Traditional Banks Must Innovate Their B2B Solutions to Stay Competitive

Both the banking and business landscape are being reshaped by next-generation behavioral expectations.

In order to meet these emerging end-user expectations, which tend to center around convenience, security and digital innovation, it has never been more important for financial institutions (FIs) to stand up competitive offerings — particularly for their commercial clients.

And with the news on Tuesday (June 18) that J.P. Morgan has teamed up with Loop to “boost working capital with freight payments,” capturing share within the B2B space by providing innovative, digital payment products that streamline the end-to-end commercial relationship is increasingly top of mind for FIs.

Also on Tuesday, business-focused FinTech Brex launched its own suite of digital banking products. This launch makes Brex the only spend management platform to marry corporate cards, expense management, bill pay, travel booking, treasury and banking into one vertically integrated offering, as the company noted in a statement.

The push by FinTechs into the business banking space should serve as a wakeup call for banks that haven’t already begun to push out their own value-added services to businesses beyond loans, savings and checking accounts, that they need to consider doing so or risk falling behind.

Of course, as banks look to stand up competitive B2B offerings, it is important to remember that against the backdrop of today’s operating environment, innovate or perish has evolved into partner with the wrong solution and suffer the consequences.

Read more: Why Banks Are Starting to Care About MACH Architecture

Understanding B2B Market Needs and Unlocking Digital Benefits

For banks, the B2B space presents a lucrative opportunity. Digital shifts, FinTech partnerships and open banking can all be used to bolster their offerings, provide personalized experiences and transform the branch setting. However, to stand up a competitive B2B offering, FIs must first understand the nuanced needs of their target market. Small and medium-sized businesses (SMBs), large enterprises and specific industry verticals each have unique requirements.

Embracing a firm grasp of what customers want, and how regulatory bodies allow that want to be met, can set apart productive partnerships in a new landscape where diligence informs excellence.

“Banks are starting to realize the speed at which technology has changed the world,” James Butland, vice president of payments and U.K. managing director at Mangopay, told PYMNTS. “The challenge that a traditional bank has is that they sit on 150, 200 years of legacy infrastructure and probably 60 years of legacy technology,” he added. “So, banks have found it difficult to innovate quickly.”

Collaborations and partnerships can significantly accelerate the development and deployment of innovative business banking solutions. By partnering with FinTech companies, banks can leverage technological expertise and innovation. FinTechs bring agility and technology to the table, enabling banks to quickly launch and refine their offerings.

PYMNTS Intelligence in “The FinTech-Bank Relationship Shifts Toward Collaboration” shows that nearly 2 in 3 banks and credit unions surveyed (65%) have entered into at least one FinTech partnership in the past three years, with 76% of banks viewing FinTech partnerships as necessary to meeting customer expectations.

See also: The Cost of Legacy Payments in Light of Innovation’s ROI

Standing Out With Standout Offerings

The flameout of Silicon Valley Bank (and other banks subsequently) last year resulted in a flight to quality whereby businesses took their banking relationships to larger FIs considered too big to fail.

For smaller banks looking to compete with larger peers, providing innovative B2B solutions can be one way to do so while at the same time adding non-commodified commercial value to the banking relationship.

“It’s becoming an imperative to improve the operational efficiency at these legacy banks and be more responsive to client needs and industry trends,” Galileo Head of Product Strategy Michael Haney told PYMNTS.

The marketplace is responding to this new dynamic. As PYMNTS reported, earlier this month Torpago raised $10 million in a Series B funding round to support its white-label commercial credit card and expense management platform designed for banks.

“We’re at an inflection point where bank and credit union leaders are no longer seeing FinTechs as competition, but rather as essential partners to support and modernize their offerings and infrastructure,” Brent Jackson, CEO and founder at Torpago, said in a release.

And PYMNTS recently noted that this assembling of independent financial services with speed and agility is starting to shape a new landscape — that of composable banking.

“When done well, there’s a great opportunity here in terms of making it easier for third parties to connect to the larger financial services ecosystem,” Jim McCarthy, CEO of Thredd, told PYMNTS.

As businesses increasingly turn to digital solutions to manage their finances, it represents a significant opportunity for Fis to expand their B2B offerings and capture a larger share of the market.

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