Matt Richardson, Citizens’ head of Treasury Product Solutions, Matt Richardson
The digital transformation of payables and receivables continues to transform the outlook for treasury administration, thanks to faster transactions and greater connectivity. We have seen the reality of an automated, real time post-paper world in a very short time. With the COVID-19 crisis in mind, businesses are quickly adapting their strategies and approaches to technology.
Many people have been content with maintaining the status quo, which is about adapting to the fast pace of change and the increasing complexity of products and services. As we move forward, however, those who are prepared to invest in technology configuration and understanding the strategic value of products and services will be able to grow and produce significant productivity.
Customers where they are
One thing that has been clear, especially in the context of the pandemic response was that customer needs are now more important than ever. This is a valuable insight when evaluating new technologies and deciding how to integrate them into existing systems and infrastructures.
Many companies are now adopting faster and simpler payment systems. Many companies are switching to digital payments. This includes real-time, virtual cards and Same Day AACH. The modern options are simply more efficient, more transparent, and incredibly precise — and the growth has been impressive. According to Mercator Advisory Group, Same Day ACH has seen a dramatic increase in volume, from $17 million in 2016 and $461 million by 2020.
Mercator Advisory Group
The consumerization of payment experiences has influenced the corporate shift. This has led to on-demand payments and real-time innovations like digital wallets and contactless payment.
The COVID-19 epidemic was a catalyst for digitization. It also exposed the inexpensibility of paper transactions. Companies realized they no longer needed physical items at physical locations. They quickly adapted as they found digital options that were easy to use and accessible.
Digital transactions are becoming more popular, particularly among early adopters. They expect companies with whom they do business to have access to real-time and on-demand services. It is essential to be able to communicate with customers or trading partners on the right platform and use the right tools.
Payments and processes are now faster, more precise and quicker.
In the future, we will see more adoption of faster and better payment methods and transactions. It will be hard to determine what is important and where to focus resources and attention, with so much product fragmentation and rapid change. Corporate treasurers must prioritize operational and strategic value and determine what best aligns with their internal capabilities and IT capability.
Digital transformation will be driven by connectivity and automation
Advanced connectivity makes payments faster, more accessible, and transparent. It makes it easier and cheaper to manage everything, including accounts payable (AP), and accounts receivables(AR), as well as cash flow and reporting.
API technology has been a success. This allows companies to integrate bank and payment services directly into enterprise resource planning and treasury systems. There’s plenty of opportunity for innovation. Treasurers will see the following benefits: cutting-edge insights, analytics, more efficient payments and better working capital management.
Despite slow initial adoption, more corporations are now ready to embrace the powerful connectivity that allows for 24/7/365 flexibility. Payments in real time networks like RTP®. While there are still many things to do, RTP(r) will revolutionize billing and payment processes, streamlining reconciliations, improving communication between parties, and reducing paper reliance. While the RTP® now reaches more than half of transaction accounts in the US, the Federal Reserve Banks are developing a similar end-to-end instant payments platform, the FedNow Service. This service will be available to customers and financial institutions nationwide and is expected to launch in 2023.
In 2024 Deloitte projects that real-time payments will account for 20.9% of the volume in the payments industry with a projected transaction volume of $4.2 billion.
Point-to-point encryption solutions, or P2PE, will be a key trend in connectivity. This is a new standard to encrypt account and transaction data. This is an important layer of security that will make transactions faster and easier. It also opens the door to tokenization, which allows card numbers and account numbers to be encrypted and transmitted over the internet without divulging bank details.
The Internet of Things (IoT), which is being applied to corporate business, has been pushed. It promises to disrupt and enhance the connection between business-tobusiness trade, especially in manufacturing.
Automation
Machine learning (ML) as well as artificial intelligence (AI), will play a crucial role in reorganizing treasury operations, streamlining AP/AR processes, and realigning treasury operations. To automate manual tasks, increase payment accuracy, improve data exchange, consolidate receivables reconciliation, and reduce manual labor, intelligence-driven automation is being used. It is helping to create significant operational efficiencies as well as organizational value. Cloud-based, intelligent receivables and payables platforms will dominate this market. Paymode-X powered the integrated payment solution for citizens.
Data and analytics will be a key part of how treasury departments define their AP/AR functions in the future. More information about customers and transactions will be shared, allowing for more business intelligence. Organisations will have access to powerful insights that can be used to improve services, cut costs, or pursue new opportunities.
Payment messaging will also be important to track as digital payment options are getting more complex and data-intensive. Standardized messaging between financial institution, particularly ISO 20022, is an emerging global initiative. Corporates must be ready to migrate to meet the requirements.
Bottom line: Treasurers will be at disadvantage in this fast-paced innovation environment if they don’t keep up with new developments and prepare their systems for the next.
Learn how Citizens Business Relationship Management can help keep payment innovation alive.
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