‘Buy vs build is an out-of-date concept’, Demica’s Chief Commercial Officer, Maurice Benisty, argued last year, citing the increased number of partnerships between banks and fintechs, and the fact that 83% of bank respondents to Demica’s 2022 Benchmark Survey invest in third party platforms.
With that argument settled, the question moves from whether to buy, to what to buy, and by extension, which fintech to partner with. Put simply, why are banks choosing certain fintechs over others?
Selecting a fintech to partner with your business
The organisation is as important as the technology they sell, both will drive the future trade finance growth of a bank. The term fintech typically conjures ideas of small, fledgling organisations, however within the trade finance fintech space there are multiple sizeable, mature yet dynamic providers.
A recognised, robust provider that has an established but balanced workforce of financial and technology professionals will have the market knowledge to not only support but actively collaborate with a bank, tailoring solutions to address current and future challenges.
Alternatively, a smaller provider can be more likely to structure its development around the needs of a singular client, and while there may be more teething troubles, some banks will prefer to guide their partner rather than be advised on development priorities.
The market strategy of a vendor and its approach to clients is another critical vendor selection criterion. The trade finance fintech ecosystem contains vendors that prioritise different market participants e.g. focusing more on selling into corporates or financial institutions.
Throughout its 25+ year lifetime, Demica has always partnered closely with financial institutions. Active engagement with banks within the space has guided our product & feature development. This understanding of the challenges faced by financial institutions across geographies and maturities within the open account trade finance space led to Demica being the selected technology provider to the likes of HSBC plc, Standard Chartered PLC, and ING Group.
- Look at the size of the business, can they handle your bank’s requirements?
- Has the vendor launched similar programmes successfully in the past?
- How does the business balance the needs of corporates and the needs of banks?
Tailoring the technology to your needs
The expansive trade finance fintech ecosystem caters for a plethora of products and banks need modern solutions to the challenges of executing a trade finance opportunity.
Many vendors specialise in one area or product while others build solutions to offer a complete solution to the user: reducing IT expenditure and operational complexity by eliminating the need to partner with multiple providers.
Vendors should also be keeping track of market trends and gaps in the customer experience. For example, to resolve the industry-wide issue of slow and ineffective global supplier onboarding, Demica developed an automated Supplier Onboarding Tool. This was made to be easily configurable by a bank to offer a tailored onboarding journey for each supplier of each buyer/anchor programme, regardless of location.
As many banks and non-bank financial institutions (NBFIs) have vastly different operational structures, the ability to customise the platform to specific business needs is an important consideration. The fintech must have a solution that can provide the over-arching product in a manner which is desired by a varying client pool; Demica offers this flexibility through a multitude of features from pricing to data capture.
- Is the solution in line with your product requirements?
- Does the business understand market movements, and is its product development pipeline reflecting that?
- How customisable do you need the platform to be?
A level of customisation: Lloyds Banking Group and Commercial Bank of Dubai
Both Lloyds Banking Group and Commercial Bank of Dubai offer payables finance to clients through technology provided by Demica. The flexibility of their solution is paramount to address bank-specific, local, and international market risks and challenges.
The technology demands of your supply chain finance solution
Fintechs have an important mandate of continual development, and this is crucial to give them the edge over the capabilities of internal development teams within banks. When choosing a fintech it’s important to consider the robustness and nature of their solutions roadmap.
A roadmap needs to support banks in combating upcoming challenges and in the winning of new business. The best way for fintechs to achieve this is through engaging with their existing customer base through consistent and informed discussions with clients, informed by the fintech’s internal product expertise.
An established vendor with implementation experience with financial institutions will appreciate the vast integration effort required to reduce the operational burden on all bank users. The implementation experience can be made smoother and more efficient by experience, supported by technology that is flexible on: how data can be transferred; available formats; transmission cadence and security.
For many businesses, a cloud offering is desirable as it facilitates continual enhancement of solutions and allows worldwide access to a secure platform for multinational banks, although data residency and Information Security laws can provide a barrier in some markets. Demica, working closely Microsoft Corporation, deploys solutions in Microsoft Azure datacentres across the world. Where required for SABB, we created a private Microsoft Azure Stack to offer a cloud solution within the required jurisdiction to comply with local laws.
- Is the technology secure and stable?
- Can the platform integrate with existing systems, to the extent that your bank is comfortable with?
- Is the platform equally accessible to your clients in all geographies?
In summary, there are several fintechs in the trade finance space that are deploying significant resources, both human, financial, and technological, to enhance financial institutions offerings to their clients. When selecting a fintech to support in an upcoming project, understanding and alignment across the three themes of provider, solution, and technology, will deliver a solid foundation to an enduring partnership.
If you’re currently looking into partnering with a fintech for your working capital needs, book a call with a member of the team to discuss whether Demica’s solution is right for your business.