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Bill North

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Bill North - Pelican

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A brave new world: the need for innovation in B2B payments

27 October 2016  |  6241 views  |  0

Simplicity and flexibility.

In the many conversations our teams have with corporate treasurers working in multinational organisations around the world, these are the two words we find constantly repeated.

This is hardly a surprise. It does, however, beg the question as to why this is still such an issue in the world of B2B payments and what needs to be done to simplify it.

A simple answer

In reality, the equation behind every payment works in the same way as good journalism – you need to answer the who, what, when and how. Specifically, these are: who are we paying, what currency is the payment in, when it needs to be paid and how much is to be paid.

These key points are pretty straight forward, and consistent with every payment. Where it gets complicated is in the execution.

For instance, we need to know which banks require the details and how to get this information across – such as the preferred channel and format for this type of payment. We also need to consider what should be filed to the bank and comply with the required types of security and encryption.

As we can see, the payments process is not quite as simple as first thought. Let’s also remember that the above example represents only one payment – this is a process that is repeated billions of times a day across all regions of the world.

So in order to manage this, a team is required to deal with non-compliant and rejected payments. This takes time and resources away from other areas of the business, and currently represents a significant pain point for corporate treasurers.

Broken relationship

Historically, banks which had an ongoing credit relationship with a specific corporate got a share of the payments business.

But since the crash of 2008, coupled with counterparty credit risk avoidance activities, companies have now diversified their banking relationships. In this new context, banks must lead product offerings along with establishing competitive pricing in order to stay in the game.

This is another subject that has been brought up several times in conversations I’ve had with treasurers. They all said that while they have a desire to use a certain bank for payments processing, the technical limitations of that bank prevented them from doing so.

For example, some treasurers were telling us that they were keen on using the ISO 20022 format for all payment types, in order to leverage added data fields and harmonise processes across the enterprise. But not all credit banks accept this message format, with many only supporting international payments in SWIFT formats.

Driving innovation

This shows that banks need to listen to treasurers, and start the drive towards standardisation. It also shows that there is a need for banks to innovate in this area, and develop a flexible solution of their own.

This could send banks into a panic. But the drive for innovation doesn’t have to require years of construction that sees development costs run into millions or even billions.

By partnering with a fintech firm, banks can not only have a ready-made system that works with their own technology, but also ensure this is fully compliant while fulfilling corporate payment needs.

There are many opportunities out there to create a simple, flexible solution – but time is of the essence.

Corporate treasurers are screaming out to work with banks on their payments, but if they continue to shut their eyes and ears to the needs of their customers, they will find themselves lagging behind competitors.

 

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job title Head of Global Sales
location New York
member since 2016
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I head up the global sales team at Pelican. We enable Intelligent Payments Management through the application of Artificial Intelligence to the payments life cycle including compliance operations. To...

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