Why Banks cant afford to be Asleep on B2B Commerce

This analysis is based on a study the Boston Consulting Group (BCG) did along with SWIFT data  - Global Payments 2013 GETTING BUSINESS MODELS AND EXECUTION RIGHT.  Readers can download the full study by clicking the previous link.

 

BCG did a recent study together with SWIFT which looked at the payment and transaction banking businesses.  These various businesses (pcard,debit cards, mobile payments, etc.) produce some serious revenue for the collective banking industry.  BCG indicated in their study that in 2012 these businesses generated $301 billion in transaction-specific revenues (including monthly and annual card fees) as well as $223 billion in account-related revenues (including account maintenance fees and spread revenues).

As the battle wages with corporate to bank connectivity and corporate to B2B Network connectivity, Banks can not continue to think their corporate and commercial clients want to continue to use the banks own platforms to exchange documents, data, and information (both structured and unstructured) through them.  Corporations are rapidly moving to B2B platforms as the next generation of EDI, and these platforms are developing the payment and finance capabilities around it.  If banks are not careful, they will find significant leakage over the next few years as non banks enter the fold, unencumbered by complex compliance legislation or Basel III capital, liquidity and leverage rules.

Given the revenues at stake, banks need to be smart about how they develop working capital and supply chain finance technology platforms.  Leveraging just an inhouse built solution is risky, and working with one vendor may prove to be limiting.

So how to play?

  1. Get smart on the broader market – individual pieces won’t cut it
  2. Understand technology – it’s essential to create more efficient markets for the financial supply chain
  3. Bring different Divisions and Departments into the discussion – Enterprise Payments, ABL, Trade Finance, Commercial Finance, etc. banks are too silo to evaluate these trends holistically.  Banks run Trade finance, factoring, commercial finance, asset based lending, commercial cards, and Treasury management solutions in isolated departments.
  4. Understand how you can bring your Balance Sheet to these Networks

 

Non banks are becoming aggressive here, and if banks aren’t careful, they will lose a significant revenue stream.

 

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