As a consequence, most companies aren’t utilizing electronic payments anywhere near as effectively as they could.

Looking for a way to stay in the game
This is probably not an area where banks can make their services as seamless and competitive as FinTechs. If banks wanted to step up to provide all the necessary services around B2B payments, they would have by now.

Even if they suddenly decided they wanted to do the services piece, they’d still have to contend with their legacy technology. Banks historically have not invested in technology. It would expensive for them to catch up and unlikely they’d want to try. They may have tons of money, but they invest where they are going to make the most money and that is not in B2B payments.

Payments are just a little piece of their business, but it’s a service commercial customers want.

Specialized FinTech companies using cloud technology, supplier networks and good old-fashioned human-delivered customer service can do B2B payments at scale and at a price banks can’t match.

As banks see technology companies chipping away at their strongholds in lending and consumer payments they’re realizing that the “I go to my bank for everything” mentality is changing. FinTechs are taking aim at every part of their business. In payments, tech companies are grabbing market share from banks in the $3 trillion consumer payments space. Now banks are looking over at the $38 trillion B2B payments market for opportunities.

We bring the trust, you bring the tech
It’s a win for bankers to bring their customers an enterprise-level payments solution, even if it’s not homegrown. They retain their trusted advisor status with the customer. The bank benefits financially as their B2B payments partner uses technology and services to increase the volume of highly profitable card payments flowing through their pipes. This is definitely an area where it makes sense for banks to partner rather than build.

It makes sense for the FinTechs too. Banks have the customer relationships, and for the most part people still trust their banks and see them as safe. FinTechs are as safe and secure as banks; they’re still using regulated bank pipes to move the money, just adding technology and services to make the payments in a smarter, more efficient way. Still, they don’t have the long track record of banks, so if the customer’s bank says, “This is our payments partner” it provides a certain level of comfort for doing business with a FinTech.

The biggest winner is the customer. They can free themselves from writing so many checks, and make about 80% of their payments electronically. They can maximize card payments, and make money from card rebates. They can hand off the supplier information management piece, roll all payments into a single workflow and let the payment provider handle tedious follow up.

Customers are looking for solutions. It’s mattering to them less and less whether it comes from a bank. It’s unlikely that banks will launch modern B2B payments solutions in the foreseeable future, but highly likely they’ll look to grow their piece of that pie through partnerships.

About Tana Law: Tana Law is a Co-founder and Senior Vice President of Nvoicepay, a provider of B2B payment solutions to the enterprise.

(529)

Insights

Banking.com’s perspective on industry news and trends

(320)

Spotlight

Must-read news and insights from financial industry leaders

(205)

Voices

Compelling voices and contributed content from around the web

James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Brad Strothkamp

http://www.forrester.com/rb/analyst/brad_strothkamp

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.