Banks’ Definitive B2B Payments Guide To Sibos

Corporates have growing expectations for faster, more efficient and more secure B2B payments — whether their money is moving from one business unit to another or one country to another. While FinTechs are offering a greater variety of solutions to business users than ever before, corporate finance chiefs and treasurers still turn to their banks first to improve their B2B payments strategies.

As financial institutions gather for this year’s Sibos conference kicking off in London today (Sept. 23), PYMNTS examines its latest findings on how corporate finance professionals are shifting their payments expectations, and what their financial institution partners need to know about how to meet those elevated demands.

Payments Speed and Security

Checks undeniably still play a role in corporate payments: PYMNTS and Mastercard found in their joint The B2B Payments Tipping Point report that checks remain the most common payment method both for making and receiving B2B payments, and surprisingly, satisfaction with checks is relatively high among surveyed corporates.

However, the report found both ACH and commercial credit card adoption is on the rise, thanks in part to their high satisfaction levels, too: 67 percent of businesses are satisfied with commercial cards, while at a more than 73 percent satisfaction rating, ACH remains the payment tool businesses prefer most in both accounts receivable (AR) and accounts payable (AP) departments.

As businesses continue this shift, it is no longer safe to assume that corporates are not interested in faster payments. Indeed, 55 percent of corporate professionals say real-time payments is their top B2B payments service priority, PYMNTS and American Express note in their latest Securing B2B Payments Report.

The acceleration of corporate payments is also igniting banks’ fraud management and mitigation strategies, too, with artificial intelligence (AI) and machine learning technologies quickly coming to the forefront of FIs’ fraud conversations, particularly as banks explore how to tackle the burden of false positives in B2B payments fraud detection.

“A firm attempting to make purchases from a new overseas supplier can trigger a fraud warning, for example, but AI solutions might compare it to a cluster of similar SMB accounts and further examine it before raising a flag,” the report noted.

As banks continue to watch how AI can support fraud efforts, they will also be wise to address corporates’ security concerns as they move away from checks: according to The B2B Payments Tipping Point report, despite high satisfaction levels of cards, 36 percent of corporates that aren’t satisfied with the tool say the risk of fraud is their top concern, followed by data security.

Empowerment Through Data

Open banking is incentivizing banks to open up data in ways to promote product innovation and industry competition, but financial institutions stand to gain significantly from leveraging the data they hold.

One way, of course, is through collaboration and data integrations with FinTechs, which continues to be a paramount strategy in augmenting corporate financial services. PYMNTS’ B2B API Tracker, a Red Hat collaboration, notes that 55 percent of corporate IT managers agree application program interface (API) integrations are critical business strategies. On average, an organization will manage 300 APIs.

For financial institutions, the technology presents an opportunity to attract and retain corporate clients while simultaneously reducing security risks associated with manual or other data aggregation strategies. As the report notes, however, a key challenge for banks today will be in determining which APIs will most appeal to their strategic FinTech partners.

Banks’ ability to be empowered through data can occur in other ways beyond API integrations, though.

The industry push for SWIFT’s ISO 20022 adoption continues to encourage financial institutions to adopt the payments messaging standard for more efficient transmission of transaction data, which can have particular impact for high-value cross-border B2B payments. According to the Simplifying Cross-Border Payments report by PYMNTS and SWIFT, ISO 20022 is now the dominant standard for faster and real-time payments thanks to its ability to promote security and decrease the amount of missing data when transactions move across borders. The standard, according to SWIFT’s financial crime compliance and sanctions strategy head Heather Lee, offers banks an “opportunity to build greater levels of trust across the banking community” and promote collaboration between those partners.

While there may be some debate over ISO 20022’s compatibility with APIs, as PYMNTS’ August 2019 Faster Payments Tracker notes, the standard can enable banks to offer faster, more transparent global payment services to corporate clients — while also connecting them with essential transaction data for reconciliation and analysis purposes.

Beyond the Payment

As finance executives shift away from paper checks with increasing focus on ACH and commercial cards, these professionals are also urging their financial service providers to look beyond the payment itself to promote efficiency.

Indeed, according to this month’s Payables Friction Playbook, a PYMNTS collaboration with Corcentric, accounts payable professionals say they are more interested in eInvoice processing automation solutions than they are ePayables tools. Businesses demand solutions that not only digitize their payables, but promote efficiency in the processes that precede and follow the actual act of payment — including invoice processing, reconciliation, and analytics.

Separate analysis from the PYMNTS and Fundbox SMB Receivables Gap Playbook point to small businesses’ demand for financing solutions that can support their B2B payments processes.

As payment times continue to get longer, smaller businesses in particular need financing products like lines of credit and credit cards to fill their cash flow gaps while waiting for invoices to settle: according to the research, there is $3.1 trillion suspended between accounts receivable and accounts payable as those payment terms lengthen and B2B sales are made on credit.

Unfortunately, PYMNTS found, early-stage, low-margin small to medium-size businesses (SMBs) — the businesses most in need of external financing — are often least able to access that cash flow support, representing a key opportunity for banks and other lenders to explore FinTech collaborations, faster payment solutions and risk strategies to fill that gap.

“These findings underscore the need for firms to consider financing solutions that can reduce their vulnerability to long payment periods and defaults,” the report notes. “One option is immediate payment platforms, through which invoices are paid by third parties and fees are incurred if balances are revolved after 30 days days. Such platforms would help create a more level playing field between established firms and the younger businesses still gaining their footing.”

With technological innovation accelerating, and corporates’ payments demands expanding, financial institutions are faced with a plethora of challenges — but also opportunities. Banks must step up to promote speed and security of corporate payments, even across borders, and explore the power of the data they hold to enable innovation, product diversification and payments transparency.

It would be a mistake, however, for financial institutions to narrow their B2B payments focus solely on the payment itself, as businesses large and small seek innovative ways to improve a range of processes that surround that payment for healthier cash flows and smarter business strategies.