Like every other technology related industry, the FinTech sector is growing and changing at an incredible rate. It is not news that banks are struggling to keep up with more agile competitors, but they are not the only ones who are missing out. Every business who is involved in flow of funds and not engaged with a FinTech partner is also missing significant opportunities to cut costs, add new revenue streams and increase their operational speed.
What are they missing, and how can they recover?
The biggest opportunities provided by B2B payments are in the form of savings created by reduced transaction costs, and increased efficiency. FinTech platforms can transfer funds within seconds – even across international borders. Despite this, many organizations continue to have stuck with their incumbent banks, and the inefficiencies inherent within their systems. Maintaining the status quo is not reducing their operating costs and seriously affecting their profitability. Those organizations that don’t step towards agility and fluidity risk being left behind – their agile competitors able to scale quickly will continue to grow rapidly.
Organizations invoking agile business processes, or digital transformation programmes, need platforms that allow them to change strategy and direction quickly and efficiently. The speed at which they operate is crucial in boosting profit margins and raising the standard of service they can offer to their customers. Most domestic payments providers have managed to upgrade their systems to enable B2B transfers and payments to complete within a day – many within a matter of hours. Once businesses begin to trade internationally however, the story changes completely. Although banks are working towards clearing international payments within 3 days, waits of between 7 and 28 days are not unusual – particularly if payment is made by cheque. Choosing to stick with their existing bank and payment service providers limits their options and efficiency – even if it is just a small part of the overall customer experience.
Aside from the general inefficiency of traditional inter-bank transfers, they also tend to be relatively expensive. Favouring high value, low-volume transactions, incumbent banks can levy a healthy percentage fee for each (sometimes 3% or more) – often far higher than the same payment would cost when sent via a modern Payment Platform. Where businesses are paying more than they need for critical processes, they are effectively burning their cash reserves. Being that the overriding goal of any business is to generate healthy profits, failing to take advantage of more cost-effective payment processing options means that they are always going to realize full profit potential. Obviously this is unlikely to be a deliberate decision, but time-poor decision makers lack the necessary resources to evaluate newer alternatives effectively. As a result, most maintain the status quo and factor the additional costs into their budget.
This need to protect margins by increasing costs may satisfy shareholders and investors for a while, but it also limits the longer term growth of the business. International expansion may be delayed unnecessarily simply because the additional price hike is uncompetitive in the global market. If a B2B customer can choose a cheaper product from inside their domestic market, why would they buy from a more expensive foreign provider? Faster payments will also help businesses better manage their cashflow, ensuring their money is in their account, not being held by providers for days during “clearing”. Greater control over cashflow provides financial enablement for more agile operations, allowing businesses to respond more effectively to capitalize on new opportunities and challenges. The issue is not purely related to cost though. Consumers have become accustomed to on-demand services and real-time payment – and they are taking those expectations into the workplace. Two thirds of businesses claim that given the chance to switch to a payment provider offering faster transactions, they would make the change immediately. This opportunity does exist, but once again a lack of time and resources to evaluate providers means that they are missed.
Most B2B organizations do not prioritize payment services, often resulting in antiquated manual processes with multiple systems, especially when having to exchange between currencies as part of the equation. So long as money continues to flow, delays and fees are often considered an acceptable cost of doing business. The fact that there are systems available offering speed and cost improvements means that these companies are missing opportunities to improve their offerings – to their customers and their stakeholders.
Time will always be the most valuable resource for any organization, regardless of size. However, investing some time in evaluating and identifying FinTech alternatives will safeguard against future losses through better value offerings and improved efficiency. But it does mean that the modern business will need to shift its priorities, or risk being left behind by their more agile, better-connect competitors. The good news is that these opportunities may have been missed up to this point, but there is still time to catch up.