Payments and receipts are key functions of any corporate treasury. We spoke to Sophie Ryckaert and Wim Grosemans of BNP Paribas about what they’re doing to make those processes more efficient, and how they are laying the foundations for a more efficient industry of tomorrow.

Portrait of Wim Grosemans, Head of Product Management, Payments & Receivables, Cash Management, BNP Paribas
Sophie Ryckaert is Payments & Receivables Product Marketing Manager and Wim Grosemans is Head of Product Management, Payments & Receivables, Cash Management at BNP Paribas.

BNP Paribas perform billions of transactions in Europe every year. When it comes to payments and receipts, they have three clear objectives: efficiency, reliability and speed. But they also see a need for integrated processes for the full order-to-cash and procure-to-pay cycles, to add value beyond payment processing.

“We’re making sure that the basics are efficient and fast,” says Ryckaert. “At the end of the day, treasurers are always happy to see innovation, but they need also to rely on very functional transactions.”

Security in the payments and receipts space is something BNP Paribas takes seriously.

“Security is definitely important, because it’s a reality,” says Ryckaert. “For example, in 2021, two out of three companies have been the victim of a fraud attempt.”

These attempts include CEO fraud, social engineering fraud, phishing, and malware. BNP Paribas offer a range of fraud prevention tools, as well as specific cyber-risk awareness training.

They also offer an account verification tool that allows their clients to check whether the bank details they’re paying to belong to the counterparty they’re trying to reach, which integrates with the SWIFT pre-validation scheme.

And they are deploying cutting edge technology to aid in the fight against fraud.

“We have the ability to detect fraud thanks to artificial intelligence,” says Ryckaert. “We believe we could stop about 90% of fraud attempts over the last year. It’s very effective, and we have invested and keep on investing in it.”

The transition to instant payments is an important paradigm shift in this area.

“Once you push the button, the money is gone in an irreversible way,” says Grosemans. “Obviously, that augments the danger of all these kinds of fraud attempts that may occur.”

And the offering BNP Paribas is rolling out to their clients is very likely to become legally mandatory in the next few years, across Europe at least. The European Commission has proposed a requirement for banks to verify the account number and account name correspond.

On top of this, Europe is bringing in new e-invoicing regulations on a country-by-country basis.

“We know France is coming pretty soon, and Spain,” explains Ryckaert. “Belgium also announced they are going to issue a law. That is going to be a challenge, it’s going to be scattered across Europe, per country. That’s where our bank has a role to play, to offer a solution for clients so they don’t need to be pre-occupied with the local details and local integration.”

Instant payments are becoming the new normal – and in a shorter timeframe than most people have expected. The next step is to reach the same type of real-time processing for cross-border transactions as well as domestic ones.

Ryckaert predicts that by the end of 2023, one transaction out of every four will be instant.

“BNP Paribas is absolutely prepared to take that volume of transactions,” adds Ryckaert. “The payment engine has been built for SEPA instant payments. It’s very agile and can accommodate large volumes – so we don’t really have too much concern about that.”

The European Union is trying to further enforce the use of instant payments, with some predicting up to 90% of transactions will be instant.

“There is likely to be a trend to oblige banks to offer instant payments at the same price as normal SEPA payments,” explains Grosemans. “That’s probably going to drive the adoption from the retail perspective.”

But Grosemans doesn’t expect a future where 100% of all payments are instant – there’s just not enough liquidity in the market to allow for that, not to mention the additional credit risks we need to manage.

“Instant payments are pre-funded,” he says. “We pre-fund liquidity at the clearing platform to be able to send those payments. And that’s okay for retail traffic, that’s okay for bespoke business traffic. But the industry will never be able to settle all payments on a real-time basis.”

The paradigm shift from batch-based processing to real-time processing is impacting the receiving side of transactions more significantly than the sending side.

Grosemans explains: “There are some bespoke use cases where corporates use instant payments on the paying side. Customers will integrate them through an application programming interface (API) and append them to a certain business process – closing insurance claims and these kinds of things. But in the majority of sending cases, instant payments remain a nice-to-have, not a must-have.”

On the incoming side, however, instant payments are creating a quicker resolution of incoming payments and reconciliation, reducing the business’s days sales outstanding (DSO). And so Grosemans sees the instant payment as an important building block for any future receivables’ strategy.

“More and more of our customers are combining payment initiation use cases,” Grosemans says. “E-commerce is one of them. It may also be triggering invoice payments, putting themselves more in control of the actual payment process on the side of their customer. And this is important, because if you can trigger the instant payments on the side of your counterparty, that’s when you create maximum predictability on the side of the payer. And in the end, where you get more and more control of the cash collection cycle.”

ISO 20022 is the new technical standard for electronic data interchange between financial institutions, expected to be in place in early 2023.

“We see lots of talk about ISO 20022 for payments across the board,” says Grosemans. “What is happening now – whether you’re talking about instant payment schemes, or SWIFT or local RTGS platforms – is they’re all moving to more or less the same bridge data standard.

“This enables a lot of formalisation and interoperability between schemes – and enables us to provide simpler, more industrial data services to our customers. The benefits will only come a few years down the road in creating more seamless payments with less exceptions.”

A growing trend is the expectation of faster, more seamless experiences when it comes to payments – even cross-border payments.

“When we look at cross-border payments,” adds Grosemans, “I always aim to simplify the target promise. The promise is simply for cross-border payments to be instant and frictionless.”

Things have come a long way on that front since Grosemans first started working in Cash Management.

“Years ago, we explained to customers cross-border payments were like throwing a bottle in the sea. When you throw it in, you don’t know when it will arrive – and you don’t know what is still in the bottle when it arrives. That has changed a lot.”

SWIFT gpi was an important part of that. “That enabled us – not to make instant cross-border payments, not to eliminate all the friction – but at least try to make them a bit faster and give some track and trace on what is happening. Which is already much better than what we had before.”

BNP Paribas were one of the first banks to adopt SWIFT gpi. Now the bank is working with SWIFT, other banks, and corporates to co-create the cross-border payments of tomorrow.

The aim is that this future system will get things right first time using as much pre-validation as possible – not just validation of bank details and names, but also formats and potentially even the settlement path itself.

A second goal is to interconnect banks and clearing infrastructures, in many ways: correspondence banks, market infrastructure interlinking – and even potentially harnessing blockchain technology to develop Central Bank Digital Currencies.

“Blockchain is all about tokenisation and creating the ability to interconnect ecosystems,” Grosemans says. “Which is where distributed ledger technology (DLT) remains a very important long-term focus for the bank. But honestly, once there are digital currencies, you will still need rails to be able to execute them. And we’ll still be looking at the classic players to provide solutions.”

Grosemans is realistic about the future. “Between saying that and achieving it, there’s a lot of ground to be covered. But these are the next steps on cross border payments. First, reducing the friction by pre-validating and doing things right the first time. And then, capitalising on existing instant payment platforms and the infrastructure of SWIFT’s potential other technological components for those payments to be made truly real- time.”

As for the present, Ryckaert sees an increased focus on the receivables side of the business – a result of the current economic context of rising interest rates, high inflation, and pressure on working capital. One development of note is the rise of B2B platforms with functionality similar to their B2C counterparts.

“It’s very much a reality that more and more businesses are launching B2B e-commerce platforms,” says Ryckaert. “We have the ability to trigger a request to pay via instant payments, for both B2C and B2B.”

Another important service is the ability to offer to the counterparties a buy now, pay later (BNPL) option – something that’s widespread for consumers, but that BNP Paribas want their clients to be able to offer their corporate customers as well. This is one of the reasons why BNP Paribas has been developing a BNPL solution specifically for B2B, which is scheduled to launch in early 2023 in collaboration with Hokodo.

“That’s more for large medium businesses toward small business,” Ryckaert explains. “We already have a solution for that for B2C – but we’re also offering a solution for B2B. We see the need for our clients to offer a tool that’s going to enable them to distinguish themselves from their competitors and increase their sales by providing financing to the clients. And give these end clients access to financing, which is also very relevant in the current environment.”

For BNP Paribas to continue expanding the role it plays, Grosemans explains they are moving up the value chain – something that’s happening, for example, with invoicing.

“We see, we have to be present much earlier in the chain before anything becomes a receivable, to continue assisting customers in optimising the settlement at the end of their sales,” Grosemans says. “It starts with the management of the invoice, complying with legal schemes, issuing the invoice, providing a link for payments, and so on and so forth – which then drills down automatically into the actual receivables process.

“It’s becoming much more than just offering all the different instruments in all the different geographies. Its more about certainty, visibility, control and improving the entire order-to-cash cycle than the receivable itself.”