In case you hadn’t heard, financial technology companies are officially saturating the B2B payments landscape and in many cases giving banks a run for their money on innovative options. The mission of every fintech we know is to change B2B payments processing for the better by removing friction from the buyer to supplier payment experience. Creating ways for payments to be made more quickly, more securely, and with greater flexibility is the name of the game. Less human error, and more time efficiencies that save money are additional byproducts that only serve as value-added benefits within an organization.
The Role of Regulation
With the evolution and adoption of regulations like the Payment Services Directive (PSD2) in the European Union, the prevalence of fintechs in the payments space is only expected to grow right along with customer trust in non-bank entities. Technology and cloud-based software can now be unleashed by fintechs who are eager to offer banking services layered with additional conveniences and rewards.
PSD2 dictates that fintechs can utilize API technology to gain access to bank information including customer account details. Enabling fintechs to work in tandem with banks to extend more innovative payment services.
The Partnership Paradigm
Some view these new regulations and directives as a means of forcing banks to compete not only against their banking peers but also against new third party entries. This perspective could be considered skewed. More accurately and simply, it should be about making changes to traditional business models in response to customer expectations.
The climate is ideal for fintechs and banks to become partners working towards a mutual goal of providing better access and customer service. With that said, fintechs can certainly operate effectively and successfully on behalf of customers without a banking partnership, while banks may find themselves in a stickier spot without a fintech.
PSD2 creates new economic obstacles for banks beginning with the IT investment required for creating an open API infrastructure. Payment Initiation Service Providers (PISP), which have been introduced with PSD2, are also predicted to have an impact on banks’ retail payment revenues. As more non-bank companies enter the payments space with enhanced options, banks may find it challenging to differentiate themselves and perhaps stay relevant if they remain solitary in their traditional roles.
The Fintech Focus
Fintechs are all about innovation and providing a laser-focus delivery of customer-centric services that resonate with most business models. B2B payments are the core element of many fintech companies and supporting ongoing innovation in the payments space is the top priority. These fintechs are:
- Agile and adaptable, giving them the ability to deliver organic solutions tailored to specific and varying business models.
- Employ full-time, dedicated and trained teams to educate and convert vendors into virtual card partners, resulting in a high success rate and additional rebate income for businesses.
- Develop comprehensive platforms that can completely integrate with various accounting software systems.
- Maintain highly secure AP platforms that can deliver detailed, invoice-level data efficiently, enabling CFOs to manage budgets and forecast with precision.
Banks are not equipped in the same ways which is why we are seeing more collaboration between fintechs and banks as they experiment with APIs.
Can’t We All Just Get Along?
The digital and mobile-friendly trend put in motion by tech savvy customers is a huge factor driving these changes. At this point, fintechs have been meeting the demand for faster, cost effective, secure, and easily accessible payments in more innovative ways. Banks maintain trusted brands, manage deep relationships with a broad set of customers and deliver valuable financial services. While the need for choosing and committing to a traditional bank just isn’t the same as it used to be, together, the combination of fintech and bank assets can provide a superior level of B2B payments service.