With speed being the most obvious value proposition of real-time payments capabilities, and with businesses often looking to extend payment terms as long as possible, it's difficult to imagine that corporate payers would be eager to embrace faster payments functionality in their accounts payable (AP) departments. But for many firms, that's exactly what they're beginning to do.
PYMNTS' recent Making Real-Time Payments a Reality: Rising Demand for Real-Time Payments report, a collaboration with Mastercard, found that two-thirds of corporate survey respondents said they are either "very" or "extremely" aware of real-time payments – and even more are interested in using the functionality.
It's not speed that's driving corporates' real-time payment roadmaps, however – convenience and data availability are at the top of their list of benefits.
According to Mastercard Executive Vice President of New Payment Flows Ronald Shultz, the survey results are promising for the real-time B2B payments landscape.
"Companies are beginning to understand the connection between payment flows and data flows," he told Karen Webster in a recent discussion. "Now you're talking about some significant process efficiencies and visibility that you don't have in an ACH environment – and certainly not in a check environment."
Despite corporates’ excitement about real-time payments, the check and ACH environment persists, with tall barriers standing in the way of turning real-time payments interest into adoption. As Shultz emphasized, collaboration – between corporates, banks, FinTechs and the broader payments ecosystem – will be essential to lifting those barriers.
Tackling Barriers, Both Real and Perceived
When it comes to real-time payments, many corporates may assume that the technical burdens of adoption will be a headache, which may prevent their first steps toward adoption. According to Shultz, all of the components of the payments ecosystem must work together to develop real-time payment products and services, with an emphasis on easy onboarding and an elevated end-user experience for corporates and small businesses.
"What we can do as existing players in the ecosystem is build applications to take on that perceived technological burden of real-time payments, and then make it easy for participants," he said, pointing to Mastercard products like Bill Pay Exchange and Payment On Delivery. "At the center of their design is an understanding that the technological 'lift' will not be part of the equation."
Another major barrier to adoption is the concern of real-time payments fraud, a threat for both service providers and corporate users.
Again, collaboration is essential to easing this point of friction, Shultz said, highlighting Mastercard's work with Vocalink – which it acquired in 2016 – to collaborate on more robust fraud solutions.
With a dramatically shortened window of opportunity to identify a potentially fraudulent transaction, and with real-time payments often irrevocable, tech innovators can work together to stay ahead of the curve, contributing their expertise in areas like pre-authorization, artificial intelligence (AI) and behavioral analytics to keep pace with fraud risks.
"There is less time to apply traditional fraud techniques," said Shultz. "It's very important to keep those fraud detection tools modern and fitting to this faster money-moving environment."
Banks' Collaborative Opportunity
While financial technology behemoths can find value in collaborating, Mastercard has also emphasized the role its network banks play in promoting corporate real-time payments adoption by working with tech partners as well as their corporate clients.
"Corporates trust their banks in this space," said Shultz. "They may see interesting applications from FinTechs, get intrigued by that, and then turn back to their banks to look for new offerings as they seek to understand more about real-time payments."
But it's not enough for banks to simply collaborate with their tech partners to develop real-time payment apps for corporates: Shultz said banks must also participate in a collaborative ecosystem that promotes compliance by combating fraud and promotes ease of implementation to drive adoption.
Because banks are often corporates' most trusted financial partners, those institutions will be key to helping businesses understand the full value proposition of real-time payments, beyond transaction speed.
For corporate recipients, the value proposition of data transmission is a clear means of promoting streamlined reconciliation. But, as Shultz noted, corporate payers may not always understand the data opportunity in real-time payments.
"The use of paper for invoicing and payments creates a pain on both sides," he said. "Think about the scenario where a payer has sent a check, but the receiver is unable to apply it to an invoice. Who are they going to call? The payer."
Real-time payments can dissipate the burden of AP departments having to explain over the phone how payments should be applied, a pain point that Shultz said is one of the many ongoing struggles corporates endure in an ecosystem where cash and checks remain so prevalent, despite recent advancements in corporate real-time payments solutions.
With banks, technology innovators and corporates working together, the ecosystem will be better able to push corporates from real-time payments interest to real-time payments adoption.
"Consumers are living in a digital payments environment with real-time responses and messaging, but when they go into their offices in accounts payable or accounts receivable, it's like they're stepping back 20 years into a commercial payments environment," said Shultz. "As an industry, we owe corporates meaningful apps to bring real-time payments to life."