Banks Morphing into “Bank as a Platform” Players
July 15, 2019 | Contributed by: Neal Polachek
Forbes published an interesting piece last week offering more evidence that banks understand they must go beyond offering narrow banking services to small businesses. They need to broaden their offering to remain relevant to SMBs and capture a greater share of their wallet.
BNP Paribas – the French bank that owns San Francisco-based Bank of the West — works with about 600,000 small businesses and is changing the way it does business with these customers.
The bank has transitioned from offering traditional banking solutions (read online banking, mobile banking, etc.) to offer a complete and automated accounting and financial management platform.
What’s so interesting is that the bank chose to work with yet another Silicon Valley fintech startup — OneUp — to accelerate its product offering. Also interesting is that OneUp was part of the Plug and Play Tech Center incubator program which the bank became a partner of earlier this year.
BNP Paribas and OneUp are taking on the big cloud accounting giants – think Sage, Intuit, Xero. BNP’s Celine Ansquer explains the rationale in the Forbes article. “Following various studies, we found that our small business customers needed help to ease their administrative tasks deemed too time-consuming (categorization of operations, automation of bank reconciliation, invoicing, quotes, tax payment, etc.) with half of our clients surveyed spending 10 hours per month . . .”
This argument lines up well with the LSA’s Modern Commerce Monitor research, which is the foundation of the association’s evolution to address the SMB SaaS industry. A consistent finding in our SMB survey research is that saving time is one of the key reasons that small businesses shift business processes to the cloud.
Interestingly, embedded in OneUp’s tech stack is machine learning that can help predict a small businesses’ pending cash flow situation. This offers the bank great value to anticipate the cash needs of their customers, and, of course, cash flow is another leading pain point for small businesses. We’ve seen a number of recent initiatives in this space, for example, aimed at helping SMBs get paid faster.
What’s at play here is the realization that banks can offer small businesses open banking options. In the Forbes piece, this is referred to as “bank as a platform” where small businesses can manage multiple business processes – likely from their phone – from invoicing to loans, to accounting to professional services.
Banks have a legitimate opportunity to extend and expand their small business wallet share. But it won’t happen without banks demonstrating an authentic and genuine interest in small businesses. They must be open and transparent with fees and charges and respond quickly and intelligently to small businesses’ inquiries.
With banks like Wells Fargo still suffering the lingering effects of dubious marketing and sales practices, a company like Bank of the West could well find some nice operating room to expand its footprint and solution coverage.