The seed of FinTech innovation often comes from a desire to do things differently. In B2B payments, that can mean discontent in the way traditional banks and FIs do business or a need for disruptive technologies to come to market faster than banks can offer.
But as finance and payments tech expands, these traditional FIs are learning that perhaps the best way to meet the demands of their corporate clients isn’t to compete with FinTech innovators but to collaborate with them. It’s the reasoning behind Capital One’s latest round of partnerships announced late last month.
Deals were made with B2B invoicing and payments firm Viewpost, as well as health care blockchain company Gem and natural language search technology company ClearGraph.
Patrick Moore, executive vice president and head of Capital One‘s Treasury Management Product Management group, told PYMNTS that these collaborations offer the ability to integrate niche FinTech capabilities into Capital One’s broader range of services. For any new FinTech company, securing a deal with a financial giant is good news. But, as Moore explained, these types of collaborations are critical to the banks, too.
“I personally think they are absolutely critical, especially from the bank/financial institution perspective,” he stated. “It’s a great opportunity for us to parlay a very niche capability into the much broader set of capabilities we bring.”
These partnerships, he continued, enable financial institutions to make new use of existing technologies and payment rails and leverage them in a way that brings progress to the B2B payments and FinTech industry.
Take Capital One’s deal with Gem, for instance. Gem uses Ethereum distributed ledger technology to streamline the health care claims process and help health care providers manage their cash and get paid.
For Capital One, which acquired the health care lending operations of GE last year, it’s not just about using a disruptive technology like blockchain to bring new treasury management solutions to its health care clients — though, of course, that is a major part of the deal. Moore explained that this also presents a window for financial institutions like Capital One to enter into the blockchain space altogether.
“By developing and leveraging blockchain to more seamlessly exchange information and streamline processes, not only does it accelerate the reconciliation and settlement of claims, but it will also hopefully increase the collection of outstanding payments by the provider,” he said, explaining how blockchain could boost health care’s cash management efforts. But this use case can easily be applied to other industries, too.
“I think it’s a perfect example of an opportunity to take friction out of the system,” he continued. “I think that blockchain is ripe for disrupting any exchange of paper or information that makes it more seamless, more timely and eliminates the risk of the exchange of data.”
He cited other use cases, like letters of credit, that demand accurate and timely exchanges of data, a part of B2B trade that could see similarly positive disruption by blockchain.
Regardless of the technology at play, collaborating with niche FinTech firms can allow FIs to provide corporate clients with new solutions that are all geared towards reducing friction in their daily processes, Moore explained. They can also help to overcome the challenges that some corporates face when exploring new technologies.
“Historically, we have seen pushback when a new solution becomes so costly or time-consuming to implement that it becomes a drawback and not a benefit,” the executive noted, adding that it is equally important to note the level of difficulty of deploying a solution from a FinTech provider as it is to understand the tool that FinTech provider offers when picking new partners. Because even if a solution can streamline cash flow management or automate financial data management, if that tool takes months and loads of resources to deploy, it may not be worth it.
“It’s important for us to think about how we can make this an easy implementation that doesn’t create incredible demand on clients’ time, or require clients to secure additional IT resources,” stated Moore. “We’re leveraging technology to really try and make that as simple and as easy to implement as possible.”