Corporate Payments: The Next Ten Years

What lies in store for corporate payments over the next ten years?

The biggest evolution in the next ten years, and one that has already begun, is the move to XML.  “Really, is moving to use XML such a big deal?” you might ask.  Well, it is much more than just changing the syntax of what gets sent to / from the bank.  I think ten years from now, we won’t be talking anymore about domestic formats except possibly for some smaller regional banks. The larger cash management banks will be fully conversant in ISO 20022 XML. The payment factory solution will have to develop away from being a format-centric solution to something that is fully XML-aware and able to deal in the different ISO 20022 XML messages – whether it’s in the realm of payments, direct debits, cash management / account reporting or bank account management. This should make it easier for corporates because they are no longer tied to domestic formats and don’t need a solution that understands all formats. I think we’ll see a complete adoption of XML and I don’t think that anything else will come along to replace that in the next ten years. There may be a successor to ISO 20022, possibly a new underlying model that comes out, but I still think that the syntax that used will be XML.

Introduction of the new ISO20022 cash management (camt) messages will gain traction and corporates will begin to adopt those, so I think we’ll see the MT940 message being much less used in ten years than it is today. This basically gives the corporates visibility to more structured information about what’s happening on their accounts.

SWIFT connectivity is already somewhat commoditised, with about a thousand corporates on SWIFT.  I think we may see SWIFT pushing down into the smaller corporate space as the costs come down. SWIFT connectivity will be a given within ten years for large corporates, and I think that connectivity will be easier and cheaper than it is today, making it an option for smaller organisations.

Two other themes that I expect to hear more of in the coming years are in a related space to payments – e-invoicing and structured remittance.  These are two areas that could make a real impact in the payment domain.  Once SEPA is fully adopted, attention will more seriously turn to what’s next.  A pan-European e-invoicing solution would bring significant additional efficiency to the eurozone and, although there are significant hurdles to jump, they may become easier if we see increased fiscal integration amongst member states.  As for structured remittance, there have already been many efforts within different countries to try and make improvements.  One of the big challenges here is going to be the ability and appetite of the banks and clearing houses to facilitate the transfer of the additional information that needs to flow end to end to improve that necessary reconciliation process within the Corporate.  I’m not yet sure how this will play out.

I don’t think any blog about the future of payments can completely ignore the role of mobile.  Whilst there is a lot of innovation and growth in the mobile payments domain, this may not impact that much on the business of corporate payments.  But, I do see a role for mobile within Corporate Payments and it has already started.  We have started to see Treasurers armed with the ability to approve payments whilst on the move and this will be followed by dashboarding/reporting-focused apps for tablets that allow users to mine the wealth of data that flows through the payment factory.

Do you think we’ll see an end to the bank format variants in the next ten years?

No, people may think that the aim of standardisation in the payments domain is to remove all bank / country variants. The adoption of ISO20022 is helping.  However, even with CGI trying to create a standard implementation guideline that all large corporates can benefit from, within that guideline there is also room for banks to add specific services / requirements on top of the default.  That will always be the case because banks are always going to want to differentiate (on service) and there will still be differences from country to country.  So even though we’ve come a long way in standards development and we’ve got a common framework in ISO 20022, there are always going to be some variances. The question is whether you are able to deal with those variances better now than in the past and I think with ISO 20022 and XML that will definitely be the case.

Where do you think we will see further improvements?  

The other thing that we’re starting to see is that there are more and more large Internet-based companies that don’t follow the traditional multinational corporate model.  These companies are not physically located in many countries around the world even though they’re doing business everywhere; they’ll maybe focus their (physical) operations in one country yet may be doing business in many.  Facebook is just one example – they don’t have offices in every country in the world but they’ve got users in every country and they may have to make payments to some of those users if they are building apps/widgets etc.  It’s a similar situation for Apple with their Apps store and paying developers.  I see companies using the internet to do business globally as becoming much more of a theme.  Their payments challenge is, if they are not located in that country, will they need to make foreign exchange transactions and are they then at the mercy of their bank for remittance services, because that becomes a very expensive way to do business.  I think there will be some more innovation in that remittance space – there are bank provider solutions and vendors already starting to provide solutions in that space.  But I think we’ll see that theme continuing of enabling companies to grow outside of their physical locations using the internet and have a payment solution that enables them to continue to grow.

What changes do you anticipate over the next ten years?