Fintech 29 November 18

Time is of the essence when it comes to a competitive payments policy

Matt Rowntree
By: Matt Rowntree
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We live in the 21st century, an age in which consumers can pay using watches and phones. Yet most business’ payments policy are firmly (and frustratingly) stuck in the 20th century.

At home, people reach for their online bank account or app. They hit up their gas bill payment account or the bank details for their child’s music teacher and punch in the number. Then they hit send and, for the most part, boom – the transaction is done.

Switch this to a work environment and it’s a process so laborious and opaque, frustration among the business community is understandable. For smaller payment values, there is no real reason for there to be a noticeable difference in payment processing. For very large payment values, most are still bound to the constraints of payment rails.

An August 2018 survey by America’s TD Bank found that 42% of respondents said that real-time payments in B2B online banking would have the greatest positive impact on the industry in the next three to five years. Nearly three-quarters (74%) of those questioned said that their relationship with a commercial bank would improve if it had an app.

The same survey found that 36% of respondents said that both corporations and smaller banks needed to update their infrastructure to support real-time payments.

Why payments aren’t faster in B2B

Faster payments require more than just upgrading software and systems. The payments process is an ecosystem. For it to work smoothly, everyone in that ecosystem must work within the same parameters – in this case, payment methods. Some clients are fully automated, while others rely on cheques and carbon copy invoices, issued in triplicate. How well everyone in the payments ecosystem can mesh is influenced by many things, including technological capability, financial need and attitude to innovation.

For example, it has been suggested that businesses feel their suppliers might not welcome a change in payment method. But this couldn’t be further from the truth. According to Payments Journal, 82% of suppliers stated they were likely, or very likely, to accept a new payment method, while 72% said they preferred to be paid electronically. Only 25% said they preferred a cheque as their primary payment method.

However, there are many businesses for whom the payment need is limited. They may only have a few local payments to make, to tradespeople for example. Or they may only make transfers of large sums that they don’t wish to depend on a single click. Payments management may be so low priority as to not merit changing to the automated service needed to feed a faster, electronic payments system.

Banks may be assuming – wrongly – that these businesses make up most of their customer base. And therefore, if most don’t want payments automation and faster processing, there is little business value investing in it. In fact, according to, recent research showed that banks felt corporates didn’t want payments automation technology, while studies among corporates showed the opposite. They do want it and, because banks aren’t providing it, they’re using third parties and fintechs instead.

The trickle of customers that have gone off to source their own faster payments automation solution via third parties will undoubtedly turn into a flood. Even the most laggardly companies will update their invoicing to processes that can access electronic payments systems. And when they do, they will be looking for a readily available, easily accessible plug and play solution.

Banks must lead their partners towards faster payments

Is it now a question of who blinks first? Do the commercial clients upgrade their payments systems with a view to greater efficiency, only to find their banking provider is still pushing paper? Or do smaller clients find themselves eventually locked out of services because their bank has upgraded processes to accommodate faster payments, but now that service is incompatible with their client’s finance infrastructure?

The answer lies in a collaborative effort that helps everyone to start marching in step. Banks are often reluctant to invest heavily in infrastructure where there is no proven customer base. But by using API solutions such as Currencycloud, it’s possible to access payments solutions at volumes appropriate to the levels of available business.

Bringing early adopter or more technologically advanced clients into that ecosystem means banks and their partners can begin to educate less advanced clients, showing them the cost and efficiency benefits from payments automation and access to faster payments systems.

Addressing client concerns is even more important than the technology question. B2B payments often involve the transfer of large sums, sometimes across borders. Speeding up that process can lead to concerns over fraud and the inability to recall transactions if anomalies are discovered.

It is important to highlight that faster payments don’t mean less secure payments. Alongside automation, there is the growing influence of machine learning and AI, which can spot potentially fraudulent transactions with much greater accuracy than traditional manual processes. By bringing both speed and advanced analytics into the equation, faster payments aren’t just more convenient, they are more transparent and secure as well.

For clients still heavily reliant on paper processes, whether that’s procurement or accounts receivable, faster payments would prove to be a drop in the ocean when it comes to delivering noticeable efficiencies. However, by including it in efforts towards greater payments automation, it becomes part of the value-add suite of more transparency, traceability, efficiency and ultimately, cost savings.

Matt Rowntree
By: Matt Rowntree

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