You’ll find a version of this article and additional insights on growing deposits and attracting customers in the BAI Executive Report: Strategies for customer growth, deposits and retention.
No financial institution is completely self-contained, self-supporting and self-sufficient. Not the smallest neighborhood credit union or the largest banking conglomerate; not the oldest bank or the most recent fintech.
Financial institutions need strategic connections with technology providers if they are to meet the rapidly changing needs of their business customers. This is not a reality to be deplored, but an opportunity to be embraced. Many financial institutions, however, have not sought out the technology partnerships that could expand their offerings and services.
This is painfully evident in market research statistics; for example, a recent Aite-Novarica report stated that only 23% of businesses believe their financial institutions fully meet their cash/treasury management or payment capability needs. Why do more than three-quarters of financial institutions fail in this regard in the eyes of their customers? Clearly, these needs could be met, since 23% of businesses are fully satisfied. They are simply not being met.
As a bank or financial institution, the last thing you want is for your customers or prospects to judge that you do not have the leading-edge capabilities they need—and worse, leave you for another banking relationship. You can prevent that unwelcome outcome by partnering with technology providers in four ways to secure the all-important primary relationship with your valuable business customers.
- ENSURE FRICTIONLESS DIGITAL EXPERIENCES: Your customers—whether small businesses, mid-sized companies or commercial/corporate entities—expect a frictionless digital experience, similar to those of consumer offerings. That digital experience, however, will differ in form and function depending on the customer’s profile and requirements.
For example, small business customers can be overwhelmed with the complexity of a commercial platform. These customers need simple and intuitive user experiences that fulfill their payment needs and integrate with their accounting package so they can easily run their businesses. The right technology partner can help you provide this streamlined user experience.
On the opposite end of the spectrum, commercial and corporate customers typically have multiple banking relationships and require a clear view of their cash positions across these relationships. The best technology providers are closing these gaps by partnering with one another and leveraging APIs to extend their offerings, such as with payment hubs and ERP integrations.
- IDENTIFY AND OPTIMIZE NEW REVENUE OPPORTUNITIES: Up until very recently banks relied on monetizing data to produce that ancillary revenue, and that trend will continue.
But generating revenue from payments will be the strategy that wins primary relationships. A 2023 report from The New York Federal Reserve found that revenue from payment services brings in from one-third to two-fifths of the combined operating revenue of the 25 largest bank holding companies. “This contribution to revenue is considerably larger than commonly appreciated and indicates that the production and distribution of payment services is one of the core activities of commercial banks,” the report states. “The greater-than-expected importance of payment services has several implications for the identification and measurement of the banking sector’s output and for theories of the fundamental nature of commercial banking.”
One strategy is to partner with a digital banking provider that is creating new revenue streams for its commercial banks by better monetizing ACH payments. By fully integrating with a B2B payments network to enable the clearing of a portion of the ACH payments volume via that network, a revenue share similar to card interchange fee models is realized. Banks then can retain some of that revenue. They can also choose to pass along a share of that revenue to their business customers who are making the payments. This process creates a rebate incentive with those customers, which encourages them to consolidate more services and payments through their primary bank. This model reinforces your position at the center of the banking relationship with the business customer.
- PURSUE TIGHTER FINTECH INTEGRATIONS: The Aite-Novarica report calls for tighter, broader integration with fintechs. Such integration can serve as a competitive differentiator because it facilitates the creation of new value propositions and enables banks to leverage innovative offerings. To be maximally effective, it is critical to achieve deeply curated integration at the UI level, ensuring a frictionless digital experience. APIs, of course, play the central role with such integration. Through APIs, your bank can collaborate with fintechs to offer their innovative services to your customers. Your customers benefit from access to a comprehensive portfolio of financial solutions, the fintechs benefit from expanding their revenue and you benefit from remaining the single face for your customers. Possible competition with fintechs is replaced with mutual collaboration for a triple win.
- LEVERAGE A DEEP PAYMENTS ECOSYSTEM: If you want the best in digital banking, look for a technology partner who can give you more than a point solution or expertise in a single area. Look instead for a partner who is creating an ever-deepening payments ecosystem for the banks and financial institutions they serve. Such an ecosystem involves:
» Providing a unique combination of assets
» Creating compelling new value propositions for banks to better serve customers
» Increasing visibility into holistic cash positions across banking relationships
» Innovating or improving payment monetization opportunities
A deep payments ecosystem will position your bank to win the battle for primary relationship ownership and accelerate growth.
Partner for the best in digital banking
No longer can banks rely solely on traditional metrics or age-old rapport-building tactics to gain and maintain primary banking relationships. Changing customer demands mean that banks and financial institutions must bring profound innovation, frictionless digital experiences and a full payments ecosystem to the table.
With the right technology partners, your institution can not only rise to the challenge of these constantly evolving customer needs, but actually embrace change as it comes. Don’t become a negative statistic in a market analyst’s report. Establish the technology partnerships today that you need to secure your—and your business customers’—financial future.
Rita Hubner is Vice President, Solutions Consulting at Bottomline.