What B2B Fintech Indicator are you watching for 2017?

When I speak to banks privately, especially in the trade and treasury areas, many will admit to me their threat perception is very low with fintech. This runs counter to the media hype that might make you think traditional bank models are challenged.

In a recent article in American Banker, René Lacerte, CEO and founder of Bill.com gave four reasons why nonbank fintech firms still face big challenges in competing with banks:

  1. Banks have been around (and so have their customers).
  2. Banks have the deeper pockets.
  3. Banks’ sales force and customer service infrastructure are huge.
  4. Banks have big data — really big data.

I would also add banks have access to cheap deposits.

There is no doubt technology is driving much change.   But right now according to one banker, who runs an innovation program across his bank’s global businesses, “We are at an impasse in this area. We see these different providers trying to develop platforms and gain enough scale but not necessarily seen anyone develop enough scale that is quite compelling. Someone like Tradeshift is particularly interesting in the open model, but not there yet. The impasse comes because we cannot get comfortable embedding our payment or supplier finance services into providers platforms to fill their gap.

So what happens if this banker’s view is shared by others? Do the banks wait and see what winning models emerge after the fight? Do they commoditize a value added service?

Is there an impetus for banks to move now? And that gets back to the leading indicator.  Accelerating payments is probably the biggest growth area right now.  So any indicator there would be of interest.  What is happening in Latam with einvoicing mandates is another where new models will emerge.

I would argue it is B2B Point of Sale. How companies source, buy, process, pay and finance with new B2B models will provide a meaningful change in the way companies buy-sell on platforms.

Another interesting data point is for every $1bn in corporate spend on materials, indirect, staffing, etc. how much supplier finance opportunities does that generate? Right now, the number thrown around is about $25M in early pay opportunity.  But with new expense cateogies being financed (ie, contract labor), and with new third party capital and data science extending finance opportunities, that will be sure to change.

So back to my question – What leading indicator will you be watching in 2017 that will dictate a response?

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