Across the corporate world, innovations in payments have largely been focused on efficiency – going paperless and reducing costs.
At the same time, there’s still a major need for greater controls, increased security, regulatory compliance and integration of technologies in the corporate world. Data released from a consumer security risks survey found that nearly a third of participants are casual when making online transactions.
What effect will mobile payments, real-time payments and evolving data standards have on the future of corporate payments? In an effort to examine these effects, NACHA’s Payments Innovation Alliance developed a whitepaper titled “The Future of Corporate Payments” to break down the key payments trends and technologies leading B2B toward a digital future – and changing the relationship between businesses and banks.
THE BANK-CORPORATE RELATIONSHIP
First, while innovation in the space is needed, “banks offer corporates features that cannot be replicated in business models of non-banks.” That relationship between corporates and banks is vital, and “symbiotic.” Corporates, for example, supply funds to banks, while banks pay interest or offer an earnings credit on balances, provide loans and more.
However, at the same time, says the report, banks do have ways to modernize their corporate relationships but often rely on old practices “due to regulatory compliance or more pressing priorities.” Regulatory compliance, though, is a “double-edged sword.” While regulation in part prevents banks from offering a wider, more innovation range of services, “regulatory compliance is one of the major strengths that banks bring to corporates.”
Enter: Non-bank payment processors. These players have expanded their technology offerings and enhanced their flexibility to compete with banks. That, of course, ups the competition for banks – banks will therefore need to “bridge the gap between old practices and new technologies” to keep up.
Consumers aren’t the only ones concerned with mobile payments security – corporates see it as a main obstacle when they consider the value of mobile payments. In a 2013 survey conducted by Greenwich Associates for Capital One Bank, corporates answered questions on how they use mobile payments. Respondents were broken down into two brackets – lower-end middle market businesses and large middle market businesses. According to the results, “over a third of lower-end middle market businesses and over half of large middle market businesses use at least one type of mobile banking and/or payments service.” That said, mobile banking is more prevalent – and is driven by information rather than transactions, the whitepaper indicates.
As far as which devices are preferred, NACHA notes that corporates, unlike consumers, can’t simply approve or deny payment files digitally. For that reason, they prefer tablets with large screens to convey more information as compared to mobile phones.
Corporate, B2B and consumer bill payments can all benefit from real-time platforms, in addition to mobile. According to the whitepaper, the advantages of real-time include a “simpler process, greater transparency, and a reduction in the cost of cash and check processing.” With real-time capabilities, corporates can both improve their working capital and their proposition to customers.
However, the business case for many banks and corporates, says NACHA, to invest in real-time “still lacks clarity.” B2B real-time use cases are clear, but they are not among use cases most frequently cited. In the future, though, there are many developments that could indicate real-time payments will take off in the corporate world if the right tools are in place with IT billing and invoice systems, as well as in banks integrated systems, according to the whitepaper.
DATA REMITTANCE STANDARDS
Corporates are in need of “user friendly, internationally interoperable messaging standards.” Current data remittance standards are complex as they differ around the globe. But the standardization of interfaces across multiple banks, says NACHA, would “improve automation and alleviate the burden of having to manually input data for proprietary bank interfaces.”
THE NEXT STEPS
Across the current B2B payment space, overall, solutions are continuing to maximize payment control, increase flexibility and security to help with the transition to e-payments, and update banks’ infrastructures. The aim, according to the whitepaper, is to assist businesses with payments as globalization occurs, “maximizing the exchange of valuable trade data and minimizing the impact of compliance with regulations.” That’s a lot to consider.
The following are some of the key strategic questions meant to develop dialogue around bank-to-corporate payments:
1) For mobile payments, how have corporate customer expectations and behaviors changed due to mobile services?
2) On the impact of real-time, what innovations are needed to make B2B real-time payments more imperative? What is holding back the business case?
3) Are the services third parties offer competing with banks? Can banks partner to increase competition?