Santander develops tech to keep B2B clients from going to startups

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The ploys vary widely—digital tracking, fee incentives and "coopetition"—but banks are turning up the volume on innovation to pry businesses away from checks and keep them from signing up with rival tech startups.

In just the past couple of weeks, ABN Amro has added fees to drive more customers to digital channels, a big bank-powered consortium formed to standardize digital treasury management, and Santander unveiled a portal to view business payments in transit.

The banks are dealing with the encroachment of blockchain and cloud-based startups that are disrupting supply chain and treasury finance — and which don't share banks' burden of legacy overhead costs for check-based processing.

Checks cost more to process and also require more time and labor. It’s the labor and the visibility into where payments reside in the process that are becoming pain points for banks to address.
“Businesses of all sizes in all industries seek to grow their business without adding additional headcount into their payables department,” said Chris Bozek, managing director and head of working capital solutions in the Commercial Bank division at Santander.

Santander, which is a member of the Digital Trade Network with Citi, Deutsche, HSBC and other large international banks, has also released Enterprise Payment Link, a host-to-host payment initiation channel and client access portal to track and report on wire, ACH and check payments to suppliers, customers and employees. It follows Santander Treasury Link, another business payment product.

Supply chains are becoming increasingly costly and prone to friction, providing what Santander sees as an opening for a cost-reduction play, whether it be to headcount or processing time. In the U.K., for example, the average business loses more than $120,000 per year because of supply chain friction, according to the Tungsten Network, which says that’s about 6,500 work hours spent tracking down order numbers, processing invoices and answering supplier queries.

Businesses estimate they spend about 55 hours per week on manual processes, 39 hours managing invoice exceptions and 23 hours handling supplier queries. Thirty-six percent of businesses report removing this friction is a high priority, Tungsten reports.

“Over the past several years businesses have operated in a low cost of cash environment, but that is rapidly changing,” Bozek said. “Digitizing payment flows and controlling the desired payment dates to optimize payment time is becoming more critical.”

Corporations are also trying to maximize their investment in enterprise resource planning and treasury workstations by digitizing transactions and automating processes, Bozek said. EPL’s payment tracking attempts to remove processing clutter by allowing a single click for businesses to respond to customer, supplier and staff questions on payment status at any point in the process.

It's a market that fintechs are also approaching. Airwallex, for example, uses partnerships with local companies and an API that embeds in business' payment systems to process transactions and determines the best payment option based on cost and speed. FIS PayPal and Worldpay have also invested in technology or partnered with other software providers to streamline business transactions. And fleet card and health care technology provider Wex has partnered with both Visa and Mastercard to support virtual cards for digital B2B transactions.

Santander’s move "reflects a number of things — growing expectations from clients, growing competition from fintechs who can offer more things, and the realization from banks that better services generate better customer stickiness,” said Gareth Lodge, a senior analyst at Celent, adding that the tracking part is particularly interesting. “We’ve long said that information about payment is as valuable as the payment itself. That is, knowing when a payment will clear allows a corporate to plan accordingly.”

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B-to-B payments Payment processing Fintech Santander