Rapid time to value: modernizing business payments

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The payments industry has undergone more changes in recent years than in the decades before. The rise of instant payments, the emergence of fintechs, the consumerization of payments and the advent of open banking have led to significant changes in the business payments space.

In a recent PaymentsJournal podcast, James Richardson, Head of Global Product Solutions at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how companies can revolutionize the way they pay and pay.

Looking for water sources

Some of the most common issues facing CFOs related to business payments include how to solve the problem of fragmented technology and how to integrate fragmented processes.

“In general, companies believe there are smarter solutions for business payments than the technology available to them,” Richardson said. “They are streamlining their supplier relationships and looking for more meaningful strategic partnerships that will help them streamline business payments.”

Many large companies simply don’t have the staff to develop new revenue streams. Although they know that fintechs can fill these gaps, companies are often unsure how to proceed. Fintechs are also often unsure how to position themselves vis-à-vis companies.

Optimizing business payments is even more challenging due to the vast amount of information available to businesses. It can be difficult for companies to gain concrete insights into the changes taking place in their industry.

“They’re looking for sources,” Richardson said. “They’re looking for the watering holes where they can find the latest industry news, because it’s critical to find out what the best in the industry are doing. It used to be that companies could talk to their bank and get all the information they needed. Today, companies have more relationships with multiple banks than ever before.”

Companies are realizing that they should be more independent and less dependent on their bank. Financial institutions and fintechs are quickly offering solutions, fueling competition. Competition is beneficial for companies as they can now choose from a variety of solutions.

A new wave of change

European markets have more payment types, giving customers and businesses more choice. As more options become available, U.S. CFOs must consider how to most effectively modernize payments. This could mean moving from paper-based payments to electronic payments or making cross-border payments more efficient.

The opportunity to modernize through connected solutions is greater today than ever before, but adoption is slow. According to a 2022 AFP Payments Survey, over 90% of U.S. businesses accept checks for inbound payments and 86% use checks for outbound payments. In most cases, this is not due to a lack of better options, but because this is the way things have always been done.

“It’s critical to change this behavior,” Richardson said. “Frankly, it’s a cultural thing. It’s already being practiced in other countries, but over the next few years, moving away from controls will be a big challenge for U.S. companies. Once that happens and CFOs’ eyes are opened, they’ll see a new wave of change in their organizations.”

Although many businesses don’t want to process paper incoming and outgoing payments, they fear fraud. This means checks may be lying around.

“It is unlikely that there will be a government order in the United States that completely bans checks from the payment system,” Bodine said. “That means we probably won’t see the elimination of checks until the world’s largest corporations make a concerted effort to eliminate them.”

Navigating the fraud intersection

The complexity of fraud has put companies in a difficult position. Criminals now act as if they were companies, and when an organization is targeted, it is not by chance. Criminals look for vulnerabilities. When they find one, they launch targeted attacks.

“Companies can actively seek out best practices and not be a laggard,” says Richardson. “If you bury your head in the sand and commit fraud, you risk getting hit twice. First, your cash flow is impacted because you pay more slowly. Second, fraudsters prey on the weakest or slowest. You don’t want to fall into that category.”

In addition to external threats, companies must also be aware of insider fraud, which can also harm a company. To mitigate this threat, companies should create a culture where the company’s money belongs to every employee. It is everyone’s responsibility to ensure that these funds are protected.

Employees should know that it is appropriate to dispute suspicious transactions. This will become even more important as technology advances and criminals have better tools. Although new technologies can increase the risk of fraud, they can also reduce it. For example, business payment networks can provide absolute verification of the relationship between the account sender and the account recipient.

“Fraud prevention should be a priority, but it is also an ongoing process,” said Richardson. “It is important to have these points of contact to check sources and stay informed about the latest developments in fraud prevention. More knowledge makes companies more independent. This is crucial when they think about a broader payment structure that goes beyond their own borders.”

Fast value creation

When companies use the technology as a service solution, they will find that it does not take long to get up to speed. Partners can quickly integrate solutions that optimize a company’s payment systems.

“Partners, partners, partners with an exclamation point,” Bodine said. “The data shows that if you want to achieve improvements in efficiency, costs and long-term sustainability, the best thing to do is not try to modernize payments internally.”

Payment partners can now bring companies on board in days or weeks instead of months or years, so the time to value is fast. While some U.S. companies may be cautious, the companies that modernize their payment systems soon will be best positioned to reap the rewards.

“You have to be aware that the payments landscape has changed significantly,” Richardson said. “The world is smaller now. But if you look at what other countries are doing, you will be encouraged for what is coming.”