Podcast: 3 technologies banks need now

Whitney McDonald 0:02
Hello and welcome to the buzz of bank automation news podcast. My name is Whitney McDonald and I’m the editor of bank automation News Today is December 12 2023. Joining me is Kevin Pettet. He is the chief revenue officer of North American banking and financial services for bottomline technologies he is here to discuss must have technologies that banks must implement in order to remain competitive gain business clients and grow deposits.

Kevin Pettet 0:27
So Hi, I’m Kevin pettetI’m bottom lines Chief Revenue Officer for North American banking. I’ve been with bottom line for 15 years after several senior management roles in both FinTech and healthcare IT my experiences includes strategic account management, acquisition, integration, globalization, large scale delivery and program management, enterprise SAS business model transformation and Six Sigma process improvement. Bottom line itself is a business payments company focused on transforming the way businesses pay and get paid. At bottom line, we are focused on driving transformation in business payments, similar to what you’ve seen in consumer payments and what consumer payments have realized, trying to make payments, more efficient, intuitive and drive automated payment transactions. Today, we process over 6 trillion and payments volume annually across our digital banking and business payments, network offerings, and we serve over 50, the top 100 North American banks and well over 100,000 businesses.

Whitney McDonald 1:28
Great. Well, thank you so much for joining us on The Buzz it’s great to have you excited to get into today’s conversation. So with that, we can kind of look back and round out 2023 Here. As we look back on the year, we can’t help but reflect on the banks failure. The bank failures earlier this year in March, really caused a shift in certain banking strategies that we kind of saw throughout the year, even up until now, let’s kind of start off by talking through how those collapses in March did have banks in their clients switching up strategies throughout the rest of the year. businesses

Kevin Pettet 2:02
of all sizes are increasing the number of banking relationships that they have multi bank relationships had been the norm for quite some time for commercial and corporate customers. And it’s still expanding across those groups. But it’s actually becoming the norm for small to mid sized businesses. We are seeing this trend accelerate given the recent industry instability and the bank failures that occurred that you referenced just a few minutes ago, I wrote a recent article and in the article that I wrote, I quoted a Deloitte Report and the Deloitte report stated that 33% of companies with a billion or more in annual revenues have banking relationships with 10 or more financial institutions. What we’re beginning to see a small to mid sized businesses are following suit to reduce risk and minimize operational disruptions that could occur during periods of bank instability. When you’re looking at it from a bank’s perspective, ultimately, the bank who can provide better cash visibility to their customers across their business customers, multi bank relationships will be well positioned to win the largest share of wallet. This is because the bank who owns a primary operating account with the business is the bank that the business will consolidate the majority of their services with creating the greatest revenue opportunity for the bank. And that’s really where we’re seeing a change in strategies. We’re seeing the banks themselves trying to provide better cash visibility, recognizing that it’s going to be across multiple relationships. And we’re seeing businesses expanding the number of relationships they have.

Whitney McDonald 3:32
Yes, multi bank relationships, and the diversifying of accounts is definitely something that we’ve been following along throughout the year, following those bank collapses. So how has this desire for multibank relationships really pushed banks to drive customer value prioritize relationships with those business clients? We saw that shifts and we saw that change in loyalty as well. So how do banks really step up here?

Kevin Pettet 3:58
You know, as I just shared, the bank who owns the primary operating account is the bank, the business will consolidate the majority of their services with and hence will be the bank who gets the largest share of the respective business customers wallet. As businesses look to de risk and expand banking relationships, they are in parallel, creating more competition for the banks to seek and retain and grow wallet share. So the businesses are focused on de risking, but they’re creating more competition for the banks themselves. So as a result, the banks must find new and differentiated ways to drive customer value. Given the trends we’re seeing in the market, driven by this instability in the higher interest rate, we see two key strategies that come to mind. And here a bottom line. We’re actually focused very much on both of them. The first is payment monetization. And what I’m talking about here is identifying a means and similar to a card interchange model where you can create new revenue streams for payments and businesses are already making. The objective here is to create a new shareable revenue stream without expecting or changing the payment activities that your business customers are already performing. And doing so the bank can then retain some of the revenue from this monetization while also sharing a portion with their business customers who are making the payments. Effectively, if you think about this, businesses are now getting paid to make payments, which encourages the business to do more payments through their bank partner and strengthens the overall relationship. Secondly, and I referenced it just a few minutes ago, caching is ability. Although multi bank relationships reduce the risk for the business, they actually create if you think about it a headache for the finance team. So we have to reconcile cash positions across multiple banking relationships. The bank who can provide a holistic view of a business of a business customers cash position across all banking relationships coupled with meaningful forecasting tools makes the business CFOs and finance teams job much easier, and becomes well positioned to own the primary operating account relationship.

Whitney McDonald 6:07
Now with those two examples that you just gave, and the investment that we’re seeing across the board with banks investing in technology, where does the technology fit into this? How can AI obviously, we can’t ignore AI right now, we can’t ignore data right now. How can this play a role? does technology play a role in financial institutions winning those new business clients, retaining those clients, as you had mentioned, that that competition is more fierce than ever, businesses

Kevin Pettet 6:35
are becoming more technically savvy, and they’re expecting more from their banks, and specifically from their relationship managers who support them. To be successful relationship managers must bring more than just a blend of technical and social skills. The business customers expect banks to understand their business and to be able to provide meaningful insights and predictive analytics to help the business compete and win as a foundation for building and growing relationships. If you think about it, predictive offerings around stuff like fraud prevention, customer retention, next product and buy are all becoming increasingly more important in the businesses as they compete digitally. Ultimately, a bank’s relationship manager needs to come up with solutions that solve real business problems to be successful in today’s market. Business banks need to focus on building these offerings and training and equipping the relationship managers to be digitally successful.

Whitney McDonald 7:31
Now, when it comes to this technology, you know that you gave a few examples there. Where can FinTech partners come in and support this effort, especially on the customer experience side? How can you really improve your bank’s offerings with these FinTech partners? And what should banks really be on the lookout for when selecting partners?

Kevin Pettet 7:51
I believe that partner with fintechs represents a real means of differentiation for banks. And banks should be looking for FinTech partners who can accelerate the bank’s ability to create new offerings with compelling value propositions and unique customer experiences. API’s, FinTech ecosystems around bank offerings, and embedded banking are key to delivering and accelerating this trend. That concern, if you think about it a few years ago was at fintechs with disintermediate the banks and they take the high value services away from the bank, leaving the bank to provide the commodity payment rails. Most most banks have moved away from this concern over the last several years and instead of learning to partner with fintechs, the strategy will continue and the ability to partner will be a source of strength for the best banks.

Whitney McDonald 8:42
Now, when it comes to which technology are the must haves, as banks kind of prep for 2024, they reevaluate their strategies they’ve been like I had mentioned before quarter over quarter tech investment continues to rise pretty much across the board. What are those must haves that business clients are asking for banks? What are those? I know that you mentioned fraud? I know that you mentioned on the customer experience side? What technology do the banks have to have in order to remain competitive within this within this market when deposits and just maintain those deposits that that they’re that they already do have?

Kevin Pettet 9:23
So I think there’s a I think there’s quite a few things here. I think first and foremost, payment monetization, which I covered earlier, is really all about helping banks identify new revenue streams, that they can then share with their business customers and strengthen their relationship. And secondly, all about cash visibility, given the multi bank relationships and the expansion of multi bank relationships. How do you make the CFOs job at a business easier? How do you help the CFO be able to see a holistic cash position across all of their banking accounts? So Those are two key areas we’ve highlighted. I think a third is really all around innovating around the payment, and specifically around real time payments. And I believe real time payments as you move into 2024 is going to find its way into being a holistic payment strategy for banks. If you think about the current interest rate environment, everything today is about liquidity. And it’s important to understand when you’re thinking about real time payments, that speed on its own does not make the value proposition for real time payments. Instead, it’s that real time payments, allow a business to wait until the absolute last possible minute and then still make a payment on time. You don’t make it faster, because you want to make a payment 10 days earlier, you make a faster payment, because you want to pay it on the last possible day and use that as a liquidity tool in managing your business. So ultimately, real time payments are not a strategy in and of themselves, but instead part of a comprehensive liquidity management capability that businesses can leverage and hence critical capability for banks to provide. And with the Clearinghouse it’s already here, fed now coming on board, you’re going to see a much stronger adoption, real time payments. It’s a capability that as a bank you need to be able to provide. That’s I think, as we close it’s important for banks to recognize that payments are not a commodity, but instead an area of focus for innovation and proof monetization. payments have often been looked at in commercial banking as a commodity as banks have focused on creating unique user experiences by owning the user interface. Whereas innovation around the payment has been a key strategy in consumer banking for quite some time with the rise of digital wallets and Person to Person payments as two relevant examples. And you actually spoke about them earlier on in the call. What we said at the bottom line for quite some time as an innovation starts on the consumer side and overtime migrates to the commercial side, which still holds true but we expect this migration to accelerate given the current market conditions. Higher interest rates are decreasing commercial loan demands of banks need to find ultimate means of revenue. And we believe that innovation around the payment is really the key or that to drive that incremental revenue will help fill the gap from decrease lending and drive incremental revenues for the bank.

Whitney McDonald 12:16
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Transcribed by https://otter.ai