Why Real Time Is The Game-Changer For Corporate Cash Pros

Citi podcast

Instant payments are more promise than reality in the US.  Citi’s global head of payments and receivables, Manish Kohli, tells Karen Webster that lack of ubiquity is a hindrance, but interoperability and enhanced messaging can help set the stage for widespread adoption – and transformation, especially for B2B, is in the offing.

With ongoing shifts in payments, commerce, security and transparency, corporate cash managers have a lot on their plates. The question for any number of treasury professionals is what lies ahead?

Add speed to the list of new challenges that need to be considered and grappled with.

The fact remains that instant payments — as a concept, perhaps, and certainly as measured in execution or deployment — has not caught on as quickly in the United States as in other countries.

 

But that doesn’t mean instant payments are just a futurist’s fancy.

Financial institutions and treasury operations would do well to get ready for it all, sooner rather than later. And for corporate cash professionals, “instant” may hold tremendous promise.

Manish Kohli, global head of payments and receivables at Citi, told Karen Webster in a recent podcast that instant payments — with a few exceptions — have yet to really become entrenched here due to a number of factors.

As he told Webster, TCH’s instant payments debut two years ago represented the largest evolutionary development in payments in the last 40 years.

“The introduction of something market-wide into the world’s largest economy, one that has more than 10,000 banks, is no small undertaking,” Kohli said.

Although progress has been made on the reach and infrastructure, and on the range of products and solutions on offer, there still is much work to be done to spur adoption, he added.

One impediment has been the lack of ubiquity, Kohli noted. Since there is no mandate in place for all banks to embrace the real-time payments system, there’s been a “slow burn,” as he called it, to get banks on board.

The vacuum created by the absence of a ubiquitous real-time or instant payments scheme has been filled in by private sector innovation, perhaps readily evident in offerings like Zelle and Venmo. The move to instant payments will take time, Kohli said, as FIs and corporates will have to undo and reconfigure previous technology integrations.

The Use Case – and B2B

That’s not to say instant is not making an impact — and there is a natural progression at work. Kohli said person-to-person (P2P) use cases are among the first to gain ground.

In the U.S., especially, bill payments are proving to be valued by consumers and B2C transactions, as the gig economy and insurance disbursements are a strong use case for Citi’s clients.

“The value to businesses is amplified when there is a consumer on one side of the transaction,” Kohli said, adding that having surety that funds will be delivered instantly, with real-time confirmation is paramount in the settlement process.

The opportunity is also there for B2B’s transformation, he pointed out, as use cases coalesce around the twin drivers of speed and certainty. After all, knowing where funds are at any given point of the journey is a critical part of corporate cash management. And not knowing that part of the payments equation is one the challenges cash managers grapple with.

“We also believe that some of the unique attributes that come with instant payments — through enhanced messaging — allow firms to enhance their digital operations and walk away from paper invoicing,” Kohli said.

Digitization and enhanced messaging can help automate back-office functions and reconciliation, and new functionalities like request to pay also have ripple effects that improve reconciliation as manual processes are eliminated.

Kohli also discussed the concept of reachability, which delivers value in the form of directory services.

Interoperability is Key

Enhanced messaging truly delivers value, Kohli told Webster, but it ideally should be delivered through a consistent form, which sets the stage for instant payments delivered across a global stage.

“The way we look at this is: If instant payments are the next wave of how domestic payments will be done, and if messaging associated with those payments is consistent, then we have an opportunity to build interoperability to support cross-border instant payments,” Kohli said. “That’s because a cross-border payment is simply two domestic payments with an FX rate in between them.”

Security is also top of mind. With the layer of security that can be applied to instant payments, security should never be one of the things that keeps a cash manager awake at night.

The pace at which this all gets done may be uneven, varying country by country, but we are indeed headed toward a world where instant payments will be the norm, said Kohli.

It’s an analog-to-digital transformation, and a shift from batch to real-time — and he said he believes the changes are inevitable.

“I think that within the next three years, every significant economy in the world will have a thriving instant payments scheme,” he told Webster. “The next logical question is: How do you get them to speak to each other?”

Against that backdrop, Citi’s focus has been on building a presence across instant payments functions, tying together incoming and outgoing transactions, tokenization and directory services across several payment schemes through a single point of access.

As for the corporate cash managers, Kohli said they should be sleeping soundly if they have their money with the right organizations focused on risk management practices, and if they are continuing to invest in innovation.

“They may have other things to worry about, but payments won’t be one of them,” he told Webster.