Are Banking ePayables Losing You More Time Than They Are Saving You?
The emergence of FinTechs has revolutionized the financial services industry, especially in the past decade. Rapid technological advances coupled with the desire to improve working capital and simplify complex financial processes have redefined the business-to-business (B2B) payment landscape for Accounts Payable (AP) departments.
FinTechs versus Banks:
Before deciding whether to partner with a FinTech or bank for your AP processing, understanding each is essential.
What is a FinTech?
Financial technology (FinTech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. At its core, FinTech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones1.
What is a bank?
A bank is a financial institution that is licensed to accept checking and savings deposits and make loans. Banks also provide related services such as individual retirement accounts (IRAs), certificates of deposit (CDs), currency exchange, and safe deposit boxes2. Types of banks include retail banks, commercial or corporate banks, and investment banks.
What’s the difference between FinTechs and Traditional Banks?
FinTechs and traditional banks provide customers with financial products and services but operate differently. FinTechs use cutting-edge technology like cloud computing, machine learning, Artificial Intelligence (AI), and real-time data insights to deliver amazing customer experiences. Leveraging new technologies make FinTechs more accessible and more appealing, especially to customers who want to manage their finances online.
While they do provide some ePayables options, banks are often limited in digital offerings because they are bound by legacy infrastructure and strict regulations. Such regulations are one of the key differences between FinTechs and banks. Although FinTechs have more flexibility regarding regulations, it’s important to note that any business providing financial services will be regulated in some shape or form. Trusted FinTechs must comply with regulatory requirements set by the Payment Card Industry Security Standard (PCI DSS) to ensure that all companies that process, store, or transmit credit card information maintain a secure environment and protect their customer’s money.
The Rise of FinTechs:
The FinTech industry currently has a net worth of approximately $180 billion3. Global FinTech industry revenue generated by services including personal finance, blockchain, lending, wealth management, and money transfer and tracking software has generated significant revenue for the industry. As a result, global FinTech industry revenue has nearly doubled since 20173.
FinTech’s Impact on Accounts Payable:
FinTechs also provide electronic payment services to customers, enabling them to automate B2B vendor payments. Digital payments occupy 25% of the FinTech product market4. Payment Automation provided by leading FinTech companies have empowered AP departments nationwide by streamlining workflows and eliminating tedious manual processes associated with paper checks, including printing, reviewing, and singing, sorting and stuffing into envelopes, mailing or transporting checks, and follow-up and reconciliation.
Best-in-class FinTech payment processing companies are transforming and driving value in AP departments. Here’s how:
1. Increased efficiency:
Overwhelming manual tasks are now finished in seconds at the touch of a button, eliminating 90% of steps in payment processing while saving 80% of time.
2. Increased security:
Paper checks are highly susceptible to fraud. Electronic payments reduce risk and increase security controls by eliminating paper checks.
3. Increased visibility:
On-demand reporting capabilities give users more transparency through self-service reporting. This includes a payment history report, archived documents, and a payment status report.
4. Decreased Costs:
Issuing one paper check costs between $1 to $26, with an average price of $6 per check5. Payment Automation significantly lowers costs by 80%-90%.
5. Improved supplier relationships:
Faster payments to suppliers with their preferred payment method make both parties happy.
6. Customer focus:
If there is a problem with an invoice or payment, customers and their vendors have accessible customer support with real humans, not bots.
FinTechs are expected to continue their rapid expansion and keep a competitive edge against banks. Robust solutions offered by FinTechs equip customers with the ability to increase efficiency, enhance security, and focus on what matters most to them. With 51% of enterprises having digital B2B payments in operation6, it’s evident that more finance teams are using the powerful finance automation technology provided by leading FinTech companies.
To learn more about partnering with a best-in-class FinTech Payment Automation provider, schedule a demo with Paymerang now.
1Investopedia: Financial Technology (Fintech): Its Uses and Impact on Our Lives
2Investopedia: How Banking Works, Types of Banks, and How To Choose the Best Bank for You
4McKinsey & Company
5Check Issuing: The Cost of Issuing Checks (A Guide for Business)