Macroeconomic dislocations have highlighted the need for organizations to future-proof their businesses against uncertainty.
Times of turmoil generally provide firms with a key opportunity to focus, or refocus, on the fundamentals.
Dimitri Dadiomov, co-founder and CEO at money movement application programming interface (API) Modern Treasury, told PYMNTS CEO Karen Webster that the collapse of Silicon Valley Bank (SVB) and the “mini” banking crisis it kicked off last month has underscored the need for banking resiliency and relationship redundancy.
“Financial operations in general oftentimes take a backseat to growth and getting your company going at an early state,” he said. “So, a lot of companies were left without any other banking relationship [after SVB entered into [Federal Deposit Insurance Corporation (FDIC) receivership] had to go open up accounts from scratch.”
Dadiomov added that establishing a new banking relationship takes days and sometimes weeks.
“To some degree, this was a learning that a lot of companies didn’t think they had to worry about,” he said. “They knew there were best practices [around having a Plan B bank] but believed they would be able to delay them, and it’s different for a mature company versus an early-stage startup … then it turns out there was this black swan event.”
Read also: SVB Collapse Has Companies Reviewing Financing, Cash Management Strategies
As both an immediate impact of SVB’s failure and a reaction to ongoing macro challenges, businesses are now doing more diligence on what banks they are using to hold their deposits or partner with, and many are deciding to shift or spread out their money.
“Every generation earns its scars,” Dadiomov said. “I think people who have been through this will add [banking relationship redundancy] as part of the risk management framework, making sure a business can operate whether it’s just making payroll or something more core to the business.”
Because Modern Treasury’s product is a software layer that gives organizations a single, centralized integration for multiple bank accounts and payment methods, it was possible to see what was happening in real time and help connect businesses to other banks as well as assist in moving their operations to Plan B places that were safer and more resilient, he said.
But as disruption lingers, with many firms shifting their money to some of the largest U.S. banks, Dadiomov emphasized that bigger isn’t always better.
“The reality is not every company fits the ideal customer profile of every bank,” he said. “When you talk to financial institutions, they usually have a certain set of clients that they’re really excited to serve, while there are other clients that they might be less excited to serve — and they still will, but it comes more of a conversation.”
“At the end of the day, it pays to know which financial institution is trying to bank folks like you,” he added. “…It smooths a lot of things over.”
Before SVB failed, startups, and in particular FinTechs, were already navigating a different existential crisis.
“Most companies are operating in a fundamentally different environment today than a year or two ago,” Dadiomov said.
Now, organizational leaders are increasingly updating their strategies to meet the new “new normal” of economic uncertainty by seeking to modernize business processes and focus on fundamentals to reduce operating costs while setting a sustainable foundation for healthy growth.
“Treasury has become more of a day-to-day topic for companies even at a relatively early stage,” Dadiomov said. “If you set things up correctly early on, it’s an enabler for not only a healthier and more sustainable business, but also a far safer and more resilient business.”
As for the future innovations Dadiomov sees coming out of the contemporary environment?
He stressed that as businesses diversify their banking relationships, there will emerge a need for more seamless reconciliations across those various banking networks.
“How do you think about a public company reporting a 10-K in a very quick way when all their funds are sitting across statements at different banks?” he said. “How do you handle your end-of-month reconciliation flows when they are spread across not just banks but also other financial players and third-party processors? Being able to ledger things correctly becomes quite a challenge.”
For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More