Why SocGen’s B2B Marketplaces Strategy Needed FinTech

Online business-to-business (B2B) marketplaces are fast growing in popularity, helping to accelerate digital payment innovation in the business space. According to a research study by McKinsey, global sales generated via these platforms are expected to quadruple from $1 trillion to $4 trillion between 2020 and 2025, accounting for 60% of online sales by 2023.

This creates a ripe opportunity for financial institutions (FIs) to unlock huge gains in the fast-growing space by helping corporate clients manage payments with greater insight and efficiency, says Alexandre Maymat, head of global transaction and payment services at Société Générale.

“Today, only 15% of the CAC 40 companies [largest companies by market capitalization on the Paris Stock Exchange] have a B2B marketplace. But this number is fast growing and it’s very important that Société Générale, known as an innovative bank for corporate clients, is fully part of this evolution,” Maymat, told PYMNTS in an interview.

Against that backdrop, the Paris-based European banking giant recently teamed with payments firm Lemonway to help European companies launch B2B marketplaces, while assisting them in improving the online payment experience for their customers as well as enhancing the distribution processes of the eCommerce supply chain.

According to Maymat, the partnership with the French FinTech firm also points to a change in mindset at Société Générale around new services offered to clients, which historically has seen most banks rely solely on internal systems to develop.

That is changing now, however, noted Maymat, who said that the time has come for banks to embrace FinTech partnerships which are not only necessary but critical to better meet the evolving needs of clients. “[FinTechs] have expertise that will take a lot of time for banks to gain, they are more agile and have developed a better service that has a better time to market,” he argued.

And while it can be challenging for incumbents operating in a highly regulated environment to work with startups subject to fewer compliance and disclosure requirements, Maymat said the shift in culture to more collaborations is more important than ever.

“We have to be less arrogant, more proactive in listening to the market and responding to the new client needs and be humble enough to accept that sometimes companies that are smaller than us can do the job better than us,” he remarked.

Improving X-Border Payment Flows

When it comes to ISO 20022, Maymat said the new international messaging standard, which all global banking and financial service actors will have to adopt by 2025, is not only one of the most important developments in the payment space in the last decade but holds great promise for transforming international payments.

It’s the reason why he urged banks to convince European clients, particularly corporate clients, who until this year haven’t had the transition to ISO 20022 message format at the forefront of their priorities, to get on board.

“It will dramatically reduce the friction in the flows of the cross-border payments and messages, reduce transfer cost and improve the control of payments, in particular regarding compliance issues,” he said.

Tackling the compliance issue is particularly key, especially in a fragmented region like Europe, where each country chooses its own interpretation and application of European Central Bank rules. This decentralized approach has contributed to the rapid surge in the cost of compliance in recent years, he added.

It is all the more reason why Maymat said migrating to ISO 20022 standards — the global rollout has been hit with some delays — is a critical first step in moving the needle as “it will impose on each and every actor in the payment chain to share the same information.”

Driving Sustainable Business Growth

In the last year, the European Central Bank — like the Federal Reserve Bank in the U.S. — has embarked on a series of rapid interest rate increases to tackle skyrocketing inflation in the last year, extending the squeeze on consumer and business spending due to the resulting increase in borrowing costs.

But the banking industry has been largely spared, Maymat said, adding that it is one of the sectors greatly benefiting from the trend as profit margins expand with interest rate hikes. “At the end of the day, most of our revenues depend on the amount of flows we are managing and deposits on our bank balance sheet. And in that regard, [rising interest rates] is a good thing for us,” explained Maymat.

That said, he pointed out that FIs have a huge challenge to tackle as liquidity is less abundant than before, which has created a “fight for deposits in the banking industry.” Overcoming this challenge will be critical moving forward, he added, not only to secure client deposits but to be able to finance its lending activity without jeopardizing business profitability along the way.

Overall, however, the global environment remains very favorable for global transaction banking and payment businesses as a whole, Maymat noted, adding that banks will need to continue investing in the solutions of the future to fully benefit from it.

This includes improving the digital experience for clients, better leveraging data and new technologies and developing a business that is better contributing to sustainable economic growth — a strategy that Société Générale is championing through its Corporate Social Responsibility (CSR) ambition.

“If we are not able, all together, to develop a banking industry that will better preserve the earth, better contribute to growth within our societies and between different regions, we may face enormous difficulties in the future,” he said, “and we as banks have an enormous power to [drive that change].”

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