As the pandemic recession and recovery call for bold, innovative fiscal action, legacy financial institutions are realizing FinTechs are more resource than rival as they maneuver in ways big FIs cannot. The PYMNTS Disbursements TrackerŽ explores the topic.
Banks and traditional financial institutions (FIs) are grappling with modernization or core systems at the worst possible time, but âbad timingâ is often an excuse for lack of preparation.
That banks and others got caught unawares by COVID-19 isnât the issue, because it caught everyone by surprise, from private industry to the CDC, the WHO and world governments.
But one canât hold that âdeer in the headlightsâ pose at a time like this. The pandemic recession and recovery call for bold, informed and innovative fiscal action. More legacy FIs are realizing that FinTechs are more resource than rival as they maneuver in ways big FIs cannot.
PYMNTS Disbursements TrackerÂŽ done in collaboration with Ingo Money explores the topic in detail, noting, âThe COVID-19 pandemic has created a new emphasis on why [investment in new solutions is] necessary ⌠especially as legacy banksâ lagging infrastructures create gaps that nimbler, mid-tier banks can fill. FinTechs that run on cloud-based infrastructure can also process disbursements and payments much more swiftly, giving them an edge over legacy FIs as businesses hunt for real-time payments support.â
Itâs an insight that legacy FIs, FinTechs and their commercial constituencies can use right now.
FinTechs Helping To Future-Proof Banks
To be a FinTech is to be more adroit and technologically creative than a large FI. Thatâs the superpower they can bring to big banking at a time when much depends on partnerships.
âIn todayâs changing financial environment, bank treasury executives should be thinking about the concept of âfuture-proofingâ their offerings for their clients by partnering with leading FinTechs [that] can iterate solutions to the challenges … banksâ corporate customers face both now and continuously into the future,â Ingo Money CEO Drew Edwards told PYMNTS.
Edwards noted, âThe right FinTech partner will continuously invest the time to engage and listen to [the] individual pain points corporates face and then quickly innovate subscription-based solutions that support the bankâs relationships and solve the challenges their institutional clients face.â
Using the example of âcontinuously expanding one-to-many gateway solutions to relevant payment types in consumersâ wallets without the need for the bank to invest in direct integrations,â he added, âLarge banks by design entrench deep pillars of safety and security into their operations and offerings to safeguard extremely large asset pools and extensive capital markets and credit facilities with enterprise clients. Change is a function of evolution for a large bank, not iteration. FinTech partners can provide that iterative layer, keeping the bank current and relevant while the evolution happens at a bankâs pace.â
Paper Jams Preventing Total Transformation
Talk of digital transformation is all well and good, unless youâre still doing the paper thing. Many still are, but signs point to paper reliance phasing out fast. FIs and corporates must make sure not to get caught on the wrong side of that swing as it happens.
âMost banks, businesses and treasurers have been aware of checksâ challenges for several years. Digital technologiesâ rise has boosted usersâ expectations for swift payments and reduced their satisfaction with older, paper-based methods. Checks are cumbersome and costly for businesses and FIs, with a price tag of about $8 to $10 per processed check, and they can take up to 15 days to process,â the new Tracker states.
More to the point, slow and inefficient invoice and checks are hopelessly out of step with the consumerization of payments thatâs overtaking the B2B and B2C worlds. Today itâs about cash flow, but not at any cost, and especially not the one thing money canât buy: time.
âThirty-seven percent of SMBs claimed that cash flow was their top concern in 2019, according to one recent report, but the pandemic is rapidly shifting companiesâ views and priorities,â per the Tracker. âWaiting 15 days for a single check to clear can have disastrous financial consequences for these entities, making real-time disbursements a must for firms. It appears that the pandemic is breaking checksâ hold on businesses, but it is now up to their payment and treasurer partners to offer the support they need to leave paper-based payments behind for good.â