Banks play catch-up in fintech for small-business clients

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The digital divide between business and retail customers is starting to disappear.

Mastercard on Monday announced a partnership with the fintech firm Strands to provide issuing banks with digital cash management and commercial payment tools specifically designed for their small-to-midsize business customers.

It is the latest partnership by a bank to develop more robust digital services for commercial clients, which for some time have complained they were being overlooked as banking gadgetry for consumers proliferated. Last week, Bank of America Merrill Lynch announced several upgrades to its CashPro mobile app for corporate customers. Other banks, such as KeyCorp, Wells Fargo and JPMorgan Chase, have all made investments in in various aspects of commercial payments over the past year.

“When you talk about the top 100 banks, they’re increasingly dedicating groups internally to look at the fintech space for partners in this area,” said Christine Barry, research director with Aite Group. “And from smaller banks, there’s starting to be more pressure on their core providers" to offer more digital services for business clients.

The partnership sees the Strands Business Financial Management digital platform leverage Mastercard’s digital payment technology on a platform designed to help businesses to better understand their finances, project their short-term cash flow and see personalized recommendations for customized solutions.

Both companies’ banking clients will be able to offer the platform, according to Strands.

“We think for banks there’s a great opportunity right now to better provide for their corporate customers,” said Strands CEO Erick Brieva. “Instead of just being a money mover, the bank can become a partner and money manager” by offering these types of digital services.

Strands, which is based in Barcelona, Spain, has been making inroads in partnerships with U.S. financial institutions. Last September, it landed its first partnership with a U.S. Bank when it began working with the $100 billion-asset Huntington Bancshares in Columbus, Ohio.

The new platform from Strands and Mastercard is designed help businesses manage accounts payable, receivables, budgets and provisions, and is powered by a layer of AI and machine-learning models. Brieva said the service will help banks retain small-business clients, which are a notoriously fickle bunch.

“We expect this kind of solution to be a high value-added service banks can offer to their customers,” he added. “It can make [business customers] become more and more loyal, and look at the bank as a place not just to come when they need a loan, but as a true partner.

"Small-to-medium businesses are the backbone of the global economy and represent one of the biggest potential sources of revenue for banks; yet they are typically offered banking solutions designed with the retail customer in mind.”

The increased focus in this area is an acknowledgment that the industry “has not really been offering these types of tools to small and medium-size business customers,” Barry said.

Small businesses are looking for more help from their banks in managing money, Barry noted. She pointed out that in an Aite Group survey of 1,000 small businesses, 61% said it was “challenging” or “extremely challenging” to manage funds, and 40% responded the same when asked how difficult it is to collect money owed to them.

Offering digital tools to help in these areas “will definitely help with client retention, it’s a sticky product,” Barry said. “More importantly it can better help the bank understand their customers’ financial situation and better enable them to cross-sell different products.”

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Digital banking Commercial banking Small business Digital payments Payment processing B-to-B payments Apps Mastercard