Over the last five years, Huntington has made significant investments to upgrade its treasury management business, in part due to rising competition from fintechs in the business-to-consumer disbursement space.
A key part of Huntington's strategy is the purchase of Digital Payments Torana, a San Francisco-based company that enables digital disbursements, in May.
“Buying Torana is part of our plan to expand our payment services to our commercial clients nationwide,” said Scott Kleinman, Columbus, Ohio-based Huntington Commercial Banking’s co-president.
In June, Huntington unified its enterprise payments businesses into
“We formed our enterprise payments organization in order to be able to adapt and respond quickly to our clients’ evolving needs,” Dhingra said.
Banks typically lag in offering the kind of robust B2C payment capabilities and choice of payment rails that the nonbank providers provide, said Erika Baumann, U.S.-based consultancy Aite-Novarica’s director, commercial banking and payments.
“The nonbank firms make disbursements really easy by enabling companies to upload a single payments file and offer simplified pricing," Baumann said. “Many of them have recipient portals which allow consumers to update their account data and decide how they get paid.”
By investing in B2C disbursement technology, banks have the opportunity to prevent themselves being disintermediated by nonbank providers, Baumann said.
“If a business is likely to stray from its bank, it will be because the bank lacks the payments capabilities offered by fintechs,” she said. “Currently, B2C payments is a huge area of investment by U.S. banks. But banks don’t have to build these capabilities themselves as they can white-label a vendor’s solution or partner with a fintech to get to market more quickly.”
Huntington will market Torana's capabilities in sectors such as government, health care, nonprofits, higher education and insurance so they can disburse funds to consumers via ACH transfers, PayPal, Venmo, gift cards and the RTP real-time payments network.
Kleinman expects Torana to generate an important stream of fee income as the platform grows over time.
“Any sector where there is a significant amount of B2C disbursement activity is relevant to us,” he said. “Consumers want alternatives to check payments; they want funds to be disbursed into their PayPal account, for example. It’s incumbent on businesses to offer them that choice."
Huntington already has a very large B2C settlements business, processing around three quarters of the class-action settlement payments in the U.S., Kleinman said. Before acquiring Torana, it worked for a year with the fintech, which was formed specifically to serve the class-action settlement payment market.
Huntington saw a greater potential for the fintech’s technology, and decided that it would be better to acquire Torana outright.
“Acquiring Torana enables us to combine the capability and customer experience offered by a fintech with the scale of a bank,” Dhingra said. “By buying Torana instead of licensing its technology, we can retain control of the customer front-end and offer features such as customized reporting to clients.”
As Torana operates in the cloud on a software-as-a-service basis, this marks Huntington’s entry into supporting cloud-based payments to its clients. The bank is evaluating whether to offer the Torana platform on a white-labeled basis to other financial institutions at some point, said Dhingra.
Other examples of banks purchasing fintechs include U.S. Bancorp's purchase of business payments and expenses management firm Bento Technologies in August 2021 and travel expenses management platform TravelBank in November 2021; and PNC's acquisition of payments processor Tempus Technologies in January 2021.
Other banks which offer B2C disbursements over multiple payments rails include PNC with its ePayments service and
“Huntington’s acquisition of Torana allows a super-regional bank to offer the same flexible B2C payment options as banks three times its size and larger,” said Patricia Hines, head of corporate banking at U.S.-based consultancy Celent.
