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Telecommunications, Media & Technology

How Every Company Will Become a Digital Bank

Dave Theran
Dave Theran


Customers have long been asking companies for more affordable payments products and many businesses have started listening. While many people have still spent money during the pandemic, they are seeking efficiencies that digital banking services offer. However, demand for B2C e-commerce and digital payments is only half the story. Not far behind these changes to consumer financial services is a shift in B2B financial services.

The global B2B e-commerce market was nearly $7 trillion in 2020 and is projected to be worth more than $20 trillion by 2027, according to Big tech companies like Amazon, Apple, Facebook, Google and Uber have disrupted the B2C and B2B payments industries to fuel their growth. Uber, for instance, continues to develop its financial products to assist drivers in acquiring vehicles, handling payments and extending credit-card services for paying for gas. Many incumbent financial services companies have felt the heat, with Visa increasing its investment in payments startups by more than 57 percent year-over-year in 2019, according to CB Insights.

The surge in adoption is equally a function of the myriad of suppliers who make digital banking services available and accessible to their business customer bases. Amazon, for example, has issued about $5 billion in loans to small and medium-sized businesses while collecting credit data in the process and enabling automatic monthly principal and interest payments, Marketplace Pulse found. Smaller enterprises also must have a stake in digital payments, as some 42 percent of U.S. B2B small and medium-sized businesses surveyed by have said they’ve seen their online transactions volume increase during the pandemic compared to a year ago. COVID-19 has accelerated the path for businesses to offer some semblance of banking services and payments to not only their end business users but also for their value chain, including vendors, intermediaries and supply chain.

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Business Intelligence Practice

How to Become a Digital Bank

According to Publicis Sapient’s Global Benchmarking study, 36 percent of major financial institutions said new products and services are being prioritized in their organization’s transformation and 17 percent said they have a change-averse workplace culture that’s a barrier to transformation. While many banks are still on their own transformation journeys, businesses should learn from what banks are doing to keep pace. In the next five years, digital banks will allow users or intermediaries to initiate and settle, borrow, pay, save or spend actions for their money through mobile phones or tablets without needing to visit a branch. Banks will integrate all of a customer’s financials in one place with simple, intuitive experiences and design. All companies need to consider this trajectory and plan to offer some semblance of digital banking and payments capability, whether they plan to transform its finance department or enable digital payments for business customers. Some businesses have already deployed methods like service design to drive best-in-class experiences leveraging data to automate out-bound and in-bound payment and banking transactions.

When getting started, it’s inefficient to tackle single pain-points like digitizing paper invoices or enabling the acceptance of business credit cards. Companies should take a holistic approach to enabling digital banking and payments to anticipate all of their users’ needs to maximize ROI.

Start by understanding the company’s spending and payment ecosystem.

For small businesses, (revenues less than $10 million), perhaps their needs are simpler than larger, commercial businesses (revenues greater than $10 million).

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Small businesses likely have basic use cases for payment and banking.

Their needs could be satisfied with services like Square, Stripe, PayPal or any other software-as-a-service payment company.

Conduct an exhaustive review of users’ needs and pain points.

Larger commercial enterprises need a comprehensive understanding of the intermediaries, banks and other vendors they need to pay and where they pay them. Spend some time to think through if there is an incremental opportunity to further drive increases in revenue or cost-reduction by possibly deploying this potential solution.

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Consider your strategic intention.

Is it to reduce payment fraud risk or accept payments faster? Or perhaps it’s to make some incremental money in the time between when a transaction was initiated and closed? Whatever your intention is, capture objectives and key results and size the business case.

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Engineering Transformation

Value Chain Partners

When the pandemic hit, CFOs, financial executives and controllers who oversee payables and/or receivables could no longer be in the office to manage what is considered to be a fairly manual, paper-based, systems-driven process. When a company is operating with several enterprise resource planning softwares, hundreds of suppliers, several banking relationships and large in-house finance staff, a paper-based workflow is neither sustainable nor efficient. It is ripe with opportunities for fraud, human handling error and financial risks. Organizations’ engineering and IT teams can increase their agility and efficiency by cutting waste, selecting the right technologies like cloud enhancements, automating tracking and visualization of key performance indicators and understanding the costs and benefits of transformation work.

As commerce becomes rapidly digital, any company that has a finance department – which is most companies -- will need to digitize its basic payment, spending and investing capabilities. And in most cases, their counter-parties, or the payee and payer, will come to expect that they get their receipts in time. Aside from convenience, there are clear benefits in obtaining greater agility in the management of financial data. It not only provides a clearer and daily picture of how organizations manage their financial assets, including their liquidities, but also helps to manage and mitigate financial risk.

End Users

In the United States, which has the world’s largest contactless credit card market with 175 million cards, consumer digital payments like credit, debit and contactless payments such as Apple Pay have increased 150 percent since 2019, according to Visa. Much of that growth has been driven by COVID-19, and B2B companies also are not exempt from this growth. In 2020, there was a whopping 40 percent increase year-over-year in business consumer spending, paying, and borrowing digitally. This trend will continue after the pandemic ends, as the global B2B e-commerce is projected to be worth more than $20 trillion by 2027, according to Amazon and Staples are just two examples of companies adopting consumer-based marketing techniques to nudge their business customers for their next order or sending alerts to remind them to make digital payments. Some businesses are doing this by introducing hybrid cloud-based payment gateways or services that authorize credit card or direct payments processing for e-commerce and brick and mortar transactions, and platforms to drive real-time funding and fulfillment.

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Mapping a Payments Vision

As more companies with significant payments volume move into adjacent industries and offer embedded solutions, there are huge opportunities to re-examine strategies and create new value from these transactions. Within the next five years, organizations that operate on the B2B side that handle payments of any type will need to embrace payments solutions to maintain their relevancy in the marketplace and compete. Millennials, considered digital natives, represent the largest percentage of the U.S. workforce, for example, and account for 73 percent of people involved in business purchasing decisions, according to Forrester. Salesforce also found nearly 70 percent of business buyers expect an “Amazon-like” buying experience from their vendors. It’s time for businesses to catch up as digital payments, and distributed working environments which digital helps enable, become more popular in the coming years.

The Brave Pursuit with Jim McKelvey
Dave Theran
Dave Theran
Client Partner, North America Payments Tech Lead

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