Financial institutions have been laser-focused on the transformation of consumer-driven payments and the move to faster online and mobile payment methods. Businesses now expect the same convenient, fast and seamless digital experiences people use to shop, connect and manage their lives.
Businesses want intuitive, immediate and inspired banking tools, including those for payment initiation, cash-flow management, invoicing and other business processes.
Delivering those experiences won't be easy. However, there's a tremendous incentive for financial institutions that meet the business sector's evolving expectations: the opportunity to find new revenue.
I spoke with Fiserv experts David Chance, vice president of strategy and innovation, Enterprise Payments Platform, and Andrew Foulds, director of global market infrastructures, Enterprise Payments Platform, to better understand what's driving the digital transformation among small and medium-sized enterprises.
Businesses expect the same service levels, speed and access to information in their business banking as people experience in their personal lives.
– Andrew Foulds, Director, Global Market Infrastructures, Enterprise Payments Platform, Fiserv
Why are small and medium-sized enterprises in the spotlight and what banking changes are they looking for?
David Chance: As the world came to terms with the pandemic, small and medium-sized enterprises were hit the hardest. Many saw their priorities change as they worked to streamline business processes to drive efficiency and save money. Part of that involves a big push to automate interactions and information exchanged between businesses and their financial institutions. By doing so, small and medium-sized enterprises can increase productivity and data transparency, which can lead to lower costs and better insights.
Andrew Foulds: Businesses expect the same service levels, speed and access to information in their business banking as people experience in their personal lives. Small and medium-sized enterprises want a one-stop shop – a centralized digital experience that encompasses multiple banking and accounting functions. They want the ability to manage multiple facets of the business – payments, cash management, payroll and lending – through an intuitive and connected platform.
When you talk about automation, does open banking play a part in that?
Andrew Foulds: Open banking provides a single view and simpler user experience, enabling financial institutions to create personalized financial services and engaging customer experiences. Rather than logging into multiple systems and pulling information into a spreadsheet or another program, people can use open banking to gather the right information to run their day-to-day businesses more effectively. It brings all the different systems and banking functions into one place. As a result, financial institutions can support a wider set of interactions for businesses and consumers.
David Chance: Open banking is the glue that holds those systems together – or, maybe more pragmatically, it's the staple. In the past, account receivables departments received a check with a copy of the invoice stapled or otherwise attached to it. That staple made sure all the necessary information and context arrived with the payment. Now, invoices and payments can be electronically exchanged, automatically categorized and reconciled. APIs and open banking enable that seamless integration. The result is a more accurate and complete view into the business, including real-time balances.
When banking systems are open, users don’t just see payments; they see payment types, departments, ledger details and pending transactions. They can automate the appropriate response, from thanking a customer for an on-time payment to dispatching the next invoice.
Overlay services can be revolutionary. What are they and how do they help businesses?
David Chance: They’re business services that sit on top of payment rails. They piggyback on the benefits of core payment processing, including speed, ubiquity and security, to generate additional value for the user.
Request to Pay is an example of an overlay service. It gives users a digital connection to the financial institution’s real-time payment system. Open banking makes such connections possible and clears the way for financial institutions to create and offer overlay services. Even the smallest financial institutions can offer massive, competitive services with overlays and open banking.
Andrew Foulds: What's revolutionary is that overlay services solve big business problems, not just pieces of those problems. They reflect a real understanding of how business gets done from A to Z and what the major constraints and headaches are for enterprises. Unfortunately, that hasn't been the traditional mindset in our industry.
Outside of banking, there are many examples where being customer-focused and problem-driven has been revolutionary. Uber, for one, erased the hard parts of getting a taxi: phoning to book one, wondering if a driver will show up and figuring out how to exchange payment. Uber identified the challenges and solved them from the customer mindset.
In banking, overlay services could make life easier for business users by validating payee information, holding escrow payments or verifying regulatory requirements for cross-border partners or suppliers. Those value-added services remove barriers for business users and can help financial institutions generate revenue and retain accounts.
It's time for financial institutions to focus on challenges they can solve rather than what they can sell.
– David Chance, Vice President, Strategy and Innovation, Enterprise Payments Platform, Fiserv
How does this new approach change how financial institutions serve small and medium-sized businesses?
Andrew Foulds: Until now, many financial institutions have largely overlooked how their products fit into the bigger picture within a business. Financial institutions want to help their business customers, but to do so, they need to solve for an entire business problem, not just one element of it.
David Chance: Financial institutions are starting to realize they can't just add a mobile app. Instead, they need a selection of services that help business owners manage their money and their entire enterprise. Likewise, services must be available when the business needs them, not within a banking day or only during business hours. Open banking brings everything into view, so financial institutions can help businesses tackle bigger issues, such as forecasting, cash flow and liquidity. Open banking can also help businesses attract better rates and services.
What can financial institutions start doing now?
Andrew Foulds: Retail and business customers really want the same thing: singular, well thought-out solutions. Understanding how their business customers work can help financial institutions deliver the best solutions for their problems. To do that, financial institutions may need to partner with a third party that can offer services and experiences on their behalf.
David Chance: It's time for financial institutions to focus on challenges they can solve rather than what they can sell. As an example, fintechs and startups focus on problems and the customer experience and aren't afraid to partner with other parties to provide a full-service solution.
Most financial institutions are built around proprietary systems that provide a lot of control. Let go a little. Financial institutions may not have the best system or database on the market, but they can partner with someone who does. Becoming part of the wider financial services ecosystem is all about fulfilling customer needs, including the expectations of small and medium-sized businesses for a complete digital experience.