Embedding Credit into B2B Payment Flows

Unleashing the Power of BaaS and Data-driven Liquidity.

As interest rates continue to rise, the working capital challenge is brought into sharp focus for both SMEs and corporates.  For the SME market, the ability to access credit efficiently and seamlessly has become a vital requirement in sustaining the business.  For corporates, maximizing working capital efficiency has become a source of considerable competitive advantage.  While traditional banks have long been the go-to source for business financing, their restrictive lending practices and legacy technology often limit SME and corporate customers from accessing the funds they need in a timely fashion and put a brake on working capital optimization, stalling business objectives and growth.

However, with the emergence of Banking-as-a-Service (BaaS) providers and the innovative concept of embedding credit into B2B payment flows, a new era of financial empowerment has dawned.

The Power of Embedding Credit

Whilst embedded payments and financing have changed the B2C experience over the last few years, embedding the more complex payment and credit flows into B2B businesses is still at an early stage, complicated by the requirement to work with a range of accounting, ERP, and treasury management systems.  The opportunity to revolutionize B2B payment flows, however, means that the opportunity is significant. BaaS technology companies, such as Bankable, are at the forefront of this financial transformation. By integrating alternative credit offerings directly into their proprietary B2B payment infrastructure, they enable businesses to leverage unlimited credit as a strategic tool to optimize cash flow and seize growth opportunities. All accessed through simple plug-and-play API connectivity.

One of the key USPs of embedding credit into B2B payment flows is the ability to provide bespoke financing products. Traditional banks often rely on underwriting methods that fail to capture the true potential of SMEs based on their historic accounting or real-time financial data. With its recent acquisition of AREX Markets, Bankable’s technology has the power to analyze a vast array of data points to assess creditworthiness accurately. This data-driven approach ensures that credit products are designed to cater to the specific needs of businesses, empowering them to access the optimum amount of liquidity required for growth.

Equally as challenging in the large corporate space is the lack of flexibility in accessing credit. Traditional providers take a rather fixed approach to approving and provisioning credit via solutions such as revolving credit facilities which incur cost and time just to set up. The new generation of BaaS providers can be far more dynamic in approving and provisioning the right amount of funds, at the point of need, thus minimizing costs and maximizing the working capital efficiency.

By integrating financing into the payment process, businesses can access immediate liquidity and bridge the gap between payables and receivables through invoice or purchase order financing. This enables companies to maintain a healthy cash flow, facilitating timely payments to suppliers and enabling them to seize new growth opportunities.

Seamless Integration with Payment Flows

By seamlessly integrating credit offerings and liquidity options into B2B payment flows, BaaS providers eliminate the need for businesses to navigate multiple platforms and lengthy loan application processes. This streamlined approach allows companies to access credit at the moment they need it most, without disrupting their day-to-day operations. Whether it’s bridging short-term cash flow gaps or investing in expansion plans, the ability to access credit on-demand is a game-changer for SMEs and corporates.

The BaaS market has witnessed tremendous growth in recent years, driven by the increasing demand for flexible financial solutions. Traditional banks now have the power to better serve their SME and corporate customer by leveraging BaaS providers for their unique credit offerings, and ability around time to market for new solutions. Furthermore, the growing ecosystem of BaaS providers is fostering competition and innovation, resulting in better products and services for businesses.

While the BaaS credit market is still in its early stages, its potential is undeniable. As more companies recognize the advantages of embedding credit into B2B payment flows, the market is poised for rapid expansion. However, to truly unlock the potential of credit products for businesses, the focus must remain on leveraging data to drive liquidity.

The Future of BaaS

The integration of financing options such as credit into B2B payment flows is revolutionizing the financial landscape for businesses, and BaaS providers like Bankable are leading the pack. By leveraging data-driven insights derived from accounting and payment data, Bankable can offer complementary credit products tailored to the specific needs of both small SMEs and large corporates alike. This approach empowers businesses to access the liquidity they need to fuel growth and seize opportunities whilst simultaneously empowering banks and other enterprise platforms to better service more of their customers.

It is crucial for the financial industry to recognize that true credit products should be designed to embrace the unique challenges faced by SMEs. By harnessing the power of data, BaaS providers can bridge the gap between the underserved SMEs and the credit they deserve. It is time for a new era of inclusive BaaS and credit solutions that empower smaller businesses to thrive, and BaaS is at the forefront of making that a reality.

As the financial landscape continues to evolve, the integration of credit into B2B payment flows offers a promising path towards a more inclusive and efficient financial ecosystem, where all businesses have access to the credit they deserve.

About Bankable

Bankable is a global architect of innovative payment solutions enabling Banking as a Service. We enable and serve dominant financial institutions, corporates, and FinTech entrepreneurs to bring to market highly differentiated payment solutions supported by a very strong, immediate business case. Bankable is a founding member of Innovate Finance.

”Trust is something you must gain”

A discussion about collaboration and trust a couple of weeks ago in London could not have benefited from better timing. During the Innovate Finance Global Summit, we were featured in a panel showcasing trust and collaboration. Together with our partner Liesbeth Righter from Moneyou, as well as representatives from NorthRow and Toronto Financial Services alliance, we were on stage in front of 350 engaged attendees, elaborating around the collaborative economy and who you can trust. A discussion that evolved around the following topics: FinTechs need to be more efficient in the way they collaborate with other actors and need to have better ways to promote trust.

Bankable and Moneyou together built a fully digital bank in the record timespan of 6 months – something that was made possible thanks to our focus on building a mutual partnership through transparency, trust and collaboration.

During the panel, Eric, CEO and Founder of Bankable recommended that one of the keys to nurture collaboration is to be organised for partnerships, highlighting the procurement process. With Moneyou, we had one single interface, which enabled us to move fast and made it possible to deploy a solution within 6 months.

However, Eric admits that not all procurement processes have been as swift as the one set up with Moneyou. In several processes, we have had to project-manage our own vendor approval. “But it’s not that I don’t like it, this is just how it is. It’s a challenge to work with large corporations, but that’s what we are organised for and we have a strong board behind us to support our mission. If I didn’t like what I did, I would make pizza instead. There are no regulations in that.”

How do you get to collaboration?

“It’s about culture. There are people in a bank with a collaborative mindset, but the culture of the bank is generally not collaborative. That’s why I like to work with start-ups and scale-ups”, says Adrian Black, CEO of NorthRow.

“We try to find the intrapreneurs of companies, people who do the same job that we do. They are here to change their company and we are here to help them. We don’t say ‘Dear client, let’s meet in 5 years, after you spent billions on replacing your core banking system’ We say, ‘Let’s start now, let’s do a pilot to start seeing transactions’”, says Eric Mouilleron, at Bankable.

“Liesbeth, we met 2 years ago, 1 year later we had a solution ready. So, there is hope, we can move fast with banks”, Eric continued.

What are the keys to collaboration?

“Trust is something you must gain from your customers and partners. It comes down to being true to what you do and being truthful in how you communicate it. If all of this is consistent, you can be faster and lean – then you can really start working together. The organisational structures are there to make it complicated, but we (Moneyou) are trying to make it lean again. One way of doing this is to take it in smaller units and compartments and change it from there.” Liesbeth Rigther, CEO of Moneyou.

“Traditionally people trust banks because they have the authority as an organisation. But I think this is about to change. And we all have to learn to deal with what happens when their trust disappears” Liesbeth Rigter, CEO Moneyou continues.

Have FinTechs really changed the stagnant infrastructure?

“It’s consumer demands that will determine the change. But already today 85% of banks know they will partner with FinTechs. It’s down to how quick you can shift due to regulations” said Jenifer Reynolds, Toronto Financial Services Alliance.

“We don’t know what banking will develop into, but it’s time to start finding that out. I really think that all this pioneering and exploring will lead to new business models, and when the market is open, the banks will have to change too.” Said Liesbeth Rigter, CEO Moneyou.

How can banks adapt rather than being protective?

“It used to be hard to set up a bank, but it’s not that hard anymore. Now it’s easier to introduce new competitive financial services solutions”, said Adrian Black, CEO at NorthRow.

“85% of the IT budget in a bank goes to maintain the legacy system. But I’m not too hostile against legacy, since that shows you have a history. When we work with incumbents; we take legacy into account but we’re not converting the whole thing. You need to adapt, or you don’t stay. The real issue is the management of the banks as many bank managers today are close to retirement. You’re not going to innovate near retirement, this is when you want to make sure that your package is the best it can be. The layer underneath top management can be dangerous too, they are the ones that made the legacy system, and they don’t want to change something they built”, said Eric Mouilleron, CEO at Bankable.

“I met a bank executive a couple of days ago, he told me that he doesn’t want to hire anyone over 40”, Jennifer Reynolds at Toronto Financial Services Alliance, reacted to the fact that an employee close to retirement will not innovate.

“We are developing with customers that are below 40 years old. If you want to innovate you need the customers under 40, because they grew up with the phone in your hand and they don’t know a world without internet. To be honest, our customers over 40 are too nice to us!”, Liesbeth Rigter at Moneyou answered.

“I employ loads of millennials, they show me things that I couldn’t imagine. We need diversity since that is also how our clients look and what they look for. Diversity is good for business!” Eric Mouilleron, CEO and Founder at Bankable finished.

You can watch the whole panel on YouTube.

Insights from a week dedicated to FinTech

week of FinTech in London. Fruitful meetings, inspiring talks and visions to establish London as the FinTech capital of Europe. As one of the founding members of the association, Bankable firstly attended the Innovate Finance Global Summit, a two-day-event where we both exchanged with varied visitors in our booth and participated in a panel with our partner Moneyou. We also spent a day discussing FinTech with challenging people at the International FinTech Conference hosted by HM Treasury at the London Tobacco Docks.

FinTech week really aimed to position London as the FinTech capital of Europe, with business leaders and policy makers backing up the same vision. We have heard announcements from policymakers, such as Bank of England, that are currently setting up new FinTech initiatives:

“We have set up a new FinTech hub that will sit at the heart of the Bank, to consider both how the Bank understands and how they apply FinTech, relevantly to its mission,” said deputy governor of Bank of England, Dave Ramsden.

Even the British government revealed their own take on the matter by releasing their first FinTech scenario ever: Philip Hammond, Chancellor of the Exchequer, unveiled a new FinTech strategy as the government is looking to support this fast-growing sector ahead of Brexit. Through the automation of regulatory compliance, they aim at “reducing costs for financial services firms, and removing a key barrier for FinTechs”, Philip Hammond said. He also stated that the United Kingdom is the best place in the world for FinTech companies – and will remain so after Brexit.

Policy makers were not the only ones making strong statements during the week – we listened to and took part in several interesting panels that discussed the future of FinTech (on the topics of Brexit, banking innovation, etc). The overall theme is easily summarised: it was all about collaboration. That is, collaboration between incumbents and FinTechs. We heard the word on every stage, with many of the panellists specifically stating that the ones that succeeded with collaboration and great partnerships are the ones that will succeed in the future. As Megan Caywood, COO and co-founder of Starling Bank said:

“The bank that partner the best will be the winner in the future”.

Also, the Chief Customer and Innovation Officer at Santander UK, Sigridur Sigurdardottir, said that

“[Banks] collaborating with FinTechs and start-ups is very effective; they get resilience and we get speed – with customers at the centre. There are challenges on the way: infrastructure and time-to-market”

The FinTech landscape is getting more mature, as we can see that more and more partnerships are being shaped between banks and FinTechs – something that Deutsche Bank’s Head of Strategic Investments, Richard Smith, also stated:

“We have large technology departments within the bank, but FinTechs bring speed and agility to launch quickly when we may not always have the bandwidth to hire quickly internally. With FinTechs, we are able to work more efficiently.”

Liesbeth Rigter, Moneyou and Eric Mouilleron, Bankable

Although the talk was about the future of partnerships between incumbents and FinTechs, we did not see many showcases of partnerships that have been fruitful and successful. Therefore, we are even prouder to have been on stage together with our partner Moneyou at the Innovate Finance Global Summit, to talk about trust and collaboration. Our CEO Eric Mouilleron and Liesbeth Righter, CEO of Moneyou, discussed the collaborative economy and who to trust, together with representatives from the Toronto Financial Services Alliance and NorthRow. Eric and Liesbeth elaborated on the key elements that made (and continues to make) the Moneyou-Bankable partnership successful – and hopefully inspired others to work for such rewarding and prosperous partnerships. (If you want to hear more about our partnership, listen to this podcast) As our CEO Eric put it:

“It is not fashionable to be alone these days”.

This week showed that we have an exciting year 2018 ahead of us – and quoting Liesbeth Righter’s conclusion to the panel:

“We do not know what the banking industry is going to develop into. But it is time to start figuring this out”

Eric also wrote an article on the topic of FinTech Nation 2018 that was published just before the event; you can read his article “The Rise of the friendly FinTech” here.

Eric and Liesbeth summarised their panel and the Innovate Finance Global Summit after their panel, listen to their key takeaways in this video.