American SMBs redirect $225Billion to third-party providers
March 15, 2023
A recently published whitepaper from BankiFi and RedCompass Labs unveiled American small and medium businesses (SMBs) who used to be reliant on traditional financial institutions for their payment services needs, are ditching them in favor of third-party providers.
Annually, American SMBs spend roughly $225Billion on accounting and payment services a year.
Why the switch?
The Whitepaper titled ‘SME Banking Channels: converting a money pit into a business opportunity’ details the reasons why this “exodus” is occurring and gives an insight into how banks can recover by delivering cutting-edge technology more efficiently.
The reason for this mass shift is revealed to be an unwillingness or inability by traditional banks to meet third-party competitors’ standards. Costs are the brunt of the issue: increasing technology and staffing costs put a wedge in traditional banks’ operations.
it’s not all doom and gloom for traditional institutions, however: in this whitepaper, BankiFi and Redcompass Labs suggest these costs can be ‘mitigated through partnering with external service providers. That way, Banks get the best of both worlds: cutting-edge technology for a good price.
keith Riddle, CEO of BankiFi, commented “we’re seeing a real crisis for both banks and small businesses.”
There is a clear need for payment and account services among SMBs, and banks are unwilling to meet it due to the current state of the market. Riddle echoed that the solution is indeed for banks to partner with external institutions.
Technology has made it apparent that important institutions, such as banks, are not impervious to the changing times. Traditional institutions will need to find solutions in order to keep meeting consumers’ needs.