The enterprise is still unsure about faster and real-time payments. With companies paying suppliers on strategic schedules, real-time transactions aren’t always necessary — or beneficial — for the B2B payments space.
Yet there is some adoption of faster payment technologies among corporates. In the U.S., NACHA found B2B payments made up 6 percent of the nearly 2 million same-day ACH transactions that occurred in the first 11 days the service went live. It’s not huge, but it’s not dismissible, either.
A new report from Deutsche Bank suggests that even if adoption of accelerated payments remains muted for corporates, the trend is still affecting the enterprise and how it manages money — a fact that corporate treasurers must pay particular attention to.
In its “The road to real-time treasury,” Deutsche Bank urges treasurers to get ready for a world of real-time transacting. Apart from supplier payments, the shift could have significant impacts on foreign exchange conversions for faster hedging, real-time investments, faster risk-mitigation capabilities and real-time visibility into more accurate cash positions.
“As instant payment schemes continue to roll out across the world, this not only impacts B2C companies, but also has a knock-on effect on the full value chain of globally connected corporates,” said Deutsche Bank Head of Cash Products, Global Transaction Banking Shahrokh Moinian in a statement announcing the report.
The report cited research from Euromoney in which more than two-thirds of organizations said they would be interested in adopting a tool that provides automated, 24/7 currency conversion solutions based on real-time FX rates. Deutsche Bank noted that this can have multiple positive impacts on corporate treasury, including faster cross-currency payments, faster FX exposure management, and faster actions taken to address FX volatility.
According to Deutsche Bank EMEA Head Jeff Smeeton, one of the largest challenges of FX management for treasurers is the lack of visibility into what FX rate was used and applied when a transaction is made. Faster payments tools can provide corporates with the data they need in near real time, and adopt faster hedging tools from their banks in a gradual move toward real-time FX management.
On a broader scale, faster payments and access to transaction data in real time can help shift organizations toward real-time liquidity management, too, reported Deutsche Bank.
Again citing Euromoney research, the report noted nearly 87 percent of executives said they expect real-time payments to have a positive effect on their liquidity planning, forecasting and cash investment efforts. Nearly half of the treasurers surveyed by Euromoney said liquidity management is the area most in need of automation — presenting a significant opportunity for disruption as faster payments make inroads.
Deutsche Bank pointed to cash pooling processes as a key area that can benefit from real-time payments.
“While most cash pooling arrangements … involve end-of-day sweep between the master and participant accounts, intra-day cash pooling allows for multiple sweeps during the course of the day,” the report stated. “This ensures that cash is centralized at a group level more dynamically, potentially reducing borrowing costs and optimizing interest returns.”
Rising adoption of virtual accounts, which are linked to a single physical bank account, enables corporates to set up a virtual account per customer or business line, then reconcile that data to the central account. Deutsche noted that this tool supports real-time treasury with the ability to automate reconciliation and cash allocation, interconnecting data between accounts payable and accounts receivable.
While adoption of real-time payments in the B2B sphere remains limited, the global market’s push toward payments acceleration presents opportunities for corporate treasuries to make use of faster transaction capabilities and financial data in real time.
“The immediate value of, and ability to realize, the real-time treasury vision will vary across industries and individual organizations, depending on their scope of activity, commercial and financial drivers and technological sophistication,” Deutsche concluded. “However, treasuries will inevitably, incrementally be forced to operate in real time.”