THE VALUE OF REIMAGINING COMMERCIAL PAYMENTS With the value of business-to-business (B2B) payments expected to rise substantially over the next few years, ramping up commercial payments could provide a substantial revenue source for community banks. Though financial institutions have long viewed commercial payments largely as an expense, changing market conditions and a major increase in B2B activity position them to be a significant revenue source. According to data from Research and Markets, global B2B payments totaled just over $88T in 2022 and are expected to climb to more than $111T in 2027, a 26% increase fueled largely by inflation and economic growth within developing markets. By 2027, the average business is expected to make more than 1.4K domestic payments each year. If community banks want to capture this business, now is the time to begin addressing the things business customers are seeking in commercial payment services. Time is of the essence, particularly since fintechs and other nontraditional banks have already begun aggressively courting this business and siphoning off customers. LEVERAGING LOYALTY AND VALUE-ADDED SERVICES According to Accenture, 55% of traditional financial institutions that provide commercial payments say they have lost business to fintechs and major technology providers offering the same services. If community banks don’t take steps to remain competitive on this front, that trend is only likely to continue. Research from Accenture found that four out of 10 customers who use commercial payment services would be willing to switch to a new provider whose offerings include value-added services. Fortunately for community banks, Accenture also found that 51% of businesses would prefer to access value-added services such as credit checks, closed-loop transactions and data dashboards from traditional banks, with that number rising to just shy of 60% for features such as real-time payments and bill payments. In fact, Accenture predicts value-added services are an untapped value proposition for payment providers that could be worth $371B by 2028. Capturing that business necessitates implementing the changes needed to remain competitive now. TARGETED TECHNOLOGY Some strategic moves that can help community banks enact meaningful change in their B2B payment offerings include upgrading legacy platforms and core systems, utilizing developing technologies such as artificial intelligence, tailoring offerings to individual business customers and partnering with third parties to expand their services. As banks begin reimagining their commercial payments, there are a few things they should keep in mind, including the following: • One-stop banking: More than 80% of business customers would prefer to use a single institution for their payment services to manage costs. As of now, however, many businesses feel they are forced to use multiple providers to find everything they are looking for. Community banks have the opportunity to fill this void by identifying and adding the services business customers value most but are currently lacking within their own commercial payment offerings. By Matt Helsing SVP & Northwest Regional Manager, PCBB, ICBC Associate Member INDEPENDENT REPORT | 23
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