Contextual Banking Awaits Its Star Turn

As treasury management becomes increasingly digital, a bank’s corporate banking clients face challenges when it comes to modernizing treasury workflows.

Ideally, they need to change existing ecosystems without giving rise to a major IT project.

To that end, as Lisa Shields, CEO of FISPAN, told Karen Webster, contextual business banking, with service embedded within enterprise resource planning (ERP) and business banking, is ready to take off.

Embedding banking into ERP systems has been a hot topic as of late — although the buzz surrounding it has been years in the making.

And, according to Shields, “we’re still in the really early days of the buzz curve, quite frankly.”

The shift toward contextual banking has a tailwind in place as the financial institutions (FIs) that have been market leaders have been seeing strong deposit growth — and as corporate customers are growing those balances, they want to be able to see their account activity and cash balances visible within the same application on demand.

“They can’t wait for end-of-month, or even end-of-week, reconciliation anymore,” she told Webster — and so corporates are pushing their banks to do something different.

The vast majority of treasury organizations want simple, tech-driven solutions that don’t require them to go out and make use of new products. And a simple approach, said Shields, involves a clickable app that provides the benefits of automation and integration with service providers.

FISPAN’s “sweet spot,” she said, sits with the small to medium-sized firm that is logging international growth and has outgrown small business banking services, accounting and ERP offerings.

These corporates need to migrate off a small business banking system into a cloud-based ERP. As they need to move into more robust back-end services, said Shields, these expanding companies take a more granular look at their treasury and payment services — and banks must have a strong payments and cash management integration with ERP.

Many-To-Many Markets 

Thus far, the markets are “many to many,” as Shields put it. Any ERP or accounting systems player will want to service the broadest swath of corporates possible. And FIs want to service as many of their customers as possible with integrated, embedded solutions, regardless of the ERP or accounting system the corporate client uses. The accounting system and ERP providers (with app and API ecosystems in place) are, in turn, coming to the banks and offering specs to provide data feeds that enable instant reconciliation and application services for end users.

The banks don’t want to have to work with and integrate with dozens of players — and so they are turning to platforms such as FISPAN’s to act as a bridge and ultimately connect FIs to enterprises.

“FISPAN sees an opportunity for banks to not only automate and improve that data exchange, but to actually have an extension of their treasury apps and user experience inside the ERP,” Shields told Webster. Banking services offered through treasury portals also make it more cost-effective for banks to serve their corporate clients — though for right now, garnering more (and deeper) business relationships is more of a driver than cost savings.

In terms of mechanics, the customer and the accounts payable (AP) team can work completely within their ERP, but the bank’s treasury portal is still there — both as a backup channel for anything done manually and for the oversight and secondary approval. So, Shields sees embedded treasury services delivery as an augmentation of the online channel and the API channel, but not as a replacement (it does, however, replace direct API channels, host-to-host infrastructure and file exchange).

Here And Now — And What’s To Come 

For now, the FIs delivering more services through ERP banking are gaining a competitive advantage as they gain share of wallet against other traditional FIs and also tech upstarts, including FinTechs.

“We’ve seen massive success in accounts payable in the last year,” Shields noted, adding that “as soon as ERP banking is adopted, we see the contraction of paper-based payment methods — between 30 and 50 percent contraction — and a  significant increase in the banks’ overall volume of transactions and deposits.”

Looking ahead, the company is focusing on bringing more banks into the ERP banking fold. Shields said that possibly in the back half of next year, FISPAN will look to augment its core capabilities with new payment rails that will enable banks to help enterprise customers digitize all accounts and day-to-day activities.

For banks and B2B, she said, “the holy grail is moving that invoice end to end from supplier to customer and back, and automating not just the financial part of the transaction on behalf of customers, but that end-to-end customer flow, too.”