In this environment of “higher for longer” interest rates, chief financial officers recognize the need to prioritize payments innovation.
“In the old world, all payments went into a bank account,” said McCray, who added that in the current world of B2B commerce — and as corporates embed payments into their models — recipients may want to get payments sent to digital wallets, virtual cards or any number of digital options.
“Our corporate clients are looking to diversify supply chains,” McCray said. “The more diversified those supply chains get, the more payment ‘needs’ there are out there.”
Bank of America, for its part, is evolving into what McCray said is a “real-time payments bank,” helping clients capitalize on the benefits of real-time transactions (both domestic and international).
With a nod toward real-time payments, he said, “most of the adoption has happened within the business-to-consumer payment flow.” Use cases seeing widespread embrace include payments to gig economy workers (including content providers), the funding of digital wallets, and merchant payouts. Insurance firms have been using real-time rails to speed disbursements.
For B2B payments, he told Webster, “we’re excited to start helping our clients start receiving payments in real time.”
He said that real-time requests for payment are gaining interest from corporates. Real-time fund flows can help firms get working capital into their coffers quickly, giving them cash on hand to grapple with unforeseen challenges or opportunities, such as emergency payroll or just-in-time supplier payments.
Beyond simply receiving money faster, improving B2B payments lies in a two-part strategy, he said. Reducing the frictions inherent in the payments themselves is a first step.
“And then there’s reducing the friction in terms of your ability to understand information about the payment itself,” he said.
These goals are attainable with the ISO 20022’s data-rich formatting, where enhanced notifications improve the transparency of payments, he said.
“The more structured your data is, and the more data that you have, the easier it is to get that payment processed in a ‘straight-through’ manner,” said McCray.
Treasurers and CFOs gain benefits from the real-time notifications that payments have gone through.
McCray noted that for executives to realize the full benefits of those information flows — both before and after payments — Bank of America has been focused on three initiatives.
The first is connecting enterprises’ treasury back ends to accounting-end reconciliation systems with the aid of application programming interfaces (APIs).
“The conversations I’ve been having with treasury groups and CFO groups over the past few months have changed in tone,” he said, adding that while using payments has been thought of as a way to help cement end-customer reactions and a better user experience, “there’s also more focus on efficiency and cost savings … and they want to wring more out of straight-through processing.”
The second initiative is modernizing cross-border payments.
And the third is harnessing data that’s available to corporates and banks to create real-time insights into fund flows — and strategic management of cash.
“From an investment standpoint,” said McCray, finance professionals “are looking at where they are putting their cash, and at where they can get the best return.”
Real-time insights mean that the “treasury group is able to manage cash flows to free up working capital,” he said.
The efforts to maximize cash flow also foster a collaborative effort among various stakeholders as they forge new insights into supply chains and risk management, he said. The collaboration extends all the way down to the management and creation of new products and services, as payments can be featured as part of the overall experience.
Doing so means that forward-thinking companies must collaborate with banks — and banks’ own networks of providers — to meet their goals of embedding payments into their ever-evolving business models, he said. Most firms have designed their back-office processes to handle traditional payments such as ACH and wire payments, and they are beholden to their legacy technologies.
“Among the things we are focused on is identifying FinTechs that have developed expertise in helping companies connect to banks,” McCray said. “We want to make it as seamless and easy as possible for our clients to take advantage of the new opportunities being created in the payments industry.”
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