The complexity of payment workflows within and between mid-market and large corporate entities can be so immense that many treasurers aren't able to pinpoint exactly where the friction exists.
Financial technology today is on the path to tackling some of the biggest hurdles in B2B bank transfers resulting from complex back-office systems, internal workflow inefficiencies, a lack of agility from traditional banks and more choice than ever in how businesses move funds from one place to another.
In a recent conversation with PYMNTS, Adam Bialy, chief product officer at OpenPayd, offered insight into how an application programming interface (API)-first strategy can smooth the friction for chief financial officers and corporate treasurers (and their technology providers) by reducing firms' reliance on banks to handle payments.
But first, understanding that payment bottlenecks and inefficiencies exist is key to successfully battling the payments headaches.
"At the very bottom of the value chain, it can be very hard to discover that problem," said Bialy. "But when you discover it, it's even harder to solve for."
While every company is different, there are some common pain points that mid-market and larger corporates face in managing bank transfer payments, both incoming and outgoing.
Excel spreadsheets and CSV files are common in treasury teams, explained Bialy, forcing finance professionals to manually input high volumes of data and switch between back-office platforms and bank accounts.
"They're working off of a lot of data, logging into their banking providers — which, if they're big, they'll have three or four providers — each with a different login, a different token, some are brick-sized devices you need to take a code from, and they log you off after five minutes," he said. "When you try to upload a payment file, you get validation errors — it's just a mess."
He offered the example of the marketplace business model. An online marketplace will collect and process payments from a consumer into its main depository. Much of the pain occurs, he said, during the payout period, when that marketplace pays the seller or merchant.
Within a single corporation, businesses can struggle to efficiently move money from one area of the business to another. Corporate treasurers often work with bulk CSV (comma-separated values) files, leaving loads of room for mistakes and wasting valuable time on manual data management.
Amid this complexity, corporates and their finance teams must assess which payment networks and rails are most appropriate and efficient for transactions across various scenarios.
Looping Direct Into Payment Schemes
One of the largest challenges for corporates and their technology providers in addressing this friction is that regardless of scenario, entities are often reliant on banks to facilitate their bank transfers.
Open banking, however, has opened up the ability for technology players to loop directly into payment schemes, reducing the reliance on banks that has historically hampered treasurers' efforts to cut down the payments friction.
"The strategy to connect to as many payment schemes directly as possible is to have control and not rely on banks," said Bialy. "Doing business with banks is really slow."
This is particularly a challenge for software developers that face the pressure of accelerating product development and launch, which can be held up as a result of relying on banks to add bank transfer functionality within their platforms.
For developers and corporate finance teams alike, speed is also a factor in the transaction itself.
"Some banks are behemoths, with sometimes 10- or 20-year-old core banking systems that take a long time to process transactions," continued Bialy.
APIs allow direct connectivity to payment schemes within app platforms or corporates' back-office systems, enabling developers to create more agile and user-friendly solutions, while also allowing treasurers and finance teams to gain the efficiencies and cost effectiveness of no longer having to toggle between apps and banking portals.
For treasurers that manage and process thousands of transactions, those efficiencies can result in significant time and resource savings.
For some of the largest corporates, there is less incentive to raze existing infrastructure, migrate to the cloud and embrace an API-first model of payments and finance. But for some organizations, particularly high-growth, digital-native firms, the opportunity to bolster payments processes via API is an attractive one.
There's also growing opportunities for FinTechs to wield open banking and help corporates not only ease their payments pain points, but identify what and where they are.
From cutting down the manual data entry of bulk file uploads to optimizing choice of payment schemes to move funds, organizations and their technology partners that face high volumes of friction also have many opportunities to introduce efficiency.