Treasury Today Country Profiles in association with Citi

Businesses call for more security and innovation in payments

Digital security concept with padlock and circuit board pattern

Bottomline Technologies’ latest UK Business Payments Barometer study shows that the need for greater security and innovation will be the key drivers of change over the next 12 months.

UK businesses say that the increasing need to mitigate the risk of fraud will be the main driver of change in the payments industry in the coming 12 months, according to a new study from Bottomline Technologies.

The study quizzed 400 financial decision makers across the full spectrum of UK businesses about their attitude towards business payments.

External and internal fraud

The need for greater security hardly comes as a surprise given that businesses are increasingly being targeted by cyber-criminals.

However, what is perhaps more surprising is that there is an increasing worry about internal fraud occurring in organisations, with 31% of respondents listing this as a concern, up from 16% in 2016.

Indeed, this year there have been a few high profiles stories of such fraud occurring, including the fraud at Swiss multinational ABB’s South Korean subsidiary involving the treasurer.

Commenting on how businesses might start to mitigate this risk, Ed Adshead-Grant, General Manager – Payments at Bottomline Technologies says: “It is important to make sure that businesses do their internal housekeeping. Companies need to regularly review and monitor who can make payments”, he says.

Also, as more and more treasury and finance departments look to automate processes and cut headcount, Adshead-Grant advises that businesses maintain a strong segregation of duties. “You don’t want to be in a situation where one member of staff can authorise, clear and settle a payment,” he says.

And with 60% of respondents claiming that they didn’t know whether they had been impacted by financial fraud or not, there is a clear need for UK businesses to begin placing a strong emphasis on this area.

Moving fast

Faster payment schemes were another area of focus in the study and the report suggests that many businesses have still not fully understood the benefits of faster payments.

Indeed, only 44% said that that they had adopted faster payments for their regular business payments, 41% had not.

Of those that hadn’t adopted Faster Payments, the strong majority cited that there was no business reason to do so (53%). A fifth said they hadn’t because the company wants to hold cash for longer.

“This is a clear misunderstanding when it comes to Faster Payments,” says Adshead-Grant. “Using these rails and scheduling payments can actually help improve working capital by enabling businesses to hold onto cash longer rather than have it lost in the system for three days when using BACS, for instance.”

Adshead-Grant also highlights that using Faster Payment rails can help businesses improve customer experience.

Better payment ethic

Ironically, despite the development of Faster Payment infrastructure, many businesses are taking more time than ever to pay their suppliers. This is having a detrimental impact on the UK’s SMEs community, with nearly half of SMEs claiming that late payment is their biggest issue.

Slow payment ethic, which Adshead-Grant defines as being “the habit of companies looking to hold onto their cash for as long as possible through various methods” is cited as being the main reason for these statistics. Adshead-Grant states that these methods range from pushing out payments terms to simply saying that a cheque is on its way when it is not.

“This is unacceptable and I am delighted that the Duty to Report has been launched that will force large UK businesses to disclose their payment practices,” he adds. “Once this builds momentum it could have a big impact with small suppliers choosing not to do business with later payers. It might even have a longer term, negative impact on the share price of businesses that pay late.”

Brexit is coming

The report also delves into other areas including the impact of regulatory change from PSDII and other payments initiatives. The clear takeaway from the results is that whilst knowledge is growing around these regulations, more education is needed to ensure that financial professionals fully understand what it means to their business.

Another area that treasurers and financial professionals need to pay attention to is what Brexit will mean for the payments industry and the impact it will have on pan-European schemes like SEPA. “We are in the early days,” says Adshead-Grant. “And the impact will become clearer as time moves on, but organisations really need to think about where they want to do business in the future and build their payments technology strategy around this.”

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