Banks are having to reshape their digital business banking systems to keep up with changing realities since the outbreak of COVID-19. It is becoming essential for them to develop new digital solutions to increase customer adoption and usage in order to retain customers and increase digital banking revenue.

Banks need to provide business owners with a more complete online banking experience, so they can save time on the most mundane tasks and achieve their business goals faster. As high street branches continue to close, SMBs need immediate assistance and real-time access to their own company’s data, to make informed decisions quicker. The banks now have a new opportunity to reduce risks by helping SMBs remain resilient and offering them fully digitized services that are integrated in their bank, and in tune with their needs.

This new Open X ecosystem has enabled an exchange of resources and data that has accelerated innovation to deliver this increasingly superior customer experience. The banking industry has moved towards a Banking 4.X, where platform-based offerings have become the ultimate solution. Automated one-stop-shop online solutions that unify banking and business have become essential. Banks can greatly improve their customers’ journey with an online banking experience that provides access to automated accounting, cash flow forecasting, tax-ready financial reporting, an efficient invoicing system, as well as personalised financial advice; all in real time, and together in one place.

In these times of economic uncertainty and rapid change, FinTechs and Neobanks such as Revolut, Stripe, Square, etc. are working hard to stay at the forefront of innovation with solutions designed for Millennials. Across the pond, traditional banks like Bank of America and Wells Fargo are also rapidly rethinking their internal digital journeys (Sources: Forbes, March 4, 2021 and February 5, 2021). However, only a few major banks such as BNP Paribas and Lloyds Banking Group already offer their SMB customers new user experiences through selecting to fully integrate external Fintech APIs, such as those designed by OneUp (Sources: PYMNTS, July 12, 2019 and Lloyds Banking Group, Annual Report, 2019).

These full API integrations not only allow banks to deliver new solutions rapidly to the market, but also give them access to even more reliable and up-to-date ‘banking’ and ‘non-banking’ customer data. This better understanding of each user means that the customer’s experience is truly enhanced and personalised. The end-to-end customer journey from A to Z is successfully reassessed and improved, which has a direct impact on customer acquisition, growth, and retention. Effective cross-selling becomes accurate and timely, and digital banking revenue increases as a result of this new access to even more reliable data.

A fully automated and completely seamless one-stop-shop experience enabled by embedded APIs is driving a rapid change in the future of business banking.

How has the current pandemic affected the SMB market and how the banks are reacting to stay in the game

Banks need to react quickly to provide business owners with an on-demand, fully digitalised experience including hyper-personalised services and real-time assistance. The customer journey needs to be entirely modified and automated so that SMBs can not only manage their business bank accounts from their banking portal, but also organise their overdrafts, loans and credits in just a couple of clicks with real-time visible data. AI-based solutions mean that users can save time on routine tasks and manage their finances more easily. As new realities and expectations are being taken into consideration, banks need to supply nothing less than a UX on steroids!

This is even more crucial as many big banks are announcing staffing cuts, spending priorities are being rethought and more than 4,000 bank branches across the UK have already closed their doors. The US predicts the same decline, indicating that bricks and mortar banks may even become extinct by 2034 (Sources: Financial Post, May 17, 2021 and Forbes, April 23, 2021).

The race to unify business and banking is intensified as fully digital banks such as Revolut and Qonto vye for competition. FinTechs such as Square are becoming banks and others like Google Pay are offering new ‘pay-now’ methods. Millennial behaviours lead the change and the number of sole traders is soaring. A complete transformation of the banking sector is inevitable. If traditional banks are to keep in line with the competition and remain the trusted option, they should take notes from the new-age players on the scene by providing their customers with all the required solutions under one roof. Replacing existing legacy systems with AI-based FinTech solutions may be the key to overcoming this radical change by automating banking and business management processes, removing the need for manual intervention, and enabling cost savings.

“Tomorrow’s industry success stories are being built today around a modern core and mid- and back offices that are being extensively migrated to the cloud, so open platform and APIs can become a reality at scale.” – Anirban Bose, Financial Services Strategic Business Unit CEO & Group Executive Board Member, Capgemini

A customer-oriented banking industry

Open Banking and data sharing has meant that both tailor-made services and risk scoring have tremendously improved. The Open X ecosystem has pushed the limits of customer experience improvement through innovation and Banking 4.X is the new era which is “experience-driven, platform-based optimum channel banking resilient to financial and non-financial threats, built around long-term, sustainable growth where human interactions evolve from servicing to advising.”

Digital fragmentation incites complexity and the time of multiple tools in multiple places is most definitely over. Banks achieve digital transformation by either developing their own new products in-house or by wisely choosing to leverage FinTech company’s existing and proven APIs. Banks are spending 80% of their IT budget on legacy technology maintenance (Source: Financial News London, October 2, 2017). Embedded external APIs means risks are shared, time-to-market is shortened, software development costs are saved and resolutions are found faster.

Unifying business and banking within the customer’s online bank account with a full external API integration also allows access to more real-time and reliable data. It reduces synchronisation issues and triumphs where many accounting solutions have previously failed due to a lack of data integrity. This means that customers get instant access to an overview of the overall health of their business, which is crucial to decision-making when learning to operate during this extraordinary pandemic. It also lets the banks gain an intelligent understanding of each user by automated analysis of genuine ‘banking’ and ‘non-banking’ data such as won-quotes, invoicing information, profit margins, the average time it takes for invoices to be settled, cash-flow shortfalls and other, previously inaccessible, valuable customer data. Banks are now able to provide their customers with ‘smart’ advice about their business finances and the possibility of cross selling becomes endless. They can, for example, appropriately offer individual business owners a loan when cash-flow is low, or car insurance when the transaction for a new vehicle has been flagged by the algorithm. This significantly improved customer journey is a win-win solution for customers and banks alike. Business owners get access to accurate financial support from their bank, solidifying the loyalty and trust that customers have always felt for their own bank. Banks take less risks by offering their customers financing and therefore optimising their risk scoring. Usage and retention are strengthened, and strategic cross-sales amplify the bank’s net profit.

As usual the devil is in the details, and only those banks that plan to integrate full scope features, specifically designed for SMBs, with a seamless user experience will overcome the competition. Just a few of the major players have geared up to make a difference and are now leading the pack with a truly Banking 4.X approach.

How the major banks are dealing with this digital transformation

BNP Paribas

Since the beginning of Covid in 2020, BNP Paribas successfully launched two fully digital online banking solutions within “Ma Banque Pro” and “Hello Business” from Hello Bank. Aiming to support small and medium-sized businesses facing pandemic realities, Mon Business Assistant offers a highly personalised customer experience where online banking and business account management merge.

Customers get instant cash flow visibility and AI-based forecasting powered by past transactions, which means customers get a direct overview of their yearly cash flow. As the ‘Business Assistant’ learns from data input, the accuracy of its predictions is improved so shortfalls can be duly anticipated.

An officially certified digital invoicing system also allows customers to better manage incoming payments and reduce the need to keep track of unpaid invoices. An Optical Character Recognition (OCR) technology extracts data from uploaded receipts to assist in the auto-categorisation of expenses. This automated digitalization results in tax-ready accounting and customers can invite accountants to share access to their accounts so financial reports can be reviewed and exported instantly. Collaborating remotely, time is greatly saved, and accountants can focus on offering SMB customers the financial advice they need.

BNP Paribas has successfully partnered up with FinTech company OneUp, to fully embed their API straight into their online banking portal. It “grants a 360-degree view of a customer’s business activity so it can upsell value-added banking services as well as non-banking products (insurance, leases, real estate…) at preferential terms—which could represent a huge new revenue opportunity for banks” (Source : Forbes, July, 19, 2017).

Lloyds Banking Group

Lloyds Banking Group is the first bank ​​in the UK to propose a complete financial assistant to its customers and powered by artificial intelligence. Lloyds Banking Group has made a real commitment to its SMB customers by setting itself apart from all other UK banks and leading the way. Yet another example of where business and banking collide under one roof thanks to the OneUp APIs hosted on Amazon Web Services cloud. 

Lloyds’ Business Finance Assistant uses an AI to automate financial daily tasks. This includes real-time digital VAT filing directly with the HMRC, cash flow forecasting and automatic bank transaction categorisation. This means that expense management is taken care of even before customers have fired up their computers in the morning.

Business Finance Assistant allows business owners to upload receipts on the go and matches expenses, assisting in the preparation of tax reporting. They can anticipate cash flow shortages with the knowledge that their bank is quietly predicting their every move behind the scenes.

How other banks are handling the situation

Revolut

Revolut is one of the leading Neobanks that has recently experienced extraordinary growth. While the company has showcased the agility and the market understanding of a digital company, it is transitioning towards providing full business management solutions by recently introducing an integrated invoicing solution (Source: PYMNTS, May 25, 2021). This FinTech is currently taking advantage of the behaviour of millennials, as it strides ahead of traditional banking competitors innovating at an exceptionally fast pace.

Bank of America

Bank of America has chosen to innovate with a personalised and proactive virtual financial assistant, Erica. This assistant gives a personalized and proactive approach with the aim of improving their consumers’ experience by facilitating daily finance management.

Bank of America has also launched ‘Cash Flow Monitor’, an app to connect business applications right inside customers’ cash-flow dashboard. Business owners have access to their checking accounts with a range of features that suit their business needs (Sources: Forbes, Dec 11 & June 30, 2021).

Wells Fargo

Wells Fargo is straying a bit away from the trend that other major players have chosen to follow, which consists of integrating FinTech products and developing personalised solutions. Their marketplace model has positioned them as accounting solutions providers. With this framework, banks continue to develop their core traditional services and act as adviser and intermediary for SMB customers when choosing a partner product, such as Xero or Quickbooks to suit their needs.

Conclusion

In a fast-changing competitive environment, banks need to innovate quickly with value-added outsourced solutions. To generate more net revenue, they need to jump on the bandwagon to survive; marketplace and partial integration no longer seem to be enough. There is a strong correlation between the level of feature integration, its potential and customer adoption, usage, and retention. Only a deep consolidation of external APIs reduces the synchronisation risks needed to ensure data accuracy. Well-timed cross-selling can be proposed, resulting in the best possible customer journey. They are the key solutions as this digital world accelerates.

The required core transformation is so drastic that banks must react now. If they are not already working on offering new complete digital experiences expected by Millennials and SMBs, banks will not have enough time to optimise their position to stay in the game. Reinventing themselves by leveraging the expertise of FinTechs is the fastest and most powerful way to streamline.

A completely seamless customer experience is expected. An integrated and automated one-stop-shop solution that fuses Business and Banking is clearly the future of business banking.