The payments landscape has undergone structural changes over the past few years. New infrastructure such as real-time payments systems, new regulations such as allowing non-bank payment service providers (eg, e-wallets) to access these networks directly, as well as the ambition of and competition among industry players, have transformed the sector. Until recently, there was a huge mismatch between what was possible and what was happening, but we are now seeing the commercialisation of the infrastructure as adoption from big corporations to SMEs accelerates.
When I started my career, payments infrastructure was characterised by one-way, time-bound payments either as a batch or file-based that provided limited visibility. Once people had paid for their goods and services, the transaction was over and treasury teams were focussed on reconciling payments efficiently by the end of the month.
Because real-time payments systems are available 24/7, with near-instant settlement and same-day reconciliation, it has revolutionised the way businesses transact. Leveraging technologies such as APIs, companies can devise innovative straight-through processes in which payments are a part of an overall customer experience. Real-time payments are also helping bring the unbanked into the financial system. For example, HSBC partners with companies in Egypt to facilitate direct payments into e-wallets.
E-commerce has taken off on the back of digital payments. We increasingly support companies that have been relying on traditional distribution models to move to a D2C (direct-to-consumer) model that no longer depends on intermediaries. We are observing this trend across a wide range of sectors including logistics, pharmaceuticals distributors, the auto industry and insurance companies. There is certainly an element of the old guard reinventing themselves.
As companies move into the D2C space they are looking for scalability, capacity and variety in terms of how they collect payments because their customers want options. For example, companies need to support customer purchases via bank transfers, QR codes, credit cards and e-wallets in different locations across their physical, online and mobile stores.
One notable change we at HSBC have observed is that we no longer just speak to a client’s corporate treasury team. We also speak to their strategy and business development teams because they are also supporting how these new systems work and connect.
Changes in how we pay means MNCs must adapt their treasury function to become more strategic and resilient, ie, putting technologies, particularly APIs and RPAs, to effective use in payment and transaction flows and treasury processes, leverage data optimally, supporting the broader supply chain and addressing risks of payment errors, information security and fraud. As businesses pivot to D2C models, 24/7 collections and payments on demand, treasury teams must be able to adapt. We have clients who have seen the number of digital payments they process jump significantly. Add payroll on top, and it’s a big responsibility leading to increasing levels of specialisation for the treasury function.
The transformation in payments has implications for working capital management and the efficiency of processes, particularly because the cost of capital is now higher. Because interest rates remain elevated, there is increased focus on self-funding, better management of receivables and driving efficient realisation and use of internal cash. Digital payments are also changing the way companies can engage with their stakeholders to tap into competitive advantages, for example by using supply chain finance to support their broader ecosystem.
