As the financial services industry grapples with the rapid pace of digital transformation, cloud banking has emerged as an enabler of innovation, agility and cost efficiency. By leveraging cloud computing, financial institutions can streamline operations, enhance customer experiences and accelerate the development of new products and services.

That’s the space where software providers like nCino, which on Tuesday (Aug. 27) reported its second quarter 2025 earnings, play — giving them a unique insight into the banking sector’s ongoing evolution.

“In the U.S. it’s a volume business; we don’t see as many very large transformation initiatives as we did in the past … in the EU, it is lumpy. They are somewhat behind the U.S., and the pipeline is seeing bigger transformation deals,” said Pierre Naudé, chairman and CEO at nCino.

nCino sells to financial institutions, enterprise banks, regional banks, community banks and credit unions, and the majority of its revenue comes from the U.S.

“Platform deals, where they buy everything from us, that moves the needle,” Naudé said. “In Europe, they prefer point solutions.”

nCino’s total revenues for the second quarter were $132.4 million, a 13% increase from $117.2 million reported for the same quarter last year. Subscription revenues for the second quarter were $113.9 million, up from $99.9 million one year ago, an increase of 14%, per the company’s financials.

Still, nCino’s share price slid by over 10% during after-hours trading, in part driven by its softer-than-expected third-quarter 2025 guidance.

The company reported a loss of $11 million for the most recent quarter, compared to $15.9 million a year ago.

Related reading: nCino Unveils AI-Powered Banking Advisor

Demand for Cloud Banking and Artificial Intelligence  

The cloud accelerates innovation by providing financial institutions with access to advanced technologies such as artificial intelligence (AI), machine learning (ML) and big data analytics. These tools enable banks to develop personalized customer experiences, improve risk management and optimize business processes.

During the quarter, nCino expanded its partnership with ABN AMRO, a top 25 European bank, and also renewed its relationship with a Top 5 European bank for an additional three years. An institution with over $20 billion in assets also became the largest bank by asset size to expand their use of the nCino platform to include portfolio analytics for commercial real estate stress testing.

“We are pleased to report that we again exceeded quarterly guidance for total and subscription revenues as well as non-GAAP operating income,” Naudé said. “In the second quarter, we saw particular strength in the U.S. across both the enterprise and community & regional segments, with increased demand for solutions that span the breadth of the nCino platform including consumer lending and deposit account opening, as well as our Generative AI offering, Banking Advisor. While some macro-economic challenges persist, particularly in the U.S. mortgage market and international markets, we have a positive outlook on the second half of the year.”

Read more: Payments Execs Debate Banking’s Transformative Future

PYMNTS Intelligence found that nearly 70% of consumers in the U.S. and Australia would like to have a single app that would allow them to manage their banking, investments and various shopping activities.

As digital transformation becomes a strategic priority for financial institutions, the adoption of cloud banking is expected to accelerate. Cloud banking enables financial institutions to expand their operations into new markets by reducing the barriers to entry, such as the need for physical branches and local IT infrastructure. This is particularly relevant in emerging economies, where digital banking adoption is on the rise.

“The community bank space is like a machine; it just rolls forward,” Naudé said.

Data in the report ”How FinTechs Can Align With Credit Union Innovation Agendas,” a PYMNTS Intelligence and Velera (formerly PSCU/Co-op Solutions) collaboration, reveals that the pace of innovation across credit unions (CUs) has resulted in almost all FinTechs viewing CUs as collaborators more than competitors.

Only 3% of FinTechs say CUs are more competitors than clients.

For all PYMNTS digital transformation coverage, subscribe to the daily Digital Transformation Newsletter.

The post nCino: International Banks Lag U.S. Peers in Digital Transformation appeared first on PYMNTS.com.

 That’s according to a report Sunday (Aug. 25) by Fintech Business Weekly, which says that winding down a startup such as PrizePool can be disruptive to customers who have grown to depend on it for important banking tasks like direct deposits and bill pay. 

PrizePool has told customers they have until Sept. 19 to move their funds to an outside bank account, the report said, citing an email sent to users. PYMNTS has contacted PrizePool for comment but has not yet gotten a reply. 

The report also points out that the prize-linked banking startup had also worked with the “troubled” Evolve Bank & Trust.

“Thankfully, PrizePool works directly with Evolve and does not appear to have relied on an intermediary platform to support critical tasks like ledgering — though it is unclear if Evolve’s direct partners suffer from the same kinds of reconciliation challenges exposed by the ongoing meltdown of Synapse,” writes Fintech Business Weekly’s Jason Mikula.

As PYMNTS has written, Synapse’s troubles began when its company’s largest client, Mercury, chose to work directly with Evolve, Synapse’s core banking partner, thereby removing the need for Synapse as a middleman.

“That set off a chain of events, few of them good, for Synapse’s other clients who relied on the FinTech provider as their connective tissue,” that report said.

Synapse sought bankruptcy protection and, in April, agreed to be acquired by TabaPay, though that deal soon fell apart, leaving thousands of customers from its FinTech partners locked out of their accounts.

Meanwhile, PYMNTS explored the concept of prize-linked savings accounts in a 2023 conversation with Owen Monagan and Oisin Tiernan, co-founders and CEO and CTO respectively of Layup, a challenger bank offering these accounts for sports fans. Tiernan explained it’s a concept that has been around for some time.

“It exists in Australia, in South Africa. Over a third of the U.K. population has a premium bond account, which is the prize-linked savings mechanism there,” he said.

PLSAs came to America 10 years ago with the passage of the American Savings Promotion Act. The variable rate of return of PLSAs has been shown to help low- to middle-income earners save more money while lowering their spending on lottery tickets and other types of gambling.

“Leveraging digital gamification to reinforce positive behaviors, like saving money or not gambling on sports, can do a lot to accelerate the adoption of new behavioral patterns — including making smarter financial choices,” PYMNTS wrote.

The post Prize-Linked Neobank PrizePool Shutters App Ahead of Acquisition appeared first on PYMNTS.com.

It’s reflected in PYMNTS recent “How The World Does Digital” report that showed Brazil had the highest digital engagement out of the 11 countries surveyed, with mobile banking engaged at least weekly by 63.2% of respondents, with online banking at 59.4%. The rest of the world checked in at 46.8% and 42.4% accordingly.

All of which is music to the ears of Osvaldo Giménez, President-Fintech, MercadoLibre, and CEO of Mercado Pago, Mercado Libre’s financial services unit, accounting for 50 million active users and $50 billion in transaction volume, where he oversees the business strategy, including product development and promotion.

Mercado Libre is the largest eCommerce and payments ecosystem in Latin America, operating a diversified business model in 18 Latin American countries across financial services, advertising, credit and shipping logistics.

Giménez joined Mercado Pago in 2004 and became president in 2020 after serving as country manager for Mercado Libre in Argentina and launching in Chile, Uruguay and Peru.

“I think that what has happened in Brazil has been amazing,” he told Karen Webster recently. “The central bank has taken an approach that says, ‘I’m OK with innovation, and I want to increase competition.’ In some countries you see that there’s a strong lobby from traditional banks to prevent competition. In Brazil everyone wants a level playing field. They want innovation to happen.”

And Mercado Libre, as well as Mercado Pago, is ready to test that innovative spirit outside of Brazil. The company has bold expansion plans as it looks to become the dominant digital bank in Latin America, including its recent application of a digital banking license in Mexico. What began as an eCommerce platform akin to eBay now challenges traditional banks and drives financial inclusion across the continent.

“If we were to look probably 10 years back and look at how the financial system worked in every country in Latin America, typically you had a very high concentration among five or six banks per country,” Giménez said. This concentration, he argued, led to underserved populations and high margins for banks.

The rise of FinTech companies like Mercado Pago has disrupted this status quo. By leveraging technology, these new players offer competitive products at lower costs, bringing millions of previously unbanked or underbanked individuals into the formal financial system. The transformation is particularly evident in Brazil, where regulatory changes have fostered innovation and competition.

Giménez highlights the impact: “One statistic that I saw recently was a survey of where financial transactions are initiated in Latin America. Ten years ago, two-thirds of transactions were initiated in financial branches. Right before COVID, in 2019, 50% of transactions were initiated in financial branches. And nowadays it’s single digits.”

This shift toward digital banking is not just about convenience; it’s reshaping the entire financial ecosystem. Mercado Pago, which started as a payment solution for Mercado Libre’s eCommerce platform, has expanded its offerings to include a suite of financial products. From digital wallets and QR code payments to credit services and investment options, the company has become a one-stop shop for financial services.

The evolution of Mercado Pago mirrors the changing landscape of FinTech in Latin America.

“We started Mercado Libre 25 years ago,” Giménez said. “Initially we wanted to become the eBay of Latin America. We turned into the Amazon of Latin America because we soon realized that new items were more important. And that shipping and payments had to be a significant part of what we offered.”

As smartphones became ubiquitous, Mercado Pago expanded beyond online payments to offline transactions, introducing point-of-sale solutions similar to Square. The company then launched digital wallets and QR code payments, inspired by developments in Asia. The success of this model is evident in the numbers. As Giménez pointed out, over three-quarters of Mercado Pago’s total payment volume now comes from outside Mercado Libre’s eCommerce platform, underscoring its success as a standalone financial services provider.

Central to Mercado Pago’s growth strategy is its ability to offer innovative solutions tailored to local markets. In Brazil, for instance, the company has embraced Pix, the instant payment system introduced by the central bank. Giménez explained, “Pix basically is a very easy and convenient way to send money to anyone in Brazil for free. And the growth has been huge.”

The company’s ambitions extend beyond its current offerings. Mercado Pago is now seeking a banking license in Mexico, a move that Giménez says will allow it to “compete head-on and become the largest digital bank in the region.” This license would enable the company to offer a broader range of services, including salary accounts and deposit-funded lending.

Looking ahead, Mercado Pago has set its sights on expansion across Latin America. While Brazil, Mexico, and Argentina remain its largest markets, the company is making inroads in Chile and has plans for Colombia, Peru, and Uruguay.

“The way we realize it works is basically pick one of these countries and launch the full suite of products there. And that typically takes a couple of years,” Giménez said.

The post Exclusive: Mercado Pago CEO on Building Brazil’s Biggest Digital Bank appeared first on PYMNTS.com.

• Younger Consumers Jolt the Banking Status Quo
• From Big Data to Big Impact, Banking Needs to Get Personal
• Balancing Protection and Personalization in Banking
• Next Steps: Leveraging Data for Local Banking Success

Younger Consumers Jolt the Banking Status Quo

Young retail banking customers are keeping an eye on the exits at their current FIs. These digital natives want more than just slick apps at a time when banks risk forgetting that quality service still reigns supreme.

Digital capabilities alone, however, are proving insufficient to retain digital natives as the latter increasingly demand personalized, goal-oriented support. A new study finds that nearly half of Gen Z consumers are willing to switch to a banking competitor for tailored financial guidance and spend management tools. This puts a new twist on the demand for technology, with personalization becoming the goalpost of sophisticated, feature-rich banking.

Service quality no longer matters — or does it?

Although digital transformation is dominating the banking industry’s focus, memorable customer service remains a critical factor in retaining account holders. A striking 21% of retail banking consumers who have closed accounts cite poor customer service as the primary reason. This contrasts with less than 5% who did so because of dissatisfaction with the mobile experience.

The importance of service quality is top of mind for many consumers who are considering a switch: 26% who are likely to change FIs blame unsatisfactory service. This finding serves as a stark reminder that while digital innovation is crucial, even the most elaborate digital interface cannot compensate for subpar service. As banks and FIs prioritize digital transformation, they must ensure that their focus on technology does not come at the expense of quality service.

From Big Data to Big Impact, Banking Needs to Get Personal

Retail banking customers are done with one-size-fits-all. These days, they demand financial advice nearly as unique as their fingerprints. Can FIs deliver a win-win? The prize is no less than customer loyalty.

Banking customers yearn for wisdom and convenience, packaged just for them.

FIs are sporting the latest technology to unlock the potential of personalization.

FIs globally are adapting their technology infrastructure to meet the demand for personalized, digital-first banking ecosystems. An overwhelming 97% of financial services providers across every major global region have migrated at least one application to a different technology stack in the past year. Driving this trend is the need to improve data access speeds (42%), strengthen security (41%) and integrate cloud-native services such as artificial intelligence (AI) and machine learning (ML) (39%) — all critical ingredients of digital banking personalization. For community banks and CUs, which often excel in customer service, this presents both a challenge and an opportunity. By adopting modern, agile technology architectures, these smaller institutions can combine their service strengths with advanced personalization capabilities. This combination could allow them to leapfrog larger competitors in delivering integrated, personalized banking experiences.

Balancing Protection and Personalization in Banking

Data is banking’s new gold mine, but just one data breach could be catastrophic. Savvy FIs are not hiding behind walls. They are making security a competitive edge to win hearts and accounts.

A single security misstep can bankrupt customer trust.

Security is a top priority for 91% of retail banking consumers when choosing an FI. From Gen Z to baby boomers, the message is clear: Protect my data. Indeed, inadequate security measures could cost banks more than financial losses, with 75% of banking customers ready to switch to a competitor if their sensitive personal data is compromised. The takeaway? Personalize, but make ironclad security a cornerstone of that personalized experience.

Banks can turn security fears into customer empowerment.

More than 9 in 10 U.S. retail banking customers rank the protection of sensitive personal data as a bank’s most critical capability. However, with nearly half having experienced a banking security concern firsthand, there has been an erosion of trust: 67% of consumers now doubt their bank’s ability to counter sophisticated threats such as deepfake fraud. This gap between expectation and reality presents yet another opportunity for community banks and CUs. By incorporating personalized services with robust, transparent security measures, these smaller FIs can rewrite the security narrative, turning it from a worry into a value-added service.

Next Steps: Leveraging Data for Local Banking Success

Gen Z and millennial consumers’ preference for digital-first banking plus tailored financial guidance is a trend that continues to gain momentum. The race to capture these valuable customers will determine the leaders of tomorrow’s financial industry. By leveraging data-driven insights to deepen community connections, smaller FIs can differentiate themselves in an increasingly homogeneous market. Community banks and credit unions are in a position of strength — if they seize the moment.

PYMNTS Intelligence offers the following actionable roadmap for community FIs looking to gain — and keep — primary banking status with their customers:

• Implement a data-driven personalization ecosystem. Deploy advanced analytics to aggregate and parse customer data, leveraging AI-powered insights to offer tailored experiences across all touch points. Implement modular financial planning tools that allow consumers to customize strategies aligned with their life stages and financial objectives, and utilize predictive modeling to generate hyper-targeted product offerings and proactive financial guidance.
• Architect an omnichannel customer service model. Integrate AI-driven automation with high-touch human expertise. Pilot conversational generative AI chatbots for routine inquiries and preliminary financial guidance, but ensure that frictionless escalation to human advisers is easily accessible. Equip staff with real-time, data-enriched customer profiles to facilitate personalized consultations and product recommendations tailored to individual financial journeys.
• Enhance cybersecurity posture with multifactor authentication (MFA) and contextual risk analysis. Implement ML-driven predictive analytics to identify potential fraud and dynamically adjust authentication protocols. Integrate behavioral biometrics, such as keystroke dynamics or mouse-movement analysis, for continuous authentication, and provide a user-friendly security dashboard to empower customers with insights into their account activity and security measures.
• Partner with FinTechs. Prioritize partnerships that enhance personalization and improve back-end efficiency. Collaborating can dramatically accelerate implementation timelines and provide access to ongoing specialized support, enabling smaller institutions to rapidly deploy advanced technologies while maintaining their community-focused approach.

An institution’s community roots are its superpower. FIs that build this connection into every data-driven interaction will offer a banking experience that is not simply convenient but also memorable — a winning differentiator in today’s financial landscape.

The post Local Roots: How Community FIs Can Win the Digital-First Generation appeared first on PYMNTS.com.

As CEO Dee Choubey told Karen Webster, the middle-income, paycheck-to-paycheck consumer is fueling the company’s growth.

“Our clients on the consumer side are mostly middle income,” Choubey said. “They’re the firemen, the teachers, the cops, the gig economy workers. We are not as yet seeing a lot of job displacement in that segment. This is probably going to be the first white collar recession, and that’s going to potentially impact existing credit card books. But our risk selection technology is good and the demand from the essential workforce for our products is going up.”

MoneyLion is enjoying a successful pivot from a neobank to what is essentially a consumer and business financial services portal and shopping mall. Among the products its “essential” consumers are buying more of from the site and app: buy now, pay later, income advances, earned wage access, secured card products and short-term installment loans. What’s not moving yet: mortgages. However, Choubey expects business to increase if the Fed cuts prime rates as expected in September.

Q2 Earnings

Whatever Choubey and his team are doing is working. By the numbers, total revenues, net increased 23% to $130.8 million for the second quarter of 2024 compared to the second quarter of 2023, with a net income of $3.1 million for Q2 coming in the second versus a net loss of $27.7 million in the second quarter of 2023. Adjusted EBITDA was $18.5 million for the second quarter of 2024 versus $9.2 million in the second quarter of 2023.

Total customers grew 73% year-over-year to 17 million and total originations grew 40% to $770 million. The growth comes not only from the middle-income consumers Choubey referenced but from the ecosystem strategy that the company embarked on in mid-2023. That ecosystem will expand, he said. The company has launched a search tool on its site and is working on its checkout solution.

And speaking of search, one of the most interesting points of the conversation with Webster occurred when she asked Choubey if the Google antitrust decision could open some opportunities for his company as a customer acquisition and marketplace solution.

“We’re now building these web tools for any CMO that runs a financial institution, a bank, a lender … to actually think of MoneyLion as a channel,” he told Webster. “Just like they think of Google SEO as a channel.” He emphasized that the company’s teams are now optimizing bidding strategies and audience building on MoneyLion’s channel, similar to how they approach other major platforms.

Choubey also highlighted the company’s acquisition of Even Financial as a key component of this strategy, allowing MoneyLion to operate its own “walled garden” in the financial services ecosystem. This approach aims to provide a more precise and personalized experience for consumers seeking financial products, moving away from the “flea market” approach common in the industry.

Growth Drivers

Choubey outlined three main growth drivers for MoneyLion: increasing the number of suppliers (lead sources), expanding the consumer base, and broadening the range of financial product options available on the platform. The company reported that third-party products have eclipsed MoneyLion’s own offerings, accounting for 51% of products taken on their marketplace to date.

“We measure success by how many decisions a consumer’s making on our platform in a recurring manner over time,” Choubey stated, emphasizing the importance of user engagement and trust in the ecosystem.

Regarding MoneyLion’s banking strategy, Choubey presented a nuanced approach. “We don’t believe that we are the best banking solution for every American out there,” he said. Instead, MoneyLion positions itself as an “interface layer,” complementing existing banking relationships while serving as an first bank account for certain segments of the population.

The company is also making strides in implementing AI capabilities despite the challenges in the financial services sector. “It’s really hard to build GenAI capabilities in financial services,” Choubey noted, highlighting the importance of accuracy when dealing with people’s money. MoneyLion is working on integrating AI to provide personalized insights and recommendations based on users’ financial data.

Looking ahead, Choubey expressed confidence in MoneyLion’s long-term prospects, despite short-term stock market reactions that resulted in MoneyLion stock price taking a hit despite its successful earnings.

“Our team is doing such great work to ultimately get the essential workforce access to premium capabilities and insights that no one else is really creating for that universe,” he said. “It’s an important thing that we’re doing. And I think in the long run. I tweeted this today: In the short run, it’s a voting machine; in the long run it’s a weighing machine. I think we’re in a way pretty heavy in the long run.”

The post MoneyLion Continues to Play Winning Hand With Middle-Income Americans appeared first on PYMNTS.com.

With consumer expectations rapidly evolving toward seamless digital experiences, banks must navigate the high costs and complexities of updating their core systems. Exploring incremental modernization through application programming interfaces (APIs) may offer a viable path forward, enabling banks to enhance their digital capabilities and remain relevant in an increasingly competitive landscape.

A recent PYMNTS Intelligence Report, “Core Strength: FIs Must Modernize to Meet the FinTech Challenge,” in collaboration with Galileo, highlights the urgent need for traditional financial institutions to overhaul their outdated systems to keep pace with digital-native competitors. The report reveals that 75% of banks struggle with implementing new digital solutions due to their legacy infrastructure, underscoring the critical nature of modernization efforts. As FinTechs continue to capture a growing market share, banks face mounting pressure to adopt agile technologies and innovative approaches.

FinTechs Are Outpacing Traditional Banks

FinTechs and digital banks have captured 47% of new account openings in the first half of 2023, a notable increase from 36% in 2020. This surge highlights their growing dominance in the market. A sizable portion of these customers — 41% — use digital-only banks for their primary banking and credit card needs, signaling a shift away from traditional financial institutions. The swift growth of FinTechs underlines the urgent need for banks to enhance their digital offerings to avoid losing more customers.

Legacy Systems Are a Major Barrier

Legacy core banking systems hinder traditional banks’ delivery of modern digital services. According to the report, 75% of banks struggle to implement new payment solutions due to outdated infrastructure. Additionally, 59% of bankers see their legacy systems as a major business challenge, describing them as a “spaghetti” of interconnected but antiquated technologies. This complexity and obsolescence make system upgrades costly and difficult.

APIs Offer a Solution for Incremental Modernization

APIs are emerging as a practical solution for modernizing banking infrastructure without complete overhauls. Nearly 47% of financial institutions are pursuing incremental core upgrades using APIs, which allow for gradual improvements and integration of new functionalities.

This method contrasts with the 13% of banks opting for full-core system replacements, highlighting the more manageable and less risky nature of API-driven updates. For instance, Deutsche Bank’s implementation of an API-accessible payments orchestration layer illustrates how such upgrades can streamline operations and enhance digital service offerings.

As FinTechs continue to disrupt the banking sector, traditional financial institutions must prioritize updating their core systems. By adopting incremental modernization through APIs, banks can improve their digital capabilities and remain competitive in a rapidly evolving landscape.

The post Three-Quarters of Banks Face Digital Banking Infrastructure Issues appeared first on PYMNTS.com.

Yet, despite its advantages, only 11% of U.S. adults have used open banking payments in the past year, even though nearly 46% express strong interest. To unlock this potential, providers must address key barriers such as security concerns, enhance awareness and implement compelling incentives.

The PYMNTS Intelligence report, “Consumer Sentiment About Open Banking Payments,” done in collaboration with Trustly, sheds light on this gap between high interest and low adoption. This gap is primarily due to limited awareness and security concerns, highlighting a significant opportunity for growth if these challenges are addressed.

Gen Z and Millennials Lead the Charge

According to PYMNTS Intelligence, 72% of Generation Z and 66% of millennials show high enthusiasm for using open banking payments, significantly outpacing older generations. In contrast, only 42% of Generation X and 22% of baby boomers exhibit similar willingness.

This generational disparity suggests that open banking providers should focus their marketing efforts on younger demographics, who are more inclined to integrate this payment method into their routine transactions. Additionally, high-income individuals are more likely to adopt open banking payments, with 50% of those earning over $100,000 annually expressing interest, compared to 42% among those with lower incomes.

Security and Trust Are Primary Obstacles

The report reveals that 56% of non-users cite trust issues as a significant barrier, while 44% are unfamiliar with the concept of open banking payments. Security concerns are particularly prevalent among older consumers, with 64% of baby boomers and seniors highlighting this issue, compared to 44% of Gen Z and millennials.

To address these barriers, open banking providers must focus on enhancing security measures, improving transparency and increasing consumer education. Partnering with established financial institutions could also help build trust and credibility.

Discounts, Loyalty Programs Can Elevate Open Banking Adoption Rates

According to the report, 38% of consumers would be more inclined to use open banking payments if offered discounts, with this figure rising to 52% among millennials and Gen Z. Similarly, 37% of consumers are influenced by loyalty programs, with a stronger preference among younger generations.

By integrating these incentives into their offerings, open banking providers can enhance appeal and encourage wider adoption. As consumers become more familiar with the benefits of open banking, their satisfaction levels rise, particularly among frequent users, with 82% of those using the payment method more than 15 times in the past year expressing high satisfaction.

As a result, this satisfaction increases their likelihood of switching to businesses that support open banking payments, further emphasizing the need for providers to create compelling incentives to drive usage.

To capitalize on the high interest but low current use of open banking payments, providers should focus on increasing awareness and trust while leveraging incentives. Tailoring strategies to highlight the benefits of open banking payments for routine transactions, addressing security concerns transparently and offering attractive incentives will be crucial in bridging the gap between consumer interest and actual adoption.

With the right approach, open banking payments have the potential to become a mainstream payment option, especially among younger and higher income consumers who show the strongest interest and willingness to integrate this innovative payment method into their financial routines.

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• Financial Shortfalls Continue to Plague SMBs
• SMBs Seek Digital Remedies for Cash Flow Pain
• From Traditional Banks to Trusted Advisers
• Writing the Digital Prescription for SMB Client Success

Financial Shortfalls Continue to Plague SMBs

Late payments, inflation and outdated payment processes create a triple threat of blocked cash flow, inefficiency and impaired decision-making for small businesses.

Inflation is stretching small businesses to their limits.

Seventy-six percent of SMBs with revenues under $10 million say they are suffering under the economy’s prolonged inflationary conditions, with a staggering 71% still experiencing cash shortfalls. Conditions have reached desperate levels for many, with 35% of SMB owners dipping into personal savings, 31% forgoing their own paychecks and 19% filling cash gaps with personal loans to keep their businesses afloat. This unrelenting pressure calls for smarter money-management tools tailored to SMBs’ needs.

Manual accounting processes exacerbate macroeconomic distress.

In an era of advanced technology, legacy accounting processes nevertheless maintain their choke hold over many business operations. An astonishing 36% of mid-sized firms are still using costly paper payments in accounts payable (AP), while 35% are wrangling accounts receivable (AR) manually. Smaller SMBs, particularly those generating less than $100,000 annually, are bearing the brunt of this inefficiency, with these work tools contributing to already highly unpredictable payment cycles.

SMBs Seek Digital Remedies for Cash Flow Pain

SMBs are aware of the need to digitalize and are actively seeking banking partnerships that can help them do so. They are also frustrated with — and ready to jettison — those that do not.

SMBs are frustrated with their current financial management and banking processes.

SMBs have a fast-growing appetite for digital banking solutions.

Going digital is more efficient, and 78% of SMBs prefer to pay employees with a click, not a check. An even greater share, at 90%, are demanding the same push-button ease for vendor payments. Nearly seven in 10 SMBs want comprehensive cash flow management tools from their primary banks. With $150 billion in annual SMB banking revenue at stake, FIs that cannot deliver on these digital demands risk both client churn and a potential share of the valuable SMB market.

SMBs are actively pursuing new banking relationships to upgrade their digital capabilities.

Small business clients discontented with current banking partners are voting with their feet. In the U.K., 25% of SMBs plan to sever ties with their primary banks within the year, while 41% of U.S. SMBs are threatening to do the same, similarly motivated by lower barriers to credit (39%), better support (33%) and more impressive digital banking experiences (32%) elsewhere. These findings suggest that banks and CUs not offering robust digital solutions could face an exodus of their SMB clients to competitors.

From Traditional Banks to Trusted Advisers

By offering digital solutions that include predictive tools, seamless integrations and tailored guidance, community banks and CUs can position themselves as strong financial management partners in their SMB clients’ success.

To become better partners to their clients, banks can partner in turn — with technology providers.

Community banks and CUs might find themselves coveting the digital arsenals of bigger banks — such as Citizens, which can now offer SMBs a 12-month glimpse into their fiscal futures with its new cash flow forecasting tool. However, FIs do not need to be megabanks to check all the boxes on SMBs’ digital wish lists. Partnerships with the right FinTechs and other payments providers can turn community banks and CUs into digital dynamos that are second to none. Golden 1 Credit Union has taken note of this, partnering with NCR Voyix to develop an adaptable digital banking platform that caters to SMBs’ evolving needs.

Writing the Digital Prescription for SMB Client Success

The traditional banking model is simply no longer enough. SMBs are demanding comprehensive digital banking solutions, but these pleas are rooted in genuine needs that reflect a rapidly digitalizing economy. As SMBs increasingly search for intuitive, integrated and insightful banking solutions, FIs — especially community banks and CUs — face an extraordinary market opportunity to redefine their roles from mere banking service providers to strategic growth partners.

PYMNTS Intelligence recommends that community banks and credit unions consider partnering with FinTechs to offer digital services to small businesses, especially if they lack these offerings in-house. This approach can be mutually beneficial to FIs and their SMB clients by doing the following:

1. Expanding product offerings: Partnerships with FinTech firms enable community banks to integrate third-party solutions, offering a more comprehensive range of financial products to small businesses. This allows banks to provide innovative digital services without having to develop them from scratch.
2. Accelerating innovation: The ease of integrating FinTech solutions allows community banks to implement them quickly, reducing the time to market. This is particularly valuable for small banks that may not have large research and development budgets.
3. Enhancing customer experience: Collaborating with FinTechs can give banks access to cutting-edge technology, enabling seamless digital experiences and personalized services for small business customers. For example, SF Fire Credit Union partnered with a FinTech to create personalized digital experiences, resulting in significantly improved application completion rates.
4. Addressing specific needs: Partnering with FinTechs can allow FIs to tailor solutions to the unique needs of their small business clients for greater satisfaction and loyalty. For instance, The Cooperative Bank partnered with a FinTech to provide advanced artificial intelligence (AI) technology for protecting elderly customers from scams.

By offering both seamless digital technology and personalized financial expertise, community FIs can forge lasting relationships with their SMB clients — and make a serious play for the gold ring of SMB digital-first banking business.

The post The $150B Question: Can Community FIs Capture the SMB Digital Banking Opportunity? appeared first on PYMNTS.com.

The bank on Wednesday announced the waitlist for Monzo for Under 16s, designed to offer money management tools to kids between the ages of 6 and 15. 

“The account gives children the opportunity to experience magic money firsts like saving, budgeting, receiving pocket money or using a card to pay in a shop, all while giving parents or guardians complete control and visibility to ensure they’re managing their money safely,” Monzo said in a news release.

According to the release, the program lets kids sign up without paying fees for top-ups, subscriptions or spending abroad. Children can set savings goals and receive scheduled pocket money, while their parents can have these accounts linked to their own to control spending, online payments and cash withdrawals.

Monzo says the Under 16s accounts also offer guidance on things like saving, budgeting and spending safely online and allow children to move up to a 16-17s account and again to a full Monzo account upon reaching adulthood.

Monzo’s efforts to help educate younger customers come at a time when many teenagers in more prosperous countries — such as the UK and U.S. — are behind in financial literacy.

Although more than two-thirds of students regularly use financial products and services, levels of financial literacy are too low to make sure they can escape financial risks, the Organization for Economic Cooperation and Development (OECD) said last month after releasing the latest volume of its financial literacy assessment.

That study examined the financial skills of 15-year-olds in 14 OECD and six partner countries and economies and determined that many of them engage in basic financial activities from a young age. 

“However, many still lack the skills and knowledge needed to make sound financial decisions: nearly one out of five students on average in participating OECD countries and economies, did not achieve baseline proficiency levels in financial literacy,” the organization said.

Meanwhile, research by PYMNTS Intelligence has found that many consumers want more financial expertise, and often look to financial institutions (FIs) for guidance, with many younger consumers being unaware of things like their credit scores.

“This may not be surprising, considering that 79% of Gen Z and millennials say they get their financial advice through social media,” PYMNTS wrote recently. “Only 11% say they use financial advisers to get the direction they need.”

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The new funding, announced in a news release Wednesday (July 17), will help finance Matera’s continued expansion into North America and fuel product development. 

Matera has its roots in Brazil, a country that — per the release — “is a global standard when it comes to payments infrastructure, led by a long-standing innovative central bank agenda.”

Payments through the Brazilian central bank’s Pix system account for more than 40% of all electronic transactions in the country. Matera’s solution, meanwhile, processes more than 5 billion transactions a year, almost half of which are initiated by scanning a QR Code.

“Pix set the standard for the digital finance revolution,” Carlos Netto, co-founder and CEO of Matera, said in the release.

“At Matera, we know first-hand the pressure for banks to modernize their infrastructure to keep up with innovative new payment methods such as instant payments and pay-by-bank. 

We’re honored to leverage our PIX expertise with proven solutions to help financial institutions across North America keep pace with their customers’ digital demands.” 

Matera announced plans to expand into North America in late 2022 and last year introduced its flagship offering for the region, known as Digital Twin.

As PYMNTS reported at the time, this is a cloud-native software designed to sit on top of a financial institution’s core banking platform, allowing for real-time transaction authorizations and balance updates 24/7 for various financial accounts.

Digital Twin is designed to allow banks and credit unions to speed their digital transformation while reducing operational costs, the company said.

Meanwhile, research from the PYMNTS Intelligence report “How The World Does Digital” backs up Matera’s statement about Brazil’s attitude toward payments, with that study showing that the country had the highest level of digital engagement of the 11 nations studied.

And Pix’s launch was a force that “lit up” Brazil, Ruben Salazar Genovez, president of cross-border payment enabler TerraPay, said during a recent PYMNTS panel discussion.

“In many ways, Pix is the enabler for this impressive digital adoption in Brazil,” he said. “The gig economy, content creators, gaming, streaming services like Netflix or marketplaces like Mercado Libre, all of them need efficient payment infrastructure. So Pix is the backbone of this digital adoption in Brazil today.”

Pix, said Genovez, also helped businesses and consumers to engage across digital marketplaces, while setting the stage for FinTechs and other digital-only innovators — to the point that the country has been the source of 45% of FinTech revenues in the region as neobanks such as Nubank have gained ground.

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