Embedded Business Banking Rides Wave of Demand
While the pandemic is still raising as much uncertainty as there was a year ago, on the whole, businesses appear to be trying to restore some sense of normalcy. However, one thing that won’t change is what they expect from banking experiences.
FISPAN CEO and Co-Founder Clayton Weir told PYMNTS that, as a result, he is seeing rising demand for FISPAN’s services that help banks remove friction from the commercial banking experience.
“We were probably two or three years early in our business on the front of it, but I think we’ve grown right into the zeitgeist of this and the demand and the conversation more broadly around these ideas of connected, contextual or embedded banking doing nothing but growing,” he said. “So, it’s a really exciting time to be in this space.”
Dealing With Analog Business Processes
Real-time business-to-business (B2B) payments are bigger than the sum of their parts, Weir said. They’re reflections of the business relationships that facilitate them. While a consumer transaction at Starbucks is cash and carry, businesses have built mechanisms that don’t happen in real time — net-30 payment terms, invoicing, trade credit and others.
“So, realistically, you almost have to get rid of all those business processes, those kind of analog business processes,” Weir said. “It administratively has to be more real time before it would be relevant to whether the payment was real time or not.”
Weir said he expects the landscape to change and become more similar to retail or eCommerce. At the same time, though, the use of checks in the mail in B2B will only change as fast as the business, operational processes and tools do.
Monitoring Three Points of Friction
There are three points of friction when a business pays another business: the customers’ relationship with its bank, that bank’s relationship with the vendor’s bank, and the vendor itself.
The way the two business counterparties interact can create friction with the workings of their invoices and purchase orders, and with the constraints of their business applications.
Each bank’s relationship with each company can also create friction as they exchange context about paying, having been paid or what happened with those payments.
The relationship between the two banks can be a point of friction too, but Weir said this is starting to become less of a problem.
“As the quality of these clearing systems and the modern clearing systems or the modernization of the old clearing systems get a lot better about exchanging high context kind of business data between the financial institutions, it allows the banks to work out there,” Weir said. “But I think that’s three different pools of friction in that circle of B2B commerce.”
Allowing Clients to Interact With Banks
Regulation can create friction, too. FISPAN is based in Canada, but all its commercial activity has been in the U.S.
The company is not a money service business or a regulated banking platform. Since it’s a partner to banks in the way they serve their businesses, its regulatory burden revolves around being consistent with the compliance regime around the kinds of vendors or partners banks have.
“All of it is generally well-meaning, and all those things are there for a purpose, but they sure manifest in ways that are both super-expensive to comply with on the bank’s side, and then very friction-full toward doing what’s new or what’s right for the customer,” Weir said.
FISPAN focuses on providing medium-sized businesses with the same sort of automation tools that big business and banks have access to.
“Our raison d’être is the relationship between the operational software that the business has chosen to use and the bank itself,” Weir said. “So, to allow the clients within their own domain to interact with banking products and services and data.”
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