Financial institutions such as Banks and Credit Unions, have millions of small businesses as their customers, but are not able to offer compelling payment acceptance solutions to these businesses.
Despite holding bank accounts with financial institutions, businesses prefer to use innovative solutions such as Square, Stripe, Shopify, etc., as the main channels through which they accept in-person and online payments.
This means that financial institutions miss out on the revenue that could be generated, if they were able to offer compelling payment acceptance solutions to their business clients. Financial institutions also miss out on access to data what would enable them to make better informed decisions when offering services such as business financing.
- In todays connected world, a compelling payment acceptance solution has to provide substantial core functionality, while also providing an API based marketplace, using which third party service providers can add value and enhance the ecosystem. Individually, financial institutions, particularly smaller ones, are not able to build or maintain such an ecosystem.
- The new FedNow Instant payments, set to be launched in July 2023 by the US Federal bank, will provide a new channel for banks to offer instant payment capabilities to their clients, without having to go through proprietary payment networks such as Visa, MasterCard, etc. Financial institutions will have to deploy compelling end user applications, in order to capitalize on the opportunities available with FedNow instant payments.