Bank and FinTech partnerships to deliver better payments solutions
Banking Circle recently published a study, titled: "Better Business Banking, Collaborating for Success". We set up a virtual round table with them to discuss this further with a group of experts and an interactive audience.
Unanimously, everyone agreed that in the world of business banking, and more specifically in cross-border payments, partnership models between FinTech and banks are the future.
Jon Levine rightfully noted after the first poll during the session on October 7, that: "In this audience, we had a little bit more than 50% saying partnerships are critical and another nearly 50%, saying it depends. In our research, we saw that about 70% of C-suite executives of European institutions feel that cross-border payments are important to their institutions and are a core service offering".
These numbers show that partnerships are indeed critical for successful payments business banking propositions. Open banking is one aspect, but in this session we investigated the deeper partnerships.
Now they all agreed these kinds of partnerships are essential, the question is how to make these partnerships successful, and what do banks, FinTech companies and corporate clients want to get out of these partnerships?
We brought together three experts around the virtual table to discuss this:
- Jon Levine, Co-Head Institutional Banking, Banking Circle
- Brigit Carroll, Chair, PayBelgium
- Wim Grosemans, Global Head of Product Management - Payments & Receivables - Cash Management at BNP Paribas
Partnerships to go beyond the limits of a bank
Banks have many reasons to collaborate with FinTech companies. In essence, these reasons all boil down to, as Jon explained: "how do you best deliver your customer proposition in a way that delivers to your customers with a good service, a good price, and keeps everyone happy?"
Brigit observed that, after a first wave of FinTech companies who wanted to disrupt the industry, "now FinTechs and payment companies have emerged and are answering customer problems, maybe in a niche issue or a broader issue." Next to PayBelgium, she also works at Wise, a platform that is currently partnering with 17 banks in 11 different countries to help them with their cross-border payments.
Wim agreed that at BNP Paribas, FinTech partnerships are "absolutely necessary to deliver better customer value. Time-to-market is key today, and it's pretty obvious that this involves very conscious make-or-buy decisions. Is this something I want to build myself? Or does it actually make sense to try to partner with somebody who has already done it and can do it better than us? That can help us to address more quickly a number of customer challenges."
Sometimes this time-to-market is a hurdle for banks to find the right FinTech partners, explained Brigit: "You'll see more FinTechs partnering up with Neobanks or like-minded FinTechs. That's not because they don't want to partner with traditional incumbents, it's just because probably those things in terms of time-to-market don't start going as quickly maybe."
Banks still have a long way to go to achieve the goal to make Wim' job obsolete, one of the reasons being the asymmetry between corporate payments and consumer payments.
Jon: "If you think about a corporate treasurer or anyone who's moving money on behalf of an organisation, they see things generally work in one way. But then, in their personal life, they see Apple Pay or WhatsApp messaging be so easy. There's this disconnect between the corporate world, and it's still pretty difficult. In the consumer world, it's increasingly easy. We have a philosophy that actually in the corporate world that really shouldn't be any more different or any slower than the experience we have in many of the consumer aspects of our lives."
"I'm working to make my job obsolete. In 10 years from now payments should be the most unexciting thing out there because it should be so damn commoditised that you don't have to worry about the payment anymore", explained Wim. “It's all about how we use the payments to add value to the customer and what they're doing."
Luckily our experts see the light on the horizon. Cross-border payments will become increasingly straight-through and instant, at a lower cost. That is essentially what corporates are looking for. Banks understand that it is no longer enough to explain to their customers why processes don't go as expected; they understand that friction needs to be fixed.
Wim: "They're expecting us to help them with their pain points in the order-to-cash and procure-to-pay cycles. It goes much more beyond the payment itself, which brings about a number of other pains that they're looking at."
This is also Banking Circle's job, explained Jon: "We're offering through a single point of connectivity, access to the world, or at least to the 25 currencies we support. We're doing it in a thoughtful way, trying to be friendlier, easier to work with, and pushing things forward. And hopefully, in our way, we enable our customers to also do that for their end customer who would be the originator or the beneficiary of a payment."
Successful partnerships understand the limits and opportunities of regulation
Brigit: "As I'm a policy person, I bring this back a little bit to policy; it also requires the right regulatory framework to make that happen and for banks to feel comfortable to partner with FinTech companies. I think Europe has done a really good job in that context, at least within the payment space with payments, licenses, and things like that."
Wim agreed with her, saying: "The collaboration between banks and FinTech companies shows there is one very basic rule that we as banks we can never betray, and this may sound a bit dull, but I will say nevertheless, which is what customers expect from us is to be trustworthy at every possible minute, second of the day."
Jon added: "Banks are expected to be safe, resilient, protect the customers' money, and everything has to work. A lot of the regulation has been created by policymakers really making a concerted effort to meet a number of societal objectives."
He continued: "Banking Circle is a bank too. The compliance, regulatory and legal work that goes into these partnerships are there for a reason. So we've oriented ourselves towards saying, this stuff is here for a reason, we will do all of it, and do it expeditiously and do it well because the partnership model has to work for both parties."
"Everyone in the ecosystem has a role to play"
We closed the debate by asking ourselves if banks still have a role in the future of cross-border corporate payments. The feedback was also unanimously yes in this discussion. Brigit explained that there might be a future where banks no longer take part in this business, but in reality, we are still far from that future.
Brigit witnessed a lot of FinTech companies on the side, offering value-added services built on top of what banks already provide today. Interestingly, these side services often have fewer regulatory restrictions.
In this reality, the banks provide the account and the regulatory- and compliance-heavy elements, and they partner with FinTech companies for the ultimate customer experience. As banks keep modernising their infrastructures and grasp the opportunities of cloud computing and event-based API services, partnering with third parties is increasingly more convenient.
"Partnerships between banks and FinTech are going to be the name of the game and the banks are going to figure out, and quite frankly, already know, what is their core strength", explained Jon. He saw the industry quickly evolve from building everything themselves, only 5 years ago in many institutions, to increasingly more buying decisions today in the quest for the ultimate customer experience.
By the way, if you are interested in the survey of Banking Circle, have a look at our website and download this 17-page report on better business banking through collaboration.