In the past 10 years, the world has fundamentally changed all around us—from the introduction of the iPhone which celebrates its 10th birthday this year to autonomous vehicles on our roads…and much more—the last decade has seen change not rivaled since perhaps the early onset of the industrial revolution. With that as our backdrop, it stands only to reason that banking would not remain untouched from the outside world’s trends for long, and with the explosion of Fintech, it’s no surprise that what we see all around us is rapid change.
Interestingly though, an area until fairly recently that remained insulated was business banking and to an even further extent corporate banking. Steeped in “tradition,” business banking, as the logic traditionally goes, is fundamentality different from consumer banking and the trends on that side of the house will slowly get commercialized and find their way to our side of the world. A decade ago, I would not have disagreed; however, today we find ourselves in a different reality, and it’s being driven by none other than the SME market. So what is driving this change and what can we do about it? In the following two-part series, I’ll break down the trends affecting our space and its pace of change, and hopefully share insights into what we can all do to meet these new demands and stay relevant and top of mind as trusted partners with the business banking marketplace.
What Is Driving The Banking (R)Evolution?
It’s important to start at the highest level possible and answer the question of what is driving the changes in the market. While there are hundreds of discreet forces we can discuss, I believe nearly all of them could fit in some form of fashion under 4 macro trends. The Millennial Generation, Consumerization of the User Experience, Collaboration & Open APIs, and, finally, Omni-Channel needs and expectations.
With those four megatrends as our backdrop, digging into specific small business trends becomes a bit clearer.
Connecting the Physical and Digital (or put another way, omni-commerce requires omni-channel banking) – In Mercator’s most recent survey, more than one out of every two transactions occurs in person and, more importantly, MORE than 60% of transactions are physical (cash/coin or check). These businesses are nearly half and half in terms of digital for both where they operate and how the operate. This reiterates the point that while digital is extremely important, the demise of the physical has been drastically overrated and HAS to remain a pillar in any holistic small business offering…and one that has to be seamlessly included in the digital strategy when thinking about client experience.
Interest in digital offerings outpaces usage – According to the same Mercator study mentioned above, nearly two-thirds of respondents claimed it was common for them to deposit checks at a branch, and basically an additional 1/3 claimed it was common for them to do it at an ATM. There is PLENTY of value add and fee-based revenue sitting on the table with functionality that is already in market today and likely living in your business banking offerings! This is the Low Hanging Fruit!
Business owners are not treasurers – Not surprisingly, there is some level of angst in allowing additional employees to be empowered to work in the cash management solution. Banks can use this as an opportunity for leveraging assets like podcasts or short web videos; also it’s clearly an opportunity to play actively in the busy and booming social arena.
Open APIs a Future Trend That’s Here Today – Open APIs in general represent a true shift in the payment/banking ecosystem. In some parts of the world, this is being driven by regulation (e.g. Europe with PSD2 or the UK with both PSD2 and the Open Bank initiative) and in others by the market demands for easier/simpler market offerings that help to transact more efficiently and better manage everyone’s financial lives.
Open APIs will affect everyone in the ecosystem; this shouldn’t be seen as an opportunity just for FinTechs or Merchants. It is possible for established players to look optimistically at the chance for a true win-win for everyone in the ecosystem.
The Internet of Things (IoT) – From Alexa-enabled devices to connected refrigerators or the connected car, there are plenty of emerging use cases and devices for supporting those use cases with new User Interfaces (or I should say lack of them).
If consumers begin to feel comfortable with ordering a virtual personal assistant to do financial transactions, what or who is to say a small business owner wouldn’t want the same ability to pay a bill while driving to a client’s home or setting up the front of their store for an event…
Virtual Reality – The quality of these devices and services has improved leaps and bounds since the first developer packs on Oculus Rift, and if you marry this trend with the Millennial discussion with which I started (75% of the workforce will be a millennial in less than 10 years according to a Pew Research Study), you can see why this topic is something we have to keep close.
Now I won’t claim the above is an exhaustive list by any means; we didn’t touch on alternative lenders, larger FinTech plays into the space, mobile payments and numerous other trends that we’d need a lot more space for, but this is a good starting point for the discussion. Stay tuned for the next installment to hear my ten ideas on how to start tackling these trends head-on—to improve your offerings and evolve into the ‘service provider of the future’ that this market wants.