With the rise in alternative financial service providers, big banks have faced a younger breed of competition. But analysts agree that the big banks probably aren’t going away, and that realization strengthens as traditional FIs team up with their alt-fin peers.
Among the most poignant examples of this trend is the increasing collaboration between alternative and marketplace lenders and traditional banks.
Some may argue that FIs have realized it’s better to work with the competition, not against it, but according to Max Eliscu, CEO of business financial network Viewpost, the largest old-timers in the financial services world have always been inking deals with the innovators.
This isn’t Viewpost’s first partnership with a financial institution, though it is the first to see the firm’s SME services integrated directly into the bank’s platform.
Eliscu said it’s a misconception that such partnerships are a novel concept.
“There’s a bit of a misnomer that exists in the marketplace that banks have always been in a place where they operate independent of everyone else,” he said. “That’s not the case.”
Rather, it’s more accurate that banks have traditionally worked out which financial services and products they should develop on their own and which tools they should strategically offer to clients via a third party.
What is new, Eliscu said, is the way that banks discover what their corporate clients need. Data is critical both to that process and for the business clients themselves to also understand what they need, the CEO added.
“It’s very hard for business owners themselves to understand what their financial needs are,” he stated. “If you think about working capital, ultimately, it’s a function of what you’re going to collect and what you owe. Most businesses, including big ones, have no idea what they’re going to collect; they don’t know when they’re going to be paid.”
When data on B2B transactions isn’t available, this transparency issue worsens, he said. But the information beneath B2B transactions — across payments, the documents associated with transitions and the companies involved in these deals — can help business owners manage cash flow, as well as help their financial service providers understand what their clients need.
With Viewpost positioned with Bank of America to ease some of that friction even further for SMEs, Eliscu pointed to other ways data can lead to progress and ease in B2B transactions.
For instance, data is critical to mitigate supplier risk in ways already seen in the business-to-consumer space.
Yelp enables consumers to know what they should expect from their service provider, while eBay is doing the same between buyers and sellers online, the executive said.
“We see something valuable here in the B2B space in different ways,” he explained. “Not just looking at the dependency on a vendor but in finding vendors and customers and knowing in advance what it’s going to be like doing business with someone. You can take that into account in advance of there being an issue.”
The ability to access data was one of the key motivations behind Viewpost’s deal with Bank of America, Eliscu said. Not only does it enable business clients to access Viewpost’s services more easily, but information between both accounts can also flow, reducing friction between businesses, their suppliers and their financial service providers.
“The friction we see that we help eliminate in B2B commerce is very real,” Eliscu said.