A quick recap is in order: The first two posts of this three-part blog series outlined why B2B commerce networks are an incomplete solution for modernizing B2B commerce, and why Dynamic Payments are uniquely capable of delivering on the demands. The next question that naturally arises: Why aren’t big banks addressing this challenge? That’s the topic of this entry.
It’s true that banks handle the vast majority of B2B payments today, but there is a persistent notion that banks are simply not innovators when it comes to technology or network-based solutions such as B2B payments.
Recent evidence does little to dispel such perceptions. In fact, there has been virtually zero bank-led innovation in the B2B payments space for hundreds of years. Literally. Sure, some digitization of some parts has taken place, but the process itself has remained the same. Still disconnected. Still a black box. Innovation tends to enter the banking industry only through government mandate, outside changes, such as advancements in IT, or through the innovations of other industries.
The 2013 edition of the Payments Innovation Jury Report put some metrics to this conception: It confirms that leaders in the payments sector overwhelmingly believe new market entrants are best at driving payments innovation. In fact, a whopping 72 percent hold this view, according to the report. Only 4 percent thought retail banks were best at driving payments innovation.
So what’s the reason banks aren’t aggressively orchestrating the revolution in B2B transaction capabilities? In a word, complexity. They are saddled with legacy architectures and systems, as well as legacy processes that are deeply ingrained. To lead the charge, they would have to find a way to unify the technology siloes, swap out aging and fragile core banking and account management systems, make radical changes to long-standing operational procedures, reorganize for dynamic B2B commerce, and somehow instill a culture of innovation that has not historically been part of their charter.
None of these issues is an easy or fast fix—especially when you consider the sheer amount of work involved in trying to adapt such antiquated systems to meet the needs of global commerce and the demands of what has become a digital marketplace.
The reality is that it will be simpler, faster, and more effective for a new market entrant to lead the dynamic payments revolution. A company that is not carrying the heavy baggage of a “commerce-as-usual” mentality. A small enterprise that can bring a fresh perspective to an age-old challenge. An entrepreneurial firm that has no pre-conceived idea of “how things must be done,” that has no status quo to defend and protect.
In other words, a company like Traxpay.
We firmly believe that successful innovation in payments and B2B commerce will come from a company that is agile, nimble, and dynamic—just like B2B commerce should be.