Mobile-First Mindset More Important Than New Tech in Boosting Faster, Simpler B2B Payments

Payments executives and chief financial officers want more from their business payments than just making them digital: They expect an experience that mimics the ease and convenience of retail payments.

In the latest On The Agenda, a trio of payments executives told PYMNTS that the hurdles are not necessarily technological — it will take a mindset shift to get commercial payments to make the digital leap.

Interviewees included FIS Head of Strategy for Business Payments Matt Collicoat, BNY Mellon Managing Director, Strategic Payment Solutions Carl Slabicki and CWT Senior Director, Global Payments Product Michael Wirth.

The urge to streamline B2B payments and lessen the dependence on the paper checks came as 74% of financial institutions (FIs) surveyed by PYMNTS said their corporate customers experience money management problems when making payments to their suppliers. For B2B, it hasn’t been an easy task, and corporate clients cite invoice reconciliation and a lack of supplier portals as top challenges.

There is a widespread desire to modernize. Only three in 10 FIs say their current tools sufficiently reduce friction for their clients.

Around 45% of regional banks, credit unions and community banks are experiencing problems with providing supplier portals. At the same time, two-thirds of them are currently working or plan to work on providing these portals.

As for solutions that are on offer, account validation and digital lockboxes are the most common digital solutions FIs offer their corporate clients to reduce B2B payment frictions. Eighty-nine percent of FIs offer account validation and 82% offer digital lockboxes to their corporate clients to streamline the management of payments flows.

CWT’s Wirth said that that more than 40% of B2B payments, on average and across industries, are made via paper check.

By contrast, within the corporate travel space, that tally is roughly 10%, pointing to the relatively higher penetration of virtual cards, including single-use cards and digital payments — a number that has quadrupled when it comes hotel payments, Wirth remarked.

That may because the employees still traveling tend to work for energy companies, drug companies and the government — organizations that already have sophisticated travel programs.

Related: Travel Rebound Helped by Business Use of Virtual Credit Cards

Moving to Mobile Empowerment

We’re moving toward the age of “mobile empowerment,” where platforms and devices, and even checks themselves, are geared toward taking paper out of the process.

That migration is becoming more urgent, as BNY Mellon’s Slabicki said that roughly 60% of accounts receivable (AR) is “straight through processing from a reconciliation perspective,” which leaves 40% that must be dealt with by manual means.

Against that background the check, at least in its paper form, is fading — at least a bit. However, it should be noted that the check itself still has some features that underpin its staying power.

FIS’ Collicoat noted that checks are good for reconciliation and creating audit trails, but plenty of electronic solutions also offer those benefits without the significant fraud that bedevils paper payments. The problem is, of course, getting companies on board with making the shift.

“There’s a behavioral change issue here,” Slabicki said. “The hurdle that companies have to jump over to adopt digital payments is quite low.”

See also: 31% of Finance Pros Say Employees Are Submitting More Expenses Now Than Before the Pandemic

The Problem of Inertia

Simply put, many firms have simply gotten used to processing checks over the decades. But, as Slabicki said, solutions providers have built processes and offerings that leverage and cross-reference electronic payments and protect data with tokens and invoices amid the exchange of invoices.

“It will be the people within a corporate finance team that are going to be tasked with making the change,” Slabicki said. But corporate treasury and accounting staffing levels tend to run lean, and can only take on so many projects at any one time.

One key point of friction, he said, lies with the fact that companies — even the largest Fortune 500 firms — still can’t agree on a standard exchange format for invoices and reconciliation.

PYMNTS’ own research shows that 17% of FIs cited the lack of supplier portals as a problem the pandemic has made worse for their corporate clients. Additionally, 14% said the same of invoice reconciliation.

Read more: 80% of Buyer-to-Supplier Transactions Could Be Completed Electronically by 2025

It’s easy enough to understand why suppliers want online portals, Collicoat said; there’s a benefit in knowing where payments are in any point of the journey. Slabicki noted that more firms are finding a boon in using the portals to pull various levers in order to get paid more quickly.

As valuable as portals might be, the experience is still largely a fragmented one. Panelists told PYMNTS that finance professionals are frustrated with having to navigate a slew of different supplier portals just to pull in various details about invoices.

Centralized platforms can help these firms consolidate their supplier and buyer relationships in one place, with full visibility and transparency on the progress of those payments. For smaller companies, especially those with a range of payments (Venmo and Zelle among them) coming through the transom, a holistic, centralized view of transactions can improve operations markedly.

As Slabicki noted, “The earlier and the more you can shift to certainty about funds availability, the more tightly you can manage liquidity for smaller businesses. This is critical because you don’t have excess working capital.”

The panelists noted that payments themselves are getting faster, and real-time payments will be widely adopted across industries. Wirth stated that there are still concerns over faster fraud tied to faster payments, and commercial clients need to be able to limit merchant category codes and implement spending controls in order to limit exposure.

With fraud as an ever-present concern, Slabicki said that there has been a boon in businesses offering pre-validation services, particularly related to accounts payable processes.

“But we’ve got a long way to go on account validation,” Slabicki said, “in terms of how many corporates are using them.”

As 2022 winds on, the panelists told PYMNTS that we’ll see more use of advanced technologies to speed and streamline payments. Collicoat said that artificial intelligence (AI) will be more fully deployed to analyze which invoices or corporate relationships need more attention, who’s paying on time and who is not.

Slabicki projected that “the card networks are going to add new capabilities and rails, with digital wallets added country by country.” Along the way, reconciliation, accounts payable and AR processes will improve and “there will be a lot more transparency end to end.”