The global pandemic has created public health and economic uncertainty on a scale not seen in a generation. It has also motivated the great digital shift across all pillars of the global economy, including an almost unanimous move on the part of the business payments ecosystem to embrace modern, digital payments systems at a pace not seen in decades.
“COVID-19 [has] become a catalyst for lots of change within everything that we do,” Kevin Phalen, global head of Visa Business Solutions, told Karen Webster in a recent conversation. “Particularly within B2B payments, it has actually accelerated processes and forced organizations to rethink how they can make sure that they can continue to make their B2B payments properly.”
Phalen said all of the challenges are driving payments innovation at a fast pace. In fact, the most consistent thing he’s seen in the past several weeks has been the unpredictability that’s present across the commerce ecosystem — requiring a lot of pivots and upgrades.
That, he said, has pushed organizations to act far more quickly than they ever have, making fundamental system changes in days that would have until quite recently taken weeks or even months, whether it’s corporates, financial institutions, or even Visa itself.
The North Star for Visa over the last eight weeks, Phalen said, is an all-hands-on-deck attitude to “just get things done” — so that its clients can get access to the funds they need to run their businesses.
“It’s really been a bit of thinking about processes differently while also innovating and changing core infrastructures,” he said.
Moving Way Past Paper
Moving businesses away from paper checks has been a long, slow and somewhat steady process. As with cash, many payments watchers have predicted the death of the paper check for years, only to see its use persist, because the friction that it solved for — ubiquity and a simple way to make a payment — was less than the friction created in replacing it.
Not anymore. Phalen told Webster the frictions that have arisen in the past eight weeks of stay-at-home orders might finally be the quickest path to its near-certain demise.
Checks have become completely unusable for business payments given that millions of office workers are doing their jobs from home, he said. In an environment where the pandemic is already depressing business revenue, letting checks arrive by mail and sit in offices unopened and uncashed isn’t an option. That, along with asking the workforce, including the chief financial officer, to come in and sign paper checks each week so that vendors can be paid is fueling more interest than Phalen has ever seen from companies that want to become fully digital on payments.
“If workers can’t get into their offices — if people can’t open up those envelopes [and] can’t reconcile those checks — then [an] already strained financial infrastructure is strained even more,” Phalen told Webster. “So, what we’ve seen is a massive influx of our clients coming to us saying: ‘How can you help enable our suppliers for acceptance? How can you help us to drive more virtual payments?’”
The trend toward the consumerization of payments, Phalen said, is also accelerating the adoption of mobile-enabled solutions that can flex to any size or type of transaction. Phalen noted that alongside requests for virtual payment issuance, Visa has also seen a big uptick in inquiries about digital data reconciliation, essentially how to digitally transform the payables process by digitizing its end-to-end processing.
CFOs, treasurers and payables teams now need digital processes and payments to scale to new use cases.
For example, since some governments are purchasing vast amounts of personal protective equipment to deal with the coronavirus, Visa has routinely been facilitating large-ticket transfers in recent weeks, Phalen said. As a result, many companies’ expense management systems have needed massive, innovative upgrades made nearly “on the fly” and capable of facilitating B2B payments worldwide, he said, given the urgency of the need.
Getting Clarity About Immediate Access To Funds
The global crisis has also made acute the need for payments systems — payables and receivables — to offer both control and transparency for all parties. The economic uncertainties force buyers and suppliers to want a much more transparent look at payments flows, in and out of their organizations and in real time.
“There’s obviously a component of urgency and speed,” Phalen said. “As we’re talking to small businesses and large corporates, the one thing that they all want to be able to do is help them control their payments on the outbound side in a very, very specific manner — on not only the value but the timing in what they’re paying for. And then [on] the supplier side, they’re desperate to know when they’re going to get paid.”
Moreover, suppliers want to know if they’re getting the full amount due, and they need assurances that a payment will arrive by a certain date and time. That’s not surprising given that cash flow has become a life-and-death issue for many businesses. Uncertainty around when a payment will arrive isn’t merely an inconvenience anymore.
Will The Innovative Spirit Last?
The last eight weeks have revealed a lot about what needs to change within the B2B payments landscape, and what can be done when people come together, with focus, to make things happen. Will that genie be left out of the bottle? Hopefully, Phalen said, some aspects of it will stick, even though “hope is not a strategy.”
He’s convinced that what will stick is an acceleration to execution and the swift adoption of innovations in the historically staid world of B2B payments has left him encouraged that execution is now the path the ecosystem is on. And that even if things do slow down, progress, and lots of it, will come more consistently in the future.
“I do think people are rallying around how we solve real-world problems and make things better,” Phalen said. “My hope is that it’s going to continue, because I’ve seen a lot more focus on getting things done — tearing down the walls, so to speak — to make sure that people work together to deliver for their communities, for their clients and for the world.”