Give me my Share of Wallet, Bankers Cry

Look, I may not be the favorite son of many a banker, and certainly the lot has been demonized over the last few years (many feel rightly so for their short term compensation focus that is backed by implicit government guarantees) but I don’t want to go there today.

I want to talk about creating value. It’s 2015 and we are increasingly moving into a connected commerce world. And just because you as a bank are part of a relationship lending syndicate and contributing a pro rata share to some company’s revolver does not mean you should automatically get business parceled out to you anymore. Not today. Because most banks have not kept pace with the vendors that have been adding value.  For example,

  • What have you done around spend analytics? Tungsten’s analytics is changing the spend analytics game with real-time network-based spend analysis versus traditional methods on a comparative level.  Or PrimeRevenue's tool to help with payment terms companies should have, which suppliers to onboard, where to apply dynamic discounting versus factoring, where to extend terms, etc.
  • What have you done to update the look and feel of your portals from the early 2000? Taulia provides an out-of-the-box e-invoicing toolset and the capability is deep on the vendor side, especially considering that it is free. Taulia provides direct integration into supplier billing and accounting systems including small business packages such as QuickBooks, FreshBooks, and Xero.
  • What have you done to onboard customers in an automated or innovative way? PrimeRevenue has automated supplier onboarding technology and has also developed a method to reduce supplier onboarding costs through their Electronic Time Draft program.

I could go on. The fact is you do have leverage around credit, but it can’t be just about credit anymore. There are non banks increasingly filling that role, especially for small business credit. And we know investment grade corporations do not have as great a need for banks around credit given their access to the capital markets.

Innovation will increasingly be important. Connected commerce is not going away. But Fintech is not going to destroy banks. But it will remake the way we all do our financial business, including businesses. There are no easy answers here, but our recommendation is to learn from the various leaders in the market to understand what they are doing right in their digitization efforts.

If you don't, you may find yourself increasingly marginalized, at least for some corporations.

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