Attention, bankers: that rushing sensation isn’t a passing freight train. It’s the profound, seismic change banking is going through. Financial institutions are mapping the new contours of the digital coastline, making excursions, while also managing everyday ops.
It’s a monster. And everyone is facing it. In its new "Technology Trends Outlook 2025" report, fifth edition, McKinsey & Co. said this: “Executives today face a mandate to navigate rising complexity, scale emerging solutions, and build trust in a world where the lines between digital and physical and centralized and decentralized continue to blur."
Specifically, banks face mounting pressure to modernize payment systems, enhance security, and deliver more efficient services, especially for lucrative high-dollar, low-volume commercial clients. This technological leap forward is happening against a backdrop of increasing competition from fintech companies and changing customer expectations that demand faster, more seamless financial experiences.
One of the most significant shifts in the banking sector has been the approach to technology adoption and service delivery. It’s the “build or buy” debate – but more urgent.
Many FIs have pivoted from building proprietary solutions in-house to establishing strategic partnerships with technology providers. Sometimes it’s a payment service provider (PSP), sometimes a fintech, sometimes both. A collaborative approach enables banks to offer innovative solutions more rapidly and cost-effectively than they could on their own.
The trend reflects a growing recognition that staying competitive in today's B2B financial ecosystem requires both specialized expertise and technological agility. That can be difficult and expensive to maintain solely within traditional banking structures.
In a recent Payments Podcast, Michelle Pasquerillo, Head of Bank Channel Strategy at Bottomline, notes how these collaborations are transforming the industry and creating value.
"The goal is to help banks and their clients automate AP processes, improve operational efficiencies, and reduce fraud," Pasquerillo said. This mission has become increasingly important as financial institutions battle for their place in the broader payments sector.
Banking vs. the Bad Guys
Banks today face large hurdles when it comes to payment processing, with fraud prevention topping the list. The rise in cunning fraud schemes has made it essential for financial institutions to implement vigorous security measures. Time is of the essence, as many banks have yet to protect themselves or their clients from advanced AI threats.
"Fraud is a significant issue, with banks facing challenges like invoice fraud, business email compromise, and phishing attempts," Pasquerillo said. These threats can result in substantial financial losses and damage to a bank's reputation if not properly addressed.
Another major challenge stems from outdated “solutions” that many organizations still rely on. Paper-based systems and checks are still shockingly prevalent in B2B payments.
This not only adds operational friction, but it also introduces opportunities for mistakes, as well as problems like insider fraud. "Manual processes lead to payment delays, human errors, and strained supplier relationships," Pasquerillo said. "The lack of automation and proper validation procedures significantly increases the risk of fraudulent activities."
The Evolution of Bank-PSP Partnerships
For those reasons and others, the nature of bank partnerships has undergone substantial changes in recent years. Pasquerillo noted, for example, a distinct alteration in how banks approach technology adoption and collaboration since the pandemic era. Increasingly, PSPs with long track records are nudging the DIYs and Fintech startups out of the space.
"We've seen a shift from banks building AP automation solutions in-house to partnering with [services] like Paymode," she said, referring to Bottomline’s B2B payments network.
This change reflects a broader industry trend toward collaborative, technology-driven partnerships that enable banks to stay innovative and agile. The flawed approach of developing proprietary ecosystems has given way to strategic partnerships that allow banks to leverage specialized expertise and technology. It saves money, time, and more.
"Partnering [with established payment service providers] allows banks to go to market faster with advanced technology without the high costs and time-consuming nature of building solutions in-house," she said. This collaborative model lets banks focus on their core strengths while still offering cutting-edge payment solutions to commercial clients.
Making a Successful Partnership
Creating and maintaining effective partnerships requires intentional effort and clear communication from all involved. Pasquerillo emphasized the importance of establishing trust and reliability from the outset.
"Establishing a trusting, collaborative relationship with bank partners is essential for mutual success," she said. This foundation of trust is built through consistent communication and demonstrated commitment to shared goals. Regular check-ins at various levels of the organization help ensure that partnerships remain strong and that any issues are addressed promptly.
She’s a big fan of regular check-ins at the operational and executive levels for maintaining trust and reliability. Measuring success through precision metrics is another major component of effective partnerships. Measurements should be tailored to different stakeholders, including suppliers, clients, and bank partners.
"Reporting and KPIs at different levels, including supplier, client, and bank partner levels, ensure that needs are met and partnerships are successful," Pasquerillo said.
This multi-layered approach to consistent performance measurement helps all parties understand the value being created through collaboration.
What Happens Next?
Digital transformation is increasingly associated with enhanced security and efficiency. Pasquerillo advises that banks "Embrace digital payments and automation to protect teams, customers, and reputations from fraud.”
Moving away from paper-based processes not only reduces fraud risk; it also streamlines operations and improves overall user experience. And the benefits of digitization extend beyond security to include improved cash flow management and enhanced relationships with suppliers and customers. Taken together, it’s a massive change in B2B payments. Banks embracing new services via partnerships will gain as industry change happens.
"Digitizing AP processes and payment methods can optimize cash flow, enhance operational efficiencies, and improve overall customer and supplier satisfaction," Pasquerillo said. For organizations looking to stay competitive in a rapidly changing landscape, focusing on strategic initiatives and comprehensive digitization is the game.
Breaking it down to basics, she added that, "Focusing on strategic revenue initiatives and digitizing all aspects of invoice and payment processes is crucial for future success."
As the payments sector absorbs the shock of AI and other changes, partnerships between banks and technology providers like Bottomline will play an increasingly important role in delivering innovative, secure payment solutions. Collaborative relationships and the digital transformation they enable ultimately create better services for bank clients while protecting against emerging threats and capitalizing on new opportunities.