When it comes to treasury market offerings, banks have historically started wholesale and retail lockbox businesses. They were able to provide these services to their corporate customers, which effectively outsourced all of the work around receiving payments: that is, opening envelopes, scanning payments – as well as remittance information – and then making a deposit at the bank.
“For a long time, that’s been a successful model,” Tom Berdan, chief marketing officer at startup DadeSystems, told PYMNTS.com in an interview. But, as payment types and payment channels have grown to become more electronic, the amount of lockbox payments is declining rapidly.
In one case, a payer may send a payment through a supplier network, such as AvidXchange. In turn, a company may receive a deposit in their bank account a couple of days later and have to pull the remittance information from the supplier site. And in another case, which Berdan said is more frequent, payments will come from an accounts payable system within the payer. Most commonly, those payments are sent by automated clearing house (ACH). The remittance detail, however, is typically sent separately through an email or an email with an attachment.
As an example, Company A might receive an invoice for $10,000. That company might originate an ACH transfer to pay that $10,000 transaction and send the payee an email to say the payment is on the way. In addition, the company might send the payment details in an email, PDF document or an Excel spreadsheet (if there is a large volume of payments). But the customer receiving the payment is left to do a lot of work: Since most systems can’t read and parse an email or an electronic file, such as a PDF or Excel spreadsheet, they have to manually post the payment.
As corporates face these kinds of challenges, FinTechs such as DadeSystems seek to provide solutions to meet their needs. Banks, in particular, can benefit from partnering with FinTechs that can help them get access to quicker development than going it alone. In addition, banks can tap into the expertise of such firms that keep an eye on the latest developments.
“We’re out in the marketplace every day dealing with corporates and seeing the new trends out there to support the changing payment landscape,” Berdan said.