Following on from the IPSOS/Bottomline fourth annual Business Payments Barometer, a panel of experts, drawn from two representative bodies and the banking and technology sectors, was summoned to delve deeper into the rapidly changing payments landscape. This is what they had to say.
By next year, 90% of businesses are expecting to use real-time technology in their decision-making processes. The payments industry is promoting the idea not least because the regulators are paving the way for increased competition through notions such as open banking and the roll-out of APIs. However, the game-changing development that is real-time payments also raises the spectre of real-time fraud.
Bottomline’s recent ‘payments barometer’ survey shows that criminals are targeting businesses of all sizes, from the largest multinational right down to the smallest SME. With recoveries in the order of just 20%, and average losses in the UK about £240k, it is clear that the world of payments is at a crossroads.
Representatives of the UK’s Federation of Small Businesses, RBS, ShieldPay, and the Open Banking & Payments Working Group gathered in London’s iconic Shard building to discuss the impact of this challenging environment, with Bottomline Technologies playing host.
SMEs report feeling like easy targets, lacking the expertise to even know if they have been a victim. Many feel that responsibility for fraud detection rests fully with their banks – and 70% of payments barometer survey respondents consider compliance checking a bank task – but clients have a duty of care to ensure their payments and systems are not compromised.
Certainly, banks can do a lot to fend off attacks on their clients, using KYC, AML and mule-detection systems, for example. With the roll out of new ‘confirmation of payee’ checks, the expectation is for a huge dent to be made in fraud statistics.
Of course, there is so much more going on in this space, but the buzz that is emanating from the payments sector reveals an increasing dependency by businesses on the banking community to provide advice and solutions. Indeed, as access to real-time increases, firms are all but forced to respond, many driven by a ‘do or die’ need to service their own clients digitally.
One major transformation being implemented in the payments space is open banking. In reality, it is a foundation for opportunity. However, various surveys have shown that beyond those in the industry, there is no great understanding of what it is, let alone what it means.
The regulations that underpin it (PSD2 in Europe) create a means of accessing information and insight. Open banking should be seen not just as a means of generating greater competition in the market, but also as an enabler of business. As such, the banks, as the de facto experts, should be taking the initiative, working with their corporate clients to tease out their pain points and build usable solutions for them.
Banks are scrambling to deliver APIs. Although currently engaged in a vast technology knitting exercise, especially around compliance, they need to get on and deliver real services to fill an aching void. In doing so, their offerings must make absolute sense to users; for this to happen, industry needs to communicate its needs effectively, and as soon as possible.
Nowhere is the pressing need for a sound user experience (UX) more acutely exposed than in the world of mobile, especially as technology from the consumer space translates into the corporate world. There has been a notable separation in approach to user interfaces (UI) between consumer and corporate technology over the years.
Now there is an increasing expectation within the corporate space for practitioners to be able to make decisions when and where needed, on the most appropriate device, whether desktop or mobile.
Curiously, in the corporate world, where higher values are transacted, the slicker the process, the less trust there is in the technology. Banks have even created artificial speed bumps or ‘good friction’, using arbitrary stop and check stages to stimulate higher levels of trust.
However, as digitisation progresses, the race to deliver the omni-channel experience has, in many businesses, delivered nothing more than an ‘omni-bodge’, where legacy systems are piled on top of legacy systems in the hope that the results deliver the kind of UI/UX that customers demand.
There is a heavy price to pay for getting it wrong. Clearly, there needs to be a convergence between consumer demands and commercial drivers. The providers (vendors and banks) of the best functionality, data and UX will be the winners in this race.
Satisfying the need for greater speed and more information from data should go some way to reducing the shaming statistic that 92% of firms admit late payment to suppliers. Incorrect invoicing is a problem, many claim. An answer may be found in payment process automation but adoption of real-time processing is yet to reach tipping point so traditional payment mechanisms will persist for a while yet.
Improving late payment stats may be a matter of renewed incentivisation for firms. However, any regulatory ‘stick’ from government enforcing on-time payments should be matched by a suitable ‘carrot’. In this case, it could be deployment of technology capable of making the process so easy that there is no excuse nor need for withholding payments.
There are other practical steps. The reality that large businesses often present a complex supply chain process to their smaller suppliers suggests that those smaller firms should be taking it upon themselves to better understand their buyers’ procurement systems, thereby taking back some control.
Greater control over payment processes and data – including their security – is so much more achievable in a digital world. But with the payments space in flux, it is incumbent upon corporates to keep up to speed with significant progressions such as Request to Pay and micropayments. But it’s not just about the technology itself, it’s also a matter of understanding the broader regulatory environment that is facilitating innovation.
Banks have an important educational role to play, but corporates – and treasurers in particular – must develop their own views and responses to this changing environment. Doing nothing is not a sound strategy for survival.
A positive response now to the digital, real-time and mobile agenda will help businesses optimise and compete. Open banking regulations are helping to create new ways of doing business but this is just the starting point. Banks will soon no longer be the master of data and corporates the slave; the relationship is re-balancing as accessibility to it improves.
Although current concerns and issues of trust in payments seem to relate principally to lack of visibility, resolution is coming as regulatory steps and the advance of technology create a new data-control paradigm. The journey ahead will see corporates adopting solutions that they had never imagined nor asked for, but these will become solutions with which they cannot live without.