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Embedded Banking, Data and Saving SMBs with BankiFi | BankiFi

Speaking with Scott Harkey from PayCLT on their Payments Hub podcast, BankiFi Americas CEO, Keith Riddle, discusses the BankiFi journey as a provider of Embedded Banking solutions to financial institutions (FI’s), from the past, the present and future. 

From the key role that data plays in the relationship between SMBs and FI’s, to how Embedded Banking unlocks that holistic view of an SMB’s financial well-being which they sorely crave – this is an episode not to be missed. 

Scott: What are some of the aspects of the small business vertical that are challenging for banks to understand which BankiFi are helping to solve? 

Keith:  Small and medium-sized businesses (SMBs) have been underserved by their FIs for too long. The disregard of this vertical by FIs can be put down to their lack of understanding of SMBs as a segment, and how to serve them appropriately to meet their needs and therefore have a deeper relationship with them.  

At BankiFi, we are helping FIs to fill this void by adding what we call ‘financial management workflows’ into their digital channels. Breaking these workflows down, what we mean by this is the business processes of the SMB in their entirety: from order-to-cash, to procure-to-pay. But why is this important to SMBs?  

The primary challenges that face SMBs are getting paid on time/quickly and making payments to their suppliers; challenges which are the effects of late payments thrust upon the SMB vertical. According to a recent study, upwards of 75% of SMBs have 2 or more bank accounts and wish to have access to the following: 

  • Cash flow forecasting capabilities 
  • The ability to connect all their operating accounts
  • Take advantage of a better 'payments' experience overall. 

FI’s can provide the above to their SMB customers, helping to alleviate their pain points and create a more frictionless digital banking experience. Giving SMBs a holistic view of all their accounts receivables accounts payables, a financial platform that creates wellness for them and the ability to deepen the relationship they have with their FI – who are their trusted agent – would be mutually beneficial. 

Scott: How do BankiFi help FIs drive or maintain their SMB customer relationships instead of them being picked up by these third-party providers? 

Keith: FIs, particularly larger FIs, know that non-banks such as Stripe or Square, Quickbooks or Amazon, have arrived to extend their payment functionality and product ecosystems, each of which is a threat to their (the FI’s) very existence. To that point, Shopify has extended $400 million in lending in 2022; Amazon have their version of cash advance and so on. These are all examples of how third parties are leveraging a kind of core functionality to then extend products out into this ecosystem and serve SMBs in ways that FI’s have not yet been able to. 

It is educational to look at how extensive this is within the FIs customer base. BankiFi are beginning to educate FIs; explaining that the provision of ‘financial management workflows’ embedded within their digital channel then allows for more ‘eyeballs’ to be set on their digital channel from a customer acquisition perspective. Most notably, the FIs become the ‘front door’* for SMBs to manage their business financials as a result.  

* What do we mean by the 'front door'? Download your copy of our whitepaper: 'Embedded Banking But Not As You Know It' to learn more.

Embedded banking but not as you know it


Another benefit of this embedded workflow strategy is the acquisition of data from the SMBs' accounting platform. Data is critical to the FI, not only in how we use this data to create personalised experiences for this SMB vertical but also to deepen the FI-to-SMB relationship even further. 

It is a great thing that we are bringing businesses into the heart of the FI – but also that we are increasing the awareness of what will happen to the FI if they do not act quickly and if these non-banking ecosystems continue to extend as they are now. 

Scott: Whenever you are working with FIs, how do you get them to wrap their heads around the business case and guide them on how they should begin to leverage something like this? 

Keith: I believe the message of ‘customer retention’ is an incredibly important factor to the FIs as they are beginning to see customer run-off going to non-bank providers as their primary banking hub. Retention and being able to service the SMB customer base that they already have is key for us to include in our discussions with the FI. 

In terms of growth, we need the FI to really step back and think about what their growth goals are because, ultimately, if they do not have the tools within their platform that SMBs need, the question is how are they going to be able to achieve their growth goals without their value-added offerings in place? 

Lastly, again, it’s all about data and taking advantage of this intelligence data to leverage their services and provide SMBs with lending opportunities. Whether this is a traditional line of credit, invoice factoring/lending or other services that can help financial counselling is an ideal explanation as to why FIs should begin to leverage this strategy because not only is this what most SMBs are looking for, it creates a steady revenue stream for the FI as well. 

SMBs are looking at how the FI are going to help them make their business successful and around 75% of them have said that they are willing to provide non-FICO data to help them secure that liquidity; as well as to gain the knowledge and understanding of how they can perform better as a business. 

In short, it all comes down to retention, leveraging the opportunity for growth and outreach to acquire these new SMBs and then the final part is how you take the data and identify the next product or insight or financial counselling for the SMBs. 

Scott: Are you finding that FIs are ready for that data component?  

Keith: This is an interesting point because there are a lot of institutions that query what kind of SMB data they can access from solutions like ours. I believe they must also determine how they as the FI are going to consume that data and make it a part of their practical process to help them identify the next best product personalised to their SMBs' specific needs. 

There are those FIs who are perhaps slightly ahead. These FIs actually want to be able to take all the data that we provide to them from the SMB on the receivables and payables side and leverage this rich pool of data for either enhanced underwriting or to populate into platforms where they gain a better understanding of this SMB segment over time.  

Right now, I think the marketplace is torn between having access to the data and having a decided approach to how they will leverage this to benefit the FI and their SMB customers. Most FIs are wanting to provide customer notifications and personalised activity insights to those SMBs – cash flow forecasting, for example. 

I think that the data component has been a longstanding aspect within our industry, but now we need to figure out how we package this and make it consumable so that FIs can act. 

Scott: Focussing on industry terminologies such as Open Banking or Open Finance, how do you categorise what BankiFi does? Which of those descriptors do you align to? 

Keith: We position ourselves around an Embedded Banking suite of solutions, but we don’t want to be pigeonholed. What we are is an open platform with a set of unified experiences that we extend into the models our FI clients want to pursue or that our partners wish to pursue.  

Some of these FIs are very active with a Banking-as-a-Service strategy and open finance; others are more centric to the traditional enhancement of their current digital platform by embedding additional functionalities. Further to that, other FIs are traditional but are wanting to move to a more open framework that emulates Open Banking over time.  

Personally, I think we are in a great position because we can extend into and configure our solution uniquely for each of those models or scenarios. Some banks will perhaps only want an accounts receivable solution inside an Embedded Banking service that they deliver out for Embedded Finance; whereas that may differ from what they offer within their own digital channel.  

We’re not saying that ‘X’ is going to prosper over ‘Y’. Our platform is an open framework, provided to FIs, which can be applied to those strategies unique to that particular FI, and I think that that has been very well received by the institutions that we have engaged with.  

Scott: Do you think that the industry needs more clarity in those models and what they mean, or not? 

Keith: I do think there needs to be greater clarity. I have seen the term Embedded Financial Services, which probably makes the most sense because the others are more models under a broader umbrella of Embedded Services.  

So, I believe that the marketplace will evolve to that point, but right now there are so many terms that we love to initiate as an industry. 

I think all these terms will roll up into a kind of embedded strategy and a distribution effort for FIs and providers alike, all working within a broad ecosystem.  

For more about Embedded Banking and how it can help to improve your financial institutions' small business banking strategy, take a look at the blog linked below.

Embedded Finance: What's in it for banks?

Nick Reid | Head of Strategic Growth

How Can Data Acquisition From Embedded Banking Improve SMB Relationships for Financial Institutions 

Keith Riddle | BankiFi Americas CEO

What is Embedded Banking and Why Does it Matter?

Keith Riddle | BankiFi Americas CEO

Scott: What is on the horizon for BankiFi? 

Keith: FIs are constantly looking at what use cases are associated with this immediate payment phenomenon which is rapidly growing traction in the US. We have had the RTP network out in the US for 5 years, and we’ve got FedNow which is going to be rolling in around June/July this year. With this in mind, FIs are going to be looking for use cases that they can immediately enable for their business clients – and I don’t believe that there is a better use case than being able to pay and get paid immediately if you’re an SMB.  

The next level of innovation will most likely be that bridge between the retail and the business side of the bank in creating an experience where an exchange of invoicing data and payment becomes immediate. Hopefully, from here we can, as an industry, all understand the availability of data or enhanced data that is a by-product of this exchange.  

This data narrative is going to be a big focus for us, as well as enabling those services and then providing FIs with these data acquisition services so that they can identify lending opportunities, and thus, the opportunity to really grow revenue dynamically within an open framework.

Listen up! You can catch the full episode here.

If you like this, you can hear our team on more podcast episodes by clicking here.

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