The payments space has for some time been a hotbed of innovation. Much of what has been brought to market is consumer-driven so should treasurers watch and wait or act now?
It’s hardly surprising that most of what is written and spoken about in terms of payments innovation eventually boils down to delivering the right ‘customer experience’. And why shouldn’t it? Giving customers the best possible user experience when it comes to meeting the fundamental need for every business – being paid – makes perfect sense. An effective payments experience may not be the main reason for using one business over another, but frustrate that process with poor technology and, rest assured, customers will go elsewhere.
Increasingly, there is a blurring of the distinction between the user experience expected by consumers, where most new technology is launched and proven (or killed off), and that of the corporate community. After all, every commercial user is at some point a consumer and will have a view on what is good and what is not. As consumer-style payments innovation reaches further into the corporate space, so expectations rise amongst companies and their customers of a similar experience.
Consumer and business needs “for a better experience, for simplicity and security” are commonly in the driving seat, with regulations such as PSD2, initiatives such as the UK’s New Payments Architecture (NPA), and the roll-out of more real time gross settlement systems globally, propelling the market forwards. For Dino Nicolaides, MD, Head of Treasury Advisory UK&I, Redbridge Debt & Treasury Advisory, companies that keep pace with the right innovations will be dodging a bullet marked ‘competition’.
The kind of innovation that is meeting this need is rarely a bolt from the blue. Instead, it is typically the result of evolution, notes Nicolaides. It is the adaptation of existing technology and knowledge “to provide something extra that serves or creates a need”.
In practice, this usually means being able to offer corporate customers a tailored version of mobile, online and real-time payments services and, vitally, the user-friendly experience they have come to expect in the consumer space.
Mark of success
There is no shortage of new payments products vying for corporate attention. For Nicolaides, meeting the wants and needs of customers through these systems seems like a “no-brainer” given the competitive nature of most commercial sectors. If a solution “ticks all of the boxes” then its success is, or should be, inevitable.
However, he recognises that not all innovations tick all the boxes. Sometimes new solutions fall foul of over-complexity or lack end-user confidence, the latter despite the emergence of new ‘RegTech’ solutions to help businesses combat fraud and comply with KYC and AML requirements. But for corporates, he reports persistent concerns over how a new solution will be adapted and integrated into an existing infrastructure.
For vendors, it is a hard market to penetrate, and uptake of any innovation depends on many other factors, not least cost of ownership and the degree of need it is satisfying. Some solutions manage to create their own need but for most, the future is uncertain, notes Nicolaides. “If it is a nice-to-have, then it is competing with many others and may struggle. If it meets a real need that nobody has satisfied before, only then will it become a no-brainer.”
The agile fintech community has a hard time getting innovation accepted, but banks are not immune. For Phil Beck, Head of Treasury Management at Capital One Commercial Bank, there are three main issues that can hold back progress, at least from a commercial banking standpoint. The first is the age of the underlying technology across many institutions. Legacy mainframe technology (which in most cases is over 20 years old) was not built for the demands of mobile channel provision and real-time data access, he says.
Secondly, the needs of corporate clients are vastly more complicated than for individual consumers. “When an individual logs into a banking platform, generally speaking, they have full authority to do everything they need to do. In the corporate environment, different people have different access rights and processes span across organisational boundaries. That complexity makes the development and adoption of innovation a challenge.”
Thirdly, there is often an end-user change management challenge. Modernisation can sometimes be slower or less comprehensive than users expect, especially given the underlying technologies many institutions are working with and the relatively simple consumer experience most critics use as their reference point.
Fit for purpose
Of course, the threat of cybercrime is never underplayed in the corporate space and innovation in fraud prevention is developing in parallel with payments solutions. “Solution providers have to keep one step ahead of the fraudsters,” says Marcus Hughes, Head of Strategic Business Development, Bottomline Technologies. “By using machine learning and artificial intelligence (AI), they are making sure both banks and corporates have the means of monitoring transactions and behaviours, looking for anomalies.”
In what appears to be a difficult set of circumstances for most commercial payment providers, Beck says services being delivered today are “adequate” and rarely of the quality a corporate might expect, given the raised expectations they have from their experience as consumers.