Insight & Analysis

Don’t pay the price for progress

Published: Mar 2024

A change of structure because of merger or acquisition is an opportunity to ensure how money flows in and out of a business is as efficient as possible.

Business looking through magnifying glass at paper

The number of companies that changed hands globally last year may have fallen by 27% but with McKinsey estimating there was more than US$2trn in undeployed capital at the end of 2023, mergers and acquisitions are set to rise again over the coming months.

According to Bain & Company, a combination of investor impatience and smaller, attractive fintech companies low on cash will likely lead to heightened deal making in 2024, benefiting well-capitalised payment conglomerates and incumbents as they tuck in assets that accelerate their strategic initiatives.

For companies that don’t operate in the payment space but rely on efficient payment processes to maintain cash flow, feedback from back office and sales teams and customers are key data inputs for future-proofing payment system development.

“If there have been significant changes in the company’s business operations – such as a merger or acquisition – a one-off review may be needed to ensure the payment infrastructure aligns with the new business structure,” says Moshe Winegarten, Chief Revenue Officer at Ecommpay.

Additionally, if there are indications of potential issues with the payment systems (such as an increase in transaction errors or customer complaints) an immediate review should be conducted. This can quickly help to identify and address the problem, minimising the impact on the company’s operations and reputation.

If the business is planning to expand into new markets, it may also need this in-depth review of its payment infrastructure to ensure it supports the preferred payment methods in those markets. “A diverse portfolio of payment systems based on market appetite is critical and businesses must accommodate local payment methods to adapt to the market they are in,” adds Winegarten.

Reviews of payment processes should consider a number of factors, including whether the process is sufficiently automated to run at machine speed to minimise the impacts of external threats while taking advantage of opportunities presented by instant payments.

To stay ahead of the curve and ensure an organisation’s payment offering meets the needs of its customers, Jonathan Vaux, Head of Propositions & Partnerships at Thredd thinks corporates cannot afford to wait for annual reviews, although this may require specific funding as part of the annual budgetary process.

“Ensuring R&D-type funding to keep a close eye on the innovation horizon and develop appropriate response strategies is essential,” he says. “Technology in the payments space is evolving in real time and corporate reviews must reflect this.”

Annelinda Koldewe, Global Head of Wholesale Banking Payments at ING recommends corporates review all touchpoints with ERP and banking systems.

“It is crucial to have an open line of communication to discuss experiences and possible improvements with payments suppliers such as banks and ERP providers or integrators,” she says. “Individual contracts within the payment infrastructure are best reviewed every three to five years to balance investment with realising optimisations. A review does not necessarily produce immediate change, but can lead to further optimisation and an enhanced set-up.”

It is prudent to continually examine the effectiveness and efficiency of payments infrastructure with an eye to driving expense out of the revenue recognition process – especially when we consider the changes in inflation and interest rates since 2020.

As regulatory and customer demands continue to evolve, corporate banks need to ensure their technology can keep pace observes Toine van Beusekom, Strategy Director at Icon Solutions.

“For that reason, it pays to scrutinise banking relationships annually against measurable KPIs, such as straight through processing, repairs, reconciliation percentages and costs,” he says. “This will ensure corporates are working with best in class banking partners and not having to invest to overcome inherent shortcomings.”

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