Visa: Digital DNA Forges Great Companies During Tough Times

Up until quite recently, treasurers and chief financial officers (CFOs) didn’t see any pressing need to go digital.

“Three years ago,” Global Head of Visa Business Solutions Darren Parslow told Karen Webster of the embrace of new tech, “it was number six on the ‘top five’ list. It was kind of like a hobby.”

The recent conversation served as a capstone to a monthlong series that — with 81 speakers, 53 episodes and watched by 97,000 live viewers — saw CFOs, treasurers and other executives weigh in on what it means to “go digital.”

Juggling PDFs and paper checks was clunky and friction-filled, but executives and AP/AR professionals were all used to it. If it wasn’t that broke — well, there was no need to tinker too much in trying to fix it.

And then, suddenly, the pandemic spotlighted what was broken.

Fast forward from the depths of 2020, and what was a hobby became a matter of survival. And now, of course, digital is becoming part of CFOs’ and treasurers’ DNA.

Indeed, PYMNTS and Visa data show that 94% of CFOs went digital as the pandemic upended operations. And it turned out that the change wasn’t all that bad — a full 85% of executives surveyed said they planned to keep the momentum going.

But the journey from where we’ve been to where we need to go … well, that stretches far ahead, especially for smaller and middle-market firms.

“It would be premature for us to think that we’ve come a long way,” said Parslow, who added that “what we’ve done is we’ve opened people’s minds.”

Losing the Paper

It’s becoming more important than ever, with inflation and supply chain disruptions running rampant, to manage working capital efficiently. Smaller firms don’t have the same options as their larger corporate brethren do, and the cost of capital is higher now than it was just a few months ago (when that cost was, effectively, zero). Private equity and VC funding are harder to come by, to put it mildly.

“It’s going to be an interesting couple of months in front of us,” Parslow said, ”and we’ll find out what we’re made of.”

By and large, Parslow said, treasurers have taken a use case or two and digitized or automated a few processes.

There is still, stubbornly, a significant percentage of paper checks in the mix.

Even some of the electronic channels are still a bit antiquated. PDFs attached to emails gum up the works as enterprises and vendors communicate with one another.

“Managing those levers where these digital tools that are available to CFOs and treasurers more immediately to understand the health of their business and the health of their supply chains — that’s becoming very important,” Parslow said.

But as to what’s been lacking: There has not been a wholesale integration of data flows downstream into enterprise resource planning (ERP) systems.

“You’re only as automated or as real time as the most manual reconciliation or process,” he said — which means, really, that many firms aren’t really automated at all. The weak link is what stymies optimal liquidity management.

Visa, he said, has been making the investments necessary to help suppliers receive virtual cards, and with robotic computing, OCR too, helps companies embrace straight-through processing.

Blurring Some Lines — and Going Mobile

Parslow told Webster the roadmap toward blurring the lines between automation and digitization — and transforming the CFO office — is getting a bit clearer. The tools and solutions available from Visa and its partners provide the information for banks and small and mid-sized businesses (SMBs) to make quick decisions.

Corporates are pushing banks for those solutions, Parslow said, because they’re being offered a slew of solutions by FinTechs and digital players — but are coming to their traditional partners and trusted partners (including banks and Visa) to pivot to the digital future.

Part of that focus on the digital future entails going mobile, said Parslow, who added that within just a few years, 75% of the workforce would be of the millennial (or younger) generations.

“That treasurer, that procurement officer, that employee is coming to the workplace with a digital-pure and digital-only mindset — and also with a mobile-only mindset … mobile is where we [at Visa] are and where many of our clients are focused,” he said.

By extension, companies are, in the years ahead, going to be paying suppliers and managing spending through apps or QR codes. There are advantages inherent in the digital shift, he said, as companies can provision single-use accounts or virtual accounts an employee’s digital wallet. Working capital thus becomes a tool to manage on the go — even as funds cross time zones and currencies.

CFOs and treasurers say they struggle with having to be the “systems integrator” connecting all of the disparate solutions and systems across their enterprise into their ERPs to get that single view of their flows in and out and to pay and receive payments, especially across supply chains.

Parslow noted that within its Visa Business Solutions, the company offers B2B Connect for larger ticket transactions and Visa Direct for smaller, higher volume remittances geared toward consumer and business transactions. Those offerings, he said, help CFOs move away from being balance sheet custodians and more towards working with other departments to make strategic decisions.

Smokestack Firms Enter the 21st Century

Looking ahead, platforms will be the next frontier, he said, in driving the next levels of operational efficiency. Where the initial focus during the pandemic had been on collecting and analyzing data and getting it flowing faster, the onus now is on layering transactions into platforms and helping them scale.

“The notion of embedded finance and embedded payments is among the biggest trends that I’ve been talking about, and hearing about, in the last four to six months,” Parslow said.

That’s especially true of the smokestack economies, where industries rooted in paper, in phone calls — steel companies and chemical firms among them — have found the benefits of going online to negotiate pricing and get payments flowing, and by extension improve working capital.

Beyond modernizing some of these old-economy verticals, platforms also improve various back-office functions. Banks are finding opportunities with software-as-a-service (SaaS) firms (for acquisitions and for partnerships) as APIs grant access to data and open banking technologies to look at acquiring and acceptance activities.

With that robust data flow in place, the potential is there to change the nature and practice of trade finance and working capital management, he said. As he told Webster, “You’re sitting on a lot of information, not just data, that you can use to change your underwriting. … At Visa we view our platforms as working capital platforms.”

In some cases, SMBs started taking card payments, or expanded their payments optionality, at least a bit. But increasingly in commerce, and in cross-border commerce, accepting card payments and credentials with the aid of Visa’s platforms has a real-time component, which means that liquidity management can be done in real time, too.

“Pushing” credit to those SMBs means that the relative cost of that capital, especially compared to traditional forms of financing (such as receivables financing) becomes cheaper. Elsewhere, as many as 90% of smaller and middle market companies are interested in early settlement options, he said, and that functionality is being offered by almost all acquirers (even though it was digital-only firms that initially brought those options to market).

Though 2023 will doubtless have its challenges, Parslow said, uncertainty drives focus.

“Great businesses are built out of tough times,” he told Webster.