Consumers typically get to enjoy cool new banking technology first, followed by commercial customers.
But businesses – especially small to midsize ones – are losing patience with this traditional pecking order and increasingly bolting to high-tech nonbanks in response.
While a lot of the talk of the next wave of fintech are usually referred to in the context of consumer banking, banks also need to think about delivering these services to small and midsize business customers, or run the risk of losing them. Delivering tech innovation to these businesses – typically defined as firms that employ less than 1,000 people – represent a big opportunity for banks, said William Sullivan, head of global financial services market intelligence at Capgemini. Or a big risk if they are unable to give the customers what they want.
"From a business customer's standpoint, with the slowdown in the global economy, firms are starting to increasingly focus on leveraging technology to improve their operational efficiencies," Sullivan said. As a result, they "are looking to their banks to be partners in their initiatives by providing them with innovative tools and services."
Accordingly, a few banks have started offering small-business customers things like application programming interfaces for receivables and payables that are designed for enhanced monitoring, automated reporting and better management control, Sullivan said. There is still a long ways to go, though.
"The adoption level of APIs by business customers is in its infancy and as the scope of service offerings increases we can expect proliferating of API-based banking for business customers in the next three years," Sullivan said.
One firm U.S. banks and fintech companies could take heed of in this regard is the digital startup Penta Bank. The German company is specifically targeting business customers as it sets out to fix the currently "broken" system of business banking, said its chief executive, Luka Ivicev. Penta expects to begin beta testing its concept in the fall through partnerships with an existing digital bank as a white-label service, Ivicev said. It currently has 100 businesses signed up as subscribers so far. (It is also considering if it should seek a banking license of its own.)
Ivicev said the digital-only platform will give customers an "easy and intuitive" dashboard of all their financials. Additionally, it will use APIs so customers can connect with products and services offered by other partners.
"We will be offering things business customers want, but don't currently get," Ivicev said. "For example, we use smart algorithms to predict their cash flow, and offer relevant product based on that. We're also going to create reports on trends in their respective industries."
These types of services are indeed something small businesses are clamoring for. According to a survey by Javelin Strategy & Research earlier this year, 56% of owners of small to midsize businesses indicated they would value an online service that would provide a consolidated view of company finances and enable them to invoice customers, monitor payments, manage cash flow, pay suppliers, process payroll and offer tax help.
Such companies "want greater insight into their financial overview and insights into their spending," said Ian Benton, a retail payments and small-business banking analyst at Javelin. "And they're looking for contextual, advice-driven services."
Penta is also aiming to drastically reduce the lengthy process of onboarding for businesses using proprietary algorithms, Ivicev said.
"It usually takes four weeks to onboard, but we are going to get that down to within minutes," he said.
Sullivan said he expects to see more firms like Penta arise to satisfy business customers' increasing appetite for tech innovation.
"This is a largely untapped and underserved market with some big potential," he said.