As the saying goes, if it isn’t broken, don’t fix it. But in payments, understanding whether something is broken in the first place — and, if so, how to fix it — is a complicated matter.
Legacy payment rails can be slow and clunky, yet have already reached ubiquity. It’s the reason why paper checks remain a constant in B2B payments: Although businesses may not particularly like them, organizations already know how to send, receive and reconcile them.
B2B innovators have a choice when they decide to search for a better way to move money between corporates. They can either build solutions that operate on top of existing rails, or they can build new rails from the ground up. Below, PYMNTS looks at the latest solutions that take one of those two paths as innovators address friction in checks, ACH and other rails.
Work With What You’ve Got
B2B payments innovators are constantly in search of ways to get rid of paper checks, but their prevalence has some service providers exploring ways to remove the pain of checks without removing the payment method outright.
One of them is Deluxe Corporation, whose Treasury Management Solutions unit announced this week a new plug-and-play check scanner that allows users to more seamlessly begin scanning paper checks and integrating that information into back-end systems. The tools can support small businesses with lower check volumes, while Deluxe is also offering a solution for corporates with high check volumes, both of which address the cost and friction associated with launching traditional USB driver-based scanners.
PNC Treasury Management recently debuted a tool that allows corporate buyers to automatically choose a faster payment solution, including real-time payment (RTP), Same Day ACH or next-day ACH, to pay their suppliers by analyzing which payment method would be quickest and most cost-effective. It’s both a show of support for a new rail like RTP, as well as for the strategy to improve upon legacy rails like ACH.
Bank of America similarly debuted an Accounts Payable Optimization tool that enables AP professionals to automatically choose which payment method is most appropriate for their vendors based on factors like supplier acceptance and preference. This service also supports a range of existing rails, including commercial card, wire and ACH.
Both PNC and Bank of America’s latest AP offerings address one of the largest pain points of existing payment rails in B2B payments: deciding which one to use (and which ones will be accepted by a supplier).
Start From Scratch
BitPesa, an Africa-based FinTech looking to power cross-border transactions and foreign exchange for corporates and consumers across the continent using blockchain, has an expansion plan and has just announced a restructuring to fuel that growth. The company is rebranding as AZA Group, which will incorporate the BitPesa, ZeroTransfer and BFX Brands under a single parent company.
The company has developed its own payment rail using bitcoin’s blockchain infrastructure, which allows the firm to take fiat currency, convert it to bitcoin, then convert it back again into a different fiat currency. This strategy bypasses the traditional intra-banking system that can take several days and often lacks visibility into the status of funds as they move across borders and between FIs.
According to the firm’s CEO Elizabeth Rossiello, companies based in Africa are increasing their demand for U.S. dollar transactions, and that trend will continue to place pressure on the global payments ecosystem to deliver faster, more affordable, and more transparent B2B and consumer international payment solutions. For BitPesa, developing a new blockchain payment rail is the answer to that demand.
Mastercard is also taking advantage of a new payment rail in a collaboration with PNC Bank. The two firms announced this week a solution, Payment on Delivery, which leverages The Clearing House’s RTP network — the U.S.’s first new payment rail since ACH launched in 1974.
The tool will enable suppliers to receive instant access to funds in addition to detailed remittance data from the transaction. Mastercard noted it plans to collaborate with ERP to expand adoption of the tool and support integration into businesses’ back-office systems.
“Our real-time payment capability not only connects buyers and sellers to enable payments to happen in real time, but also provides them with real-time information to drive efficiency, control, security and transparency on the back end,” said Mastercard’s Executive Vice President of New Payment Glows in North America Ron Shultz.
Although technically Mastercard and PNC Bank’s new service for B2B buyers is building a solution on an existing rail, the tool is a major show of support for the strategy of building new payment rails, particularly to accelerate cash flow for corporates.