Treasurer’s top of mind: The future of B2B payments

In this article, we’ll share some key takeaways from the most recent Treasurer’s Top of Mind, our regular roundtable with prominent treasurers. The discussion focused on real-time payments and explored their potential impact on the future of B2B transactions.

Key takeaways included how the current landscape, technology, and legislation is affecting real-time payments, the consequent impact on businesses, and the role FinTechs have to play.

Real-time payments ecosystem considerations:

In today’s globalized industrial landscape, there is a growing need for seamless cross-border transactions. To fully realize a real-time payment revolution, it must be pan-regional and pan-global and provide a fix to many common problems faced by Treasurers today.

Current issues facing Treasurers

• Payment requirements : Different transaction limits and charges associated with various payment systems, e.g. SEPA, BACS, and CHAPS create manual processing delays
• Technology : Legacy ERPs are not equipped to handle multiple payment systems per currency or process diverse payment formats
• Payment formatting : Diverse payment formatting requirements of banks globally create operational bottlenecks
• Regional holidays : Delays caused by different operating times can severely hinder cross-border transactions and negatively impact relationships
• Legislation : Obtaining reliable master data, especially with data privacy policies like GDPR, can be time-consuming and tedious
• Sanctions : False positive sanction screening may hinder transactions, requiring additional time and resources to resolve the issues.
• Cybercrime : Need for enhanced transaction and operational security measures to combat rising threats

A comprehensive and globally connected real-time payment solution represents a cutting-edge technological response to these challenges. By seamlessly integrating automated processes across regions, this solution promises to diminish manual errors and enhance overall efficiency. Moreover, it takes on the crucial responsibility of delivering cutting-edge security measures and best practices, effectively addressing numerous issues currently confronting Treasurers.

The role of FinTechs:

FinTechs have emerged as key enablers of real-time payments, offering innovative solutions that address various pain points. Their tools and platforms not only facilitate quick and efficient identification of counterparties but also instill confidence in the payment process. Businesses can leverage these FinTech solutions to streamline payment processes, reducing manual efforts and the risk of incorrect data entries.

FinTech platforms that provide portals for suppliers to input payment data can significantly simplify payment processes, enhance accuracy, and reduce the burden on businesses. Additionally, FinTech solutions that address fraud concerns can improve payment security and protect businesses from financial losses.

However, despite the advantages of FinTech solutions, the upfront costs associated with their adoption may deter some businesses from fully embracing them. It will be essential for FinTech providers to demonstrate the long-term benefits and cost-effectiveness of their solutions to drive wider adoption.

Business impacts of real-time payments:

The benefits of real-time payments extend across various industries and business processes. For example, in large multimillion purchases and M&A negotiations,

faster payment processing times can have a significant impact. Businesses can experience improved cash flow management and build stronger partnerships by promptly settling transactions.

In the retail industry, real-time payments can optimize the checkout process, reducing the time spent by customers at the point of sale. This enhanced checkout experience can improve customer satisfaction and drive customer loyalty, ultimately benefiting businesses.

In regions where traditional check payments are prevalent, the adoption of real-time payments can incentivize suppliers to shift away from the cumbersome and time-consuming process of handling checks.

Furthermore, real-time payments enable businesses to meet contractual obligations more effectively. Specifying when funds will be received is often a requirement in certain contracts or regulatory frameworks. With real-time payments, businesses can ensure compliance with such requirements and maintain transparent relationships with their partners.

Supply chain disruptions and manufacturing delays caused by payment delays can be significantly reduced with real-time payments. By facilitating quicker and more efficient payments, businesses can maintain a steady flow of goods and services, ultimately enhancing their operational efficiency.

However, despite the clear benefits, the adoption of real-time payments has been slower than anticipated. Businesses tend to prioritize payment security and traceability over speed. Reconciliation issues arising from correspondent banks’ deductions from payments can create complications and hinder businesses’ enthusiasm for real-time payments. Striking a balance between payment speed and security remains a challenge that businesses must address.

Moreover, the conflicting incentives of market participants can affect the uptake of real-time payments. For instance, some business owners might prefer to use personal credit cards for transactions, creating friction in implementing more secure and efficient payment methods.

Treasurers’ perspectives on real-time payments:

Treasurers approach real-time payments with careful consideration of fees, risks, and cash flow incentives. While they value real-time payments for improved cash inflows, the motivation to expedite cash outflows might be limited due to cost considerations.

Treasurers are mindful of the potential downsides of speed, especially when processes fail, leading to manual workarounds and operational challenges. Striking the right balance between speed and security remains a key concern for treasurers.

Validating master data is crucial for smooth payment processes, regardless of the payment method. While achieving 100% confidence in master data may be aspirational, treasurers find value in curating and pre-validating a set of payment recipients. Leveraging AI and data analysis to identify unusual payments and validate vendor data can further enhance pre-validation options, reducing manual validation time.

Segregating accounts payable (AP) and accounts receivable (AR) duties is considered a best practice to facilitate reconciliation and maintain financial integrity. For treasurers, having built-in fraud detection capabilities outweighs the immediate benefits of real-time payments. Payment transparency, especially when payments are rejected, is highly valued, as it allows treasurers to understand the reasons behind rejections and make informed decisions.

An all-encompassing solution that includes pre-validation and post-validation of payment data, wire payment security, and cost-efficient ACH management aligns with treasurers’ expectations. Such a comprehensive solution would offer improved efficiency, enhanced security, and reduced risk for businesses.

Reshaping the landscape:

The real-time revolution in B2B payments promises a transformative impact on the business landscape. By streamlining processes, eliminating manual interventions, and enhancing security measures, real-time payments offer businesses an opportunity to operate more efficiently and effectively.

A key aspect of the real-time revolution is the development of comprehensive solutions that encompass various aspects of payment processing. Solutions that offer pre- and post-validation of payment data, wire payment security, and efficient ACH management will be essential to unlocking the full potential of real-time payments.

Technological advancements, especially in AI and data analytics, can further enhance real-time payment tools. Innovations in anomaly detection and vendor data validation can provide businesses with improved insights and decision-making capabilities.

The transformative potential of real-time payments and its ecosystem is immense. Businesses that fully embrace real-time payments will witness numerous benefits, including improved cash flow management, stronger relationships with suppliers and customers, and increased financial efficiency.

The real-time revolution is not just about faster payments; it empowers businesses to thrive in a rapidly evolving global marketplace. Embracing real-time payments and leveraging innovative technologies will be key to staying competitive and achieving success in the B2B landscape of the future.