B2B Payments

Uncovering The Value Proposition In FinTech Innovation

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Just because businesses are interested and willing to adopt payments innovations doesn’t mean it’s going to happen. Other key players in the adoption curve include government entities and financial institutions, says Bottomline Technologies Managing Director of Digital Banking Norm DeLuca.

Governments and banks have a lot to do with developing an ecosystem that supports adoption of payments technologies for both consumers and corporates, and DeLuca sees some stark differences between the U.K. and U.S. markets that could be slowing down the digitization of electronic B2B payments.

“The adoption curve, especially in the U.S., is definitely a curiosity,” the executive said of digital payments tools gaining traction within the enterprise. “We do a lot of business in the U.K. and other markets, and it’s entirely different; they’ve gone much faster towards faster payments and towards ePayments, and it’s been spurred directly by government action.”

Bottomline processes a “substantial amount” of the payments going through the U.K.’s Bacs and Faster Payments systems, for example.

Meanwhile, DeLuca said, financial institutions may only now just be beginning to realize that they can’t depend on their ownership of the payment rails and infrastructure to keep business customers loyal.

“In general, the big banks are increasingly aware of the threats to their payments franchise by a lot of other innovative companies in the marketplace and the opportunity to leverage their payments franchise better by investing more in innovation,” he said.

DeLuca pointed to what he called the “classic example” of PayPal, a company that took banks’ existing infrastructure and captured the benefits of it in ways the banks hadn’t been able to yet.

“Banks had become complacent about their ownership of the payment rails,” he said. “They really hadn’t been very innovative around that franchise for a long time.”

Historically, he continued, banks have taken to focusing too narrowly on the back end of payments — the plumbing and mechanics, as DeLuca described it — rather than the front-end, end-user experience. But businesses today are demanding a different experience from their banks, which is driving these FIs to look a bit more closely at innovation.

“We’re seeing a lot more interest and investment in payments technologies [by the banks],” DeLuca explained, “but increasingly in a new and different way than the old way of thinking about payments.”

Value Propositions

On top of misdirected focuses, banks have also typically failed to see the value proposition in investing in corporate payments technology. That’s where Bottomline wants to help, said DeLuca.

“You need to be able to make the bank more money, reduce friction, save time, and there needs to be a lot of really compelling value propositions around it. And I don’t think banks have done a great job of focusing on what is the value and creating that value,” he explained.

For FIs, these technologies need to be about faster payments, less friction, a higher return on investment and a deeper relationship with clients and partners if a bank is to be convinced that it needs to help propel payments innovations for its business customers.

Of course, the actual end user — the business — plays perhaps the biggest role in determining whether a market like the U.S. or U.K. will ultimately see widespread adoption of some kind of payments technology.

The biggest value propositions for companies, so far, among these tools, have been faster payments, a better banking experience, a deeper insight into business health via data analytics and payments security.

But, especially for smaller businesses, DeLuca said it can still be difficult to get companies to understand why they should change their payments infrastructure and processes, especially if what they’re working with hasn’t failed them.

“The check-based system, it sort of works,” DeLuca said, adding that many SMBs hold an “if it ain’t broke, don’t fix it” mentality about their accounts payable and receivable operations.

“But I think what’s starting to change and what we’re trying to help accelerate the change in is what is the underlying value proposition to the payer and the payee to change something that’s really burned into their business process,” the executive continued. “There really has to be a strong reason to change.”

One of the largest points of friction, so far — again, especially for smaller organizations — is that, even as companies adopt these financial technologies, the tools end up creating more friction, as a business has to use several different platforms for eInvoicing, accounts payable, online banking and the like, and none of them are connected with each other.

This problem is what Bottomline has been focusing on, what it calls “unified corporate payments,” for 2016 and beyond, DeLuca said.

“We have a wide range of payment solutions, and what we’ve been investing a lot in is integrating those solutions and making them work together more seamlessly and effectively,” he said.

And this has a value proposition for everyone, he said. It allows banks to encourage business clients to consolidate all of their solutions under one FI, making the bank a company’s primary solutions provider. SMBs, of course, will benefit from a way to end the fragmentation among payments and FinTech tools emerging in today’s market, DeLuca added, noting that the company’s own research has suggested that the lack of a unified view of the payments environment is SMEs’ number one pain point.

With this goal in mind for the spring and summer of this year, Bottomline will be working to uncover the value proposition of payments technologies for all parties — buyers, suppliers and FIs. It just may not happen along the same path, depending on the market, DeLuca said.

“We’ll be beginning to offer our bank clients enhancements to allow them to offer real-time payments and to evolve towards faster payments,” he said. “We think it’s inevitable here, and that’s the direction it’s going, but it’s at a different place than in some other markets.”

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