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Commercial banks around the country continue to treat one of the most basic services they’ve offered for decades more as a passive commodity rather than a proactive, marketable asset. It’s time for commercial banks to realize their ACH capability can be turned from a cheap, traditional, uninnovative payment solution into a sustainable and profitable source of non-interest revenue. .
The key lies in understanding how to package available resources and solutions together. In the credit/debit merchant processing world, processors charge three to seven cents for an authorization. Card brands set their credit/debit card interchange reimbursement levels for their member banks. Acquiring banks then charge three to five cents for a settlement. Then, a few banks— along with a multitude of third-party resellers— market those services and mark up the fees to make their profit spread.
Contrast that with what most commercial banks offer their commercial clients with ACH. Most offerings are currently limited to the ability to process ACH through an outdated solution that is clunky at best from their merchant’s perspective. What is the value of your bank’s ACH offering? What accounts receivable and invoicing problems related to ACH are you helping your merchants solve? How are you making their experiences more effi cient while also generating sustainable bank revenue in the process?
The vast majority of third-party, nonbank resellers continue to focus on reselling merchant processing and software solutions in the consumer (C2B) markets. However, the commercial B2B space is a multitrillion dollar market that continues to experience challenges and inefficiencies. Specifically, B2B merchants have security-, cost-, and operations-related challenges with their antiquated accounts receivable invoicing processes.
Banks can take a quick lesson from the merchant processing industry, which has been effective in selling payments related technology solutions to merchant markets. Years ago, they were all selling basic countertop terminals that were designed to simply get cards authorized for payments. Now, the authorization processes are simply one basic function embedded into the overall operational software solution they offer to merchants.
Banks are in a unique position to do a similar thing for B2B markets. Since virtually all banks offer ACH, they can proactively merge their ACH capability with new, innovative invoice and payment technology solutions. For institutions that don’t want to develop their own solution, they can seek out technology providers that offer solutions designed to solve these B2B challenges. Use the following seven steps to help you create a new B2B value-added invoicing and payments solution wrapped around your institution’s ACH offerings:
- Ask your clients to walk you through their process of invoicing vendors.
- Discuss their specific invoicing and payments pain points in terms of operational, cost, and security inefficiencies.
- Interview potential fintech vendor partners and evaluate how their solutions solve the specific pain points based on questions one and two.
- Evaluate the revenue opportunities for your potential partnerships.
- Uncover how both organizations can help distribute your new electronic invoicing and payments solution to existing and prospective B2B customers.
- Understand any technical integration requirements of using the new fintech solution wrapped around your ACH.
- Establish your market strategy and prepare to launch.
Now is the time to turn your ACH capabilities from low commodity-level pricing into higher, value-based gold pricing. Just imagine a new world of highly profitable and sustainable revenues generated by your ACH capabilities. And like the branded card networks, imagine creating new types of interchange levels with ACH.
It’s possible, and it’s beginning to happen.