Why SocGen’s B2B Marketplaces Strategy Needed FinTech

Online business-to-business (B2B) marketplaces are rapidly growing in popularity, helping to accelerate digital payment innovation in the business space. According to a research study by McKinsey, global sales generated via these platforms are expected to quadruple from $1 trillion to $4 trillion between 2020 and 2025, accounting for 60% of online sales by 2023.

This creates a ripe opportunity for financial institutions (FIs) to unlock huge gains in the fast-growing space by helping corporate customers manage payments with greater insight and efficiency,” said Alexandre Maymat, head of global transaction and payment services at Société Générale.

“Today, only 15% of CAC 40 companies [largest companies by market capitalization on the Paris Stock Exchange] have a B2B marketplace. But this number is growing rapidly and it is very important that Société Générale, known as an innovative bank for corporate clients, is fully part of this development, Maymat told PYMNTS in an interview.

Against this backdrop, the Paris-based European banking giant recently teamed up with payments firm Lemonway to help European companies launch B2B marketplaces, while helping them improve the online payment experience for their customers, as well as improve their e-commerce supply chain distribution processes .

According to Maymat, the partnership with the French FinTech firm also points to a change in mindset at Société Générale around new services offered to clients, which has historically seen most banks rely solely on internal systems to develop.

However, that is changing now, noted Maymat, who said the time has come for banks to embrace FinTech partnerships that are not only necessary but critical to better meet customer needs. “[FinTechs] have expertise that will take a lot of time for the banks to get, they are more agile and have developed a better service that has better time to market, he argued.

And while it can be challenging for incumbents operating in a highly regulated environment to work with startups that are subject to fewer compliance and disclosure requirements, Maymat said the cultural shift to more collaboration is more important than ever.

“We need to be less arrogant, more proactive in listening to the market and responding to the new customers’ needs and be humble enough to accept that sometimes companies smaller than us can do the job better than us,” he said.

Improvement of X-Border payment flow

Regarding ISO 20022, Maymat said the new international messaging standard, which all global banking and financial services players must adopt by 2025, is not only one of the most important developments in the payments space in the last decade, but also has a lot of room. promise to transform international payments.

That is why he urged the banks to convince European customers, especially business customers, who until this year have not had the transition to the ISO 20022 message format at the forefront of their priorities, to come along.

“It will dramatically reduce friction in the flow of payments and messages across borders, reduce transfer costs and improve the control of payments, especially when it comes to compliance issues,” he said.

Tackling the issue of compliance is particularly important, especially in a fragmented region like Europe, where each country chooses its own interpretation and application of the European Central Bank’s rules. This decentralized approach has contributed to the rapid increase in the cost of compliance in recent years, he added.

That’s all the more reason, Maymat said, that migration to ISO 20022 standards – the global rollout of which has been hit with some delays – is a critical first step in moving the needle as “it will require every actor in the payments chain to share the same information .”

Drives sustainable business growth

In the past year, the European Central Bank – like the US Federal Reserve Bank – has initiated a series of rapid rate hikes to tackle skyrocketing inflation over the past year, prolonging pressure on consumer and business spending due to the resulting rise in borrowing costs.

But the banking industry has largely been spared, Maymat said, adding that it is one of the sectors benefiting greatly from the trend as profit margins widen with interest rate hikes. “At the end of the day, most of our revenue depends on the amount of flows we manage and deposits on our bank balance. And in that regard, [rising interest rates] is a good thing for us,” explained Maymat.

That said, he pointed out that FIs have a huge challenge to deal with as liquidity is less abundant than before, which has created a “battle for deposits in the banking industry.” Overcoming this challenge will be critical going forward, he added, not only to secure client deposits, but to be able to fund lending activity without jeopardizing business profitability along the way.

Overall, however, the global environment remains very favorable for global transaction banking and payments businesses as a whole, Maymat noted, adding that banks will need to continue investing in future solutions to take full advantage.

This includes improving the digital experience for customers, better utilization of data and new technologies and developing a business that better contributes to sustainable economic growth – a strategy that Société Générale champions through its Corporate Social Responsibility (CSR) ambition.

“If we are not able, all together, to develop a banking industry that will better preserve the earth, better contribute to growth in our communities and between different regions, we may face enormous difficulties in the future,” he said, “and we who the banks have enormous power to [drive that change].”

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