Sibos 2023 with its theme of ‘Collaborative Finance in a Fragmented World’ comes at a time when the world of banking and financial services is experiencing a great transformation. Customers want uberized services from their banks who now have access to new technologies that can deliver this hyper-personalized on-demand experience. At the same time, unprecedented global events ranging from a pandemic to a war in Europe have led to significant market disruption, increasing pressure on revenues, and scrutiny on environmental, social, and governance (ESG) priorities. The sector is now actively exploring innovative new technology and business strategies that offer customers the seamless, hyper-personalized service they expect, while maximizing revenues and meeting ESG priorities. From embedded banking and sustainable finance to digital currencies and cross-border payments, the world is witnessing a new era of banking that demands collaboration, partnerships, and innovation amidst great economic and geopolitical uncertainty.
Decoding Collaborative Finance
What does collaborative finance mean? It can be described as a financial transaction between two individuals without the direct involvement of a bank to facilitate the transaction. Some examples of collaborative finance include virtual currencies and peer-to-peer lending platforms. The ease, convenience, and security of such banking models have led to increasing demand not just amongst individual customers but also in the B2B segment. Merchants want to be able to facilitate and process cross-border payments easily. They want to offer innovative credit solutions like ‘Buy Now Pay Later’ and more. Fintechs and tech giants offer these services and this space is expected to reach USD 1.51 trillion in annual revenue by 2030, amounting to almost 25 percent of all global banking valuations. KPMG in its ‘Pulse of Fintech’ report2 states that in the year 2021, the Americas saw an investment of $105 billion and the EMEA region saw investments totaling $77 billion in the fintech space. Over the last three years, the sector has witnessed increasing number of strategic partnerships as banks look to modernize their services with cloud-native fintechs. These fintechs aim to leverage banking data, reach, and trust. But even as they surge ahead with new collaborative solutions and business models, a key challenge that financial institutions need to address is that of revenue leakage.
Understanding and Addressing Revenue Leakage
Approximately 1 to 5 percent of Earnings Before Interest, Taxes, and Amortization (EBITA) is lost unnoticed because of inefficient contract and payment management. While most banks have been on accelerated digital transformation journeys, the focus has not been consistent across all functions. For instance, enterprise billing or account analysis have been left behind in the race to digitize. Several functions are still dealing with manual processes with the possibility of human errors, as well as a highly fragmented infrastructure with multiple systems used by different departments with no single source of accurate data. For instance, banks leave money on the table due to a lack of accurate monitoring of free trial period offers or no clarity between billing cycles and contractual obligations to offer a product or a service. This complexity will only increase as banks accelerate their open banking journeys with multiple partners in a large ecosystem.
Real-time insights and a single view of the entire customer relationship is a key differentiator for banks and a critical factor in plugging revenue leakage, especially as market disruptions intensify. 6 out of 103 banks say real-time account balance information is important for corporate customers, but only 41% of banks can fully meet client needs. 49% see error-free billing as an important essential service, but only 41% are equipped to deliver it. 97% of banks say they are looking at addressing market pressures to improve corporate banking services.
The SunTec Advantage
The good news is that modernizing your banking functions and plugging revenue leakage doesn’t need to be an expensive, time-consuming, or risky affair. A robust middle layer platform can enable you to manage and optimize revenue effectively. SunTec offers a cloud-native and micro-services-based revenue management platform that can help you plug revenue leakage at different stages of the revenue life cycle. With the SunTec solution you can design personalized and contextual deals and offerings and ensure accurate pricing and billing across dynamic customer segments and prevent revenue leakage. It can help mitigate risk and ensure regulatory compliance in real time as well as monetize partner ecosystems with a unified product catalog and enable a fair value exchange. In fact, SunTec has helped a leading bank in the USA modernize and overhaul its account analysis functions to plug more than USD 10 million in revenue leakage4. The bank was able to add USD 500,000 annually with SunTec’s flexible pricing modules and ultimately increase revenue by USD 200,000 by applying tiered pricing to one service.
The banking sector is undergoing rapid transformation now in a market context that is disruptive, unstable, and fragmented. There is great innovation underway as banks and fintechs collaboratively gear up to meet customer expectations and ensure profitability. But even as new banking models and partnerships emerge, it is crucial to ensure an unremitting focus on revenue management and optimization.
Meet Us at Sibos ‘23
If you would like to learn more about how SunTec can help your bank maximize revenue using our proprietary software, meet us at Sibos 2023. Please fill in your details here, for an in-person meeting in Toronto.
