Mastercard: Why The Time Is Now For Real-Time B2B Payments

Is the time ripe for B2B payments done in real time? In a Masterclass interview with Karen Webster, Andrea Gilman, senior vice president of product management and new payments at Mastercard, takes note of what’s happening around the globe — and says the U.S. is poised to make the leap beyond paper checks and faxes to B2B transactions done by digital means.

In the B2B world, the time is now for faster payments. The bar may seem a bit low, as the majority of transactions are still mired in paper checks, with communications still tied to faxes and phone calls.

In the Real-Time Payments Innovation Playbook, done in partnership between PYMNTS and Mastercard, financial decision-makers from nearly 400 firms across a dozen industries laid out a number of priorities for making their payment processes more efficient.

As much as 35 percent plan to reduce reliance on paper checks in the next few years. In addition, those firms that embrace real-time payments (RTP) may be setting the stage for other transformative initiatives over the next few years — as 60 percent of companies interested in RTP also intend to pursue B2B payment innovations. Among the findings, as much as 33 percent of companies plan to adopt real-time payments.

In an interview with Karen Webster, Andrea Gilman, senior vice president of product management and new payments at Mastercard, said, “It’s worthwhile — before you even start talking about business payments — to ask, ‘what’s happening around the globe?’”

Look outside the United States, she noted, and one will observe that 56 countries have adopted, or are in the process of adopting, real-time payment systems. That number represents 89 percent of the world’s gross domestic product (GDP).

“In the U.S., we are relatively late to the game,” she told Webster, as “many of these markets are on their second system already.”

Though the U.S. is indeed a newcomer to the real-time and faster payments arena, Gilman noted that many domestic constituents — as far-ranging as the government, financial institutions, consumers and corporates — want that functionality in place. It’s not just about the payments being faster — the transactions themselves are now accompanied by more data than ever before, which should be of special interest to financial professionals. Other benefits come from the security of digitizing payments, and the study found that 79 percent of companies view enhanced security and fraud protection as vital features of RTP.

In terms of timeline, Gilman said last year was the year of “everybody getting hooked up into the plumbing.” In one example, a number of financial institutions spent time and money to link to The Clearing House. This year is likely to usher in use cases and applications on top of those rails, a movement that will include a lot of B2B payments activity.

Looking At Coverage

Webster asked about the state of actual coverage for real-time and faster payments. Gilman said that coverage is growing quickly in the U.S., with perhaps half of accounts already hooked into faster systems.

As noted in the PYMNTS study, the one-third of businesses planning to get on board in the next few years is a significant number, but there is still work to be done. To get the attention of the other two-thirds of firms (and spur their intent to link into faster payments), among the low-hanging fruit of everyday use cases lie disbursements and bill payments. The benefits of faster payments are not limited to the finance department, but can have a positive impact for the whole operating expense line.

According to Gilman, the impetus will come from use cases that “show what [faster payments] can do. When we go out and talk to corporates, a lot of times, the response has been ‘we’ve been waiting for something like this.’”