When consumers use mobile apps like Uber or iTunes, the expectation that payments occur in a seamless, integrated way represents a broader paradigm shift in the payments world — one that is seeping into the corporate community as well.
According to Mphasis Senior Vice President and Head of Global Payments Andres Ricaurte, the corporate equivalent to the mobile device’s effect on payments expectations can be seen in businesses’ adoption of the cloud and Software-as-a-Service. Some of the largest points of friction in B2B payments today boil down to fragmentation and data silos: Traditionally, there is separation between a process (i.e., procurement), and its related payments (i.e., the function of payment a vendor).
The embrace of the cloud has opened up the opportunity for procurement, travel and expense management, treasury management and other corporate financial platforms to integrate and embed the payments function directly within that solution.
Ricaurte noted that as cloud and SaaS adoption progress, application programming interface (API) technologies are propelling that integrated payments functionality. However, as he discussed with PYMNTS in a recent interview, silos in corporate payments are still painfully persistent.
“Without a strong data strategy, businesses tend to replicate the same problem of their on-premise infrastructure, just in the cloud,” he said. “Just because they have moved to the cloud and payment products are now more API ready doesn’t mean companies are holistically looking at inbound and outbound payments and developing a full picture of how they should run their finances.”
That’s because of all of the other silos that remain. There are silos between various platforms like accounts payable, accounts receivable, procurement and treasury management. There are also silos between each payment rail and process, like ACH, paper checks, supply chain finance, early payment discounts and the like. Accounts payable makes a payment via paper check, accounts receivable receives an ACH transaction, and employees may be making company purchases on cards — each of these scenarios creates a new axis into the bigger web of a company’s payments infrastructure.
And within this web, data remains stuck: Just because platforms have imbedded payments functionality doesn’t mean each node in the web can communicate with another. A procurement platform with integrated vendor payments capabilities will not necessarily also be able to connect to an accounts receivable portal with integrated virtual card acceptance functionality.
“You have this problem of multiple payment integration points, multiple payment products, multiple payment providers,” said Ricaurte, who noted that this challenge continues to shape the way organizations make decisions with their finances.
The Next Steps
This is not to say that cloud migration, SaaS and API integrations are not essential to addressing B2B payments friction. Rather, these tools are the first in a long line of steps a business must take to truly transform payments and financial management.
Cloud-based and API-ready payment solutions position organizations to embrace Open Banking, for instance, Ricaurte explained, which can open more opportunity for cross-platform data integrations and communications.
They also enable businesses to be ready for other upcoming industry shifts — like faster payments — to further break down siloes and embrace a holistic view of company finances.
Within the traditional rails, faster payment capabilities mean transactions occur in context, allowing rich data to move along with money — particularly useful in accounts receivable, said Ricaurte.
In other corporate payment scenarios like cross-border intercompany payments, other technologies like blockchain and tokenization allow businesses to bypass the traditional (and sluggish) correspondent banking system and move money in real time.
Machine learning, artificial intelligence and other cognitive automation technologies can imbed across corporate payment scenarios to make use of data that is now unlocked from systems and payment service providers, allowing companies to gain actionable insights.
For example, with technology now allowing businesses to shift funds in real time from one business subsidiary to another, artificial intelligence (AI) technology can recommend when and why a company should actually do so by analyzing where liquidity currently exists within a firm, and where it’s needed. While open banking and APIs can enable a company to connect directly with a vendor’s back office systems for more seamless payments and reconciliation, machine learning can help a business to identify the most strategic moment to actually initiate that supplier payment, and provide visibility into whether a company should pay early to access an early payment discount or obtain external financing, for example.
The cloud and APIs are a catalyst for bigger transformations, Ricaurte said.
The path toward a data-integrated, modernized corporate payments ecosystem remains in its early stages, he noted, but with businesses embracing digital transformations, they have an opportunity to include payments in that journey. Doing so, noted Ricaurte, will enable “a better decision process in how to optimize liquidity.”
“The whole trend here,” he said, “is around apply intelligence to bring the full picture together as things start moving to the cloud and as banks start becoming more available in an API world.”