Working together with your banking partner can give intelligent insights into how to improve your payments strategies
Listening to the language of the financial world tells us a lot about institutions’ traditional relationships with their customers. The talk is about using financial ‘instruments’ and assets or liabilities. A bank account is a facility. It’s up to the customer how they use it – for better or worse.
But what if the commercial bank could become more than just a facility? What if instead, the bank became a financial management partner helping customers to make intelligent, nuanced company finance decisions - and all with just a click of a mouse or tap on the screen?
Our latest whitepaper, Business Banking with a Consumer Touch, explores how technology is not only influencing consumer banking behaviour and transforming retail banking but that critically, this revolution is very much also sought after by clients in the commercial banking world.
Notable areas ripe for change
The latest shockwave to hit consumer banking has been in the form of regulation-driven added value services. In Europe the Second Payment Services Directive, often referred to as PSD2, opens up banking services to allow customers to access all their financial information on a single platform. More importantly, it allows that platform provider to work with that information to deliver added value.
One of the most common ways in which we see this adding value is in managing personal finances. Aggregators are collating regular outgoings, analysing discretionary spend and notifying users of their available capital until next payday.
Such information enables consumers to moderate their spend, see where they might be overspending, compare prices and refine expenditure to make the most of their personal budget. To this, they can add flexible finance products from challenger bank lenders who don’t follow the same rigid terms as their traditional counterparts. Goodbye, early payment penalties, fixed monthly repayments, restricted draw-downs and other archaic procedures.
Research featured in the white paper shows that commercial banking clients see these services in the consumer marketplace and are increasingly asking why they can’t enjoy similar benefits in the commercial space. One of the most important findings was that centralisation of account management services was clients’ number one concern.
This is a clear sign that commercial banking clients want an intelligent relationship with their financial providers. They want a single dashboard that shows payments, outstanding debts, future income and other disbursements.
But they also want to know how they can optimise these. Are there opportunities to improve working capital by moving scheduled payments from an account to a corporate card, for example?
Better control of money
Commercial clients, particularly those in a growth space, are also looking for financial products to be flexible. This is behind the emergence of providers like Kabbage. Providing flexible finance, Kabbage enables its clients to draw down finance when required and pay it back in a similarly ‘when required’ way. Companies are therefore much more in control of incomings and outgoings and are more robust as a result.
This ‘just in time’ approach can dramatically reduce wastage. Our paper reveals that £450bn of European working capital is locked up in inefficiencies in the financial supply chain at any one time. By increasing visibility over financial commitments, both client and banking partner can respond quickly to demand. And further, through deeper insights into spend trends and patterns, more effective decision-making regarding spend or investments can be made.
For traditional commercial banks, this transformation may be difficult to achieve overnight. In 2016, the Cap Gemini World Payments Report noted that executives expected their personal banking experience to be replicated by their B2B bank. Two years on and the launch of PSD2 in January 2018 has just pushed that agenda even further forward. Those that can meet this challenge, should. Those that can’t, must look rapidly to partner with the challengers, fintechs, and vendors who can help make it happen.
Download the white paper Business Banking with a Consumer Touch here