B2B Payments

AP Automation Braces For Open Banking, Globalization

As B2B FinTech firms continue working to break down silos, and ease the numerous friction points of the B2B payments process for both buyer and seller, the opportunities for data integration are vast. Purchase, invoice and transaction data are invaluable to the journey of digitization and automation, but organizations are increasingly recognizing that the value can only be realized if that data can integrate seamlessly across platforms.

As such, B2B FinTech firms continue to embrace collaboration and data integration between each other, particularly as the financial services world at large continues its migration toward unlocking data in an Open Banking framework. One of the latest FinTech firms to do so is accounts payable (AP) automation company Centsoft, which recently announced a data integration with QuickBooks Online. Organizations that absorb and process supplier invoices within the Centsoft platform can see that data be automatically added into QuickBooks Online to support the payment and reconciliation process.

As Michael Cichy, general manager of the Americas for Centsoft parent company Palette Software, told PYMNTS, the value in cross-platform integration can be significant for companies, particularly when it comes to saving time often wasted on manual data entry.

“Once an invoice is approved or matched, an automated process [that] injects those invoices into the accounting platform for downstream processes to take over — like vouchering, and aging prior to payment — become[s], for the most part, hands-off,” he said. “This combination increases data accuracy, and shortens payment cycles.”

That acceleration means buyers can capture early payment discounts, and promote vendor satisfaction, he continued, while suppliers can enjoy shortened invoice-to-cash cycles.

Going Further With Open Banking

It’s one thing to enable two B2B FinTech platforms — like an accounts payable and accounting platform — to share data with each other. However, Open Banking frameworks look to take that power of data integration to another level by unlocking end users’ bank account data. Doing so not only means that business users no longer have to re-key data into each platform, but they can initiate transactions from directly within those platforms.

Historically, traditional financial institutions have been averse to Open Banking frameworks. Cichy said he sees the opposite happening today, though.

“I find that banks are more open to this than [FinTech firms] at the moment,” he said. “The banking platforms — in particular, treasury or supply chain finance-related ones — find value in adding a [procure-to-pay] solution into the mix of other products they offer clients.”

Payments via card programs and other tools are of particular interest when banks explore data integrations with FinTech firms, he noted. Yet, in the procure-to-pay space, streamlining and automating vendor payments can be a particularly challenging feat.

Palette Software and Centsoft are equally interested in adding invoice payment functionality within Centsoft’s accounts payable and invoice processing capabilities. However, Cichy said that the company will likely turn to a third-party solution provider to enable the function. As it searches for the right partner, Centsoft must ensure that any provider can handle a wide variety of payment methods to meet the needs of the U.S. B2B payments market.

“In addition to card and ACH/wire requirements, the U.S. still continues to process a fairly large number of checks,” he said, noting that data will be key to supporting the integrated payments capability, by ensuring that any third-party payment engine has the data and API capabilities necessary to complete transactions.

Gearing Up For Disruption

Amid the challenges of digitization, data integration and payments automation, the accounts payable space is facing broader disruption in other arenas as well. Global expansion of business operations is one trend likely to place new pressures on AP departments, said Cichy — in more ways than one.

As barriers to globalizing supply chains get smaller, competition to capture new revenue sources is at an all-time high. Yet, while selling goods to consumers and businesses overseas is now easier than ever, paying suppliers across borders can be riddled with friction.

“Sales is probably the easy part,” said Cichy. “Transacting [with a] business is what holds many companies back. International payments are costly, and require a high level of competence [in] dealing with currency fluctuations, duties, insurance and drayage.”

There is also the growing risk of tax compliance, as markets like Europe and Latin America move to capture greater tax revenues. As a result, Cichy said, tax authorities are keeping a closer eye on buyer-seller transactions, with eInvoicing standardization mandates emerging to promote compliance and mitigate tax fraud risks.

“So, in addition to language, currency and VAT challenges, companies have to be ready and staffed to take on these types of evolving international standards and policies,” he said.

Digitization and data integration will, again, be key in rising to the challenges of compliance, global transacting, FX management, fraud risk mitigation and more in the accounts payable department. However, perhaps the biggest barrier to digital data isn’t on the IT side, nor the regulatory side. Rather, internal resistance to change might be organizations’ biggest threat. Even convincing an organization used to emailing invoices — a process that Cichy noted is plagued with manual data entry, error risks and routing inefficiencies — can be a monumental task.

“Time and change management are huge barriers,” he said. “Many times, companies are mired in complex processes that are familiar to users — and, therefore, comfortable, but require huge manual effort to accomplish.”

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PYMNTS LIVE VIRTUAL PANEL: WHY SWIFT GPI IS JUST THE BEGINNING 

On Tuesday, March 31, 2020 at 9:00 AM (ET) join PYMNTS CEO Karen Webster and panelists Vincent Kilcoyne and Roland Brandli of SmartStream for an in-depth discussion on the need to use transformative digital strategies to remain relevant in today’s challenging financial landscape. The discussion will cover strategies that will allow clients to improve operational control, reduce costs, build new revenue streams, mitigate risk and comply accurately with regulation.

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