B2B banking. Who will give agility to the big players?

Open banking, sure-footed competition and the need to create new services. These were the challenges faced by Fintech Connect 2019 participants in London. Will the banks be able to take advantage of the opportunity created by the undeveloped B2B settlement? Will they monetize the available resources?

Traditional banking has to face either fear or some anxiety. Stable, secure, but overwhelmed with their weight and regulatory requirements, banks are not able to keep pace with agile fintech companies, and many times must step aside. Which bank would be able to rewrite its entire payment processing platform three times in five years – exactly like it did AliPayments, achieving 1 million transactions per second? Maybe, instead of racing with fintech, banks should do something else.

2 main trends in banking

During the last Fintech Connect London conference (3-4 December 2019), I observed two main development directions in banking. The first one is B2B payments, the second – activation of collected data in a way they can start working for the bank. Banks in the UK consider themselves to be the most advanced in Europe, but they are still just scratching the surface of data science and B2B payments. Even though large entities create departments of innovation and cooperation with fintech companies, there is no security that popular now, financial start-ups will want to cooperate with them.

Although B2C payments are already mostly available in real-time, regardless of the location of the recipient, and have quite reasonable margins, settlements between companies or institutions are still a long process. In my opinion, this is a new line of cooperation, and at the same time rivalry between banks and fintech companies: who is going to be first and who will do it better. We will observe the development of the situation because as a software house specialized in banking solutions, we are familiar with payments, and we can support them, in terms of new ideas or experience.

One hundred data scientists in one team!

London gave me an exciting inspiration related to the opportunities given to the banks by the massive amount of data they administer. One of my interlocutors, Chief Data Officer in a Scandinavian bank, talked about the Data Scientists team of 100 employees and a Data Students team, consisting of 50 people who are not yet formal employees. The scale of their activity indicates that this area is going to develop further to catch up with companies such as Amazon in using the newly discovered potential. This so-called terra incognita consists of Data-Driven Products, which banks will be able to offer next to primary, mass-supported financial products, such as cards and bills.

Undoubtedly, banks will not be able to share all the data, and none of us would want it. Still, with proper aggregation and anonymization of data, we can already think about how to monetize specific statistics, in terms of segmentation of a given market or even individual corporations. For example, a chain of stores can collect and use data on purchases of their customers, but it is much harder to find industry statistics or a specific customer segment. Banks could process and share such data.

Market data in real-time

Soon, banks will start providing reports on specific market categories, which perfectly fits in with our Payres product, a solution for monitoring, aggregating and announcing payment and card transactions in real-time. In London, I learned that some banks have also created their Payres-like applications, but they are operating with some delay.  Our solution can provide data to a specific customer in real-time so that individual trade actions are tracked. If, for example, Black Friday in all branches sales go high, and in one branch it is really low, Payres will show it right away – not in a week or two, but in real-time, enabling immediate response.

For some time, banks have been looking for a product that they could offer in addition to financial services. Some choose insurance, real estate, and others sell airline tickets with cards. I wonder how many banks are already focusing on translating their data into a specific product – and for whom? This type of product must be dedicated to a corporate audience, not a retail one. Why? Corporations will gladly pay for such a solution because it will provide them with an additional dimension of data, especially if they can receive it regularly. Multinational companies will probably be interested in buying data for a specific market to make decisions about development, acquisition or merger, and enterprises would choose a data subscription to get instant information about their market shares.

Bank as a research institution? Will real-time market data be available in the SaaS model? Banks have a future in offering complementary products that are ‘by-products’ of their work. Do data-based products have a chance to fight for supremacy in this field? Will banks take advantage of the opportunity offered by their resources? I’m curious about that.