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Evaluating The Future of B2B Payments

Not that long ago, the thought of a multiple vaccines being developed, tested, approved, and rolled out within a year would have been considered impossible. Global collaboration, idea sharing, combining resources, and embracing new technologies is taking the world’s scientific community to a new reality.

In financial services, payment technology innovation has also created a new reality for consumers. For many, a wallet stuffed with cash, checks, receipts, and bank cards is a thing of the past. Life is now connected and can be contained within a mobile device.

But what about businesses? Where is their new reality? Despite innovative alternatives, paper checks still dominate in many jurisdictions. B2B payments have a long way to go compared to B2C.

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A Connected Future

Change for businesses involves many legacy systems and processes, which inherently slows the pace of change. The challenges of 2020, however, have created a new focus, with businesses seeking the benefits of technology to survive. This focus will accelerate change in our industry.

B2B payments innovation was initially driven by those who create products – non-bank specialists and FinTechs, mainly – not those who use them. A slick user interface may be enough to capture consumers, but businesses clients are more complex. They can’t simply rely on a single credit card or app. There’s financing, hedging, insurance, logistics, cash flow; the list goes on.

Demand for better products to manage this complexity is now coming from business clients themselves. As consumers, they are used to innovations such as TV subscription models and per journey car insurance. These consumer solutions have principles that will transfer to B2B payments. Payment providers connecting through a SaaS host will collaborate and create transformative solutions. The possibility to finance a payment, ensure a shipment, hedge foreign exchange exposure and book logistics exists today. The missing element is how to connect the dots.

Enter APIs, or application programming interfaces. Now the default mode for Financial Institutions connecting to each other, APIs will be the technical backbone that allows payments providers to create connected solutions that solve for all aspects of the payment process in a single, connected, cloud-based platform.

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A Less Painful Future

Business demand for connected solutions will be equaled by demand for ones that solve long existing pain points, especially surrounding payment data capture and validation. Many countries have different requirements and payments fail if these are not met. For example, capturing a VO code or CUIT# for payments to Russia and Argentina is required for successful credit. With over 200 countries and territories, the total combinations of codes and formats is vast. Many payment platforms today still miss vital pre-payment features, exposing customers to unnecessary costs.

Business must also contend with email payment fraud. One area ripe for pre-payment innovation is creating secure channels for payee/payor communication. The successful payment platforms of the future will be the ones that create a secure gated environment for the capture of required payee payment details, regardless of where in the world they are.

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A Virtual Future  

Payments themselves are experiencing several trends that will accelerate, including real-time settlement and local currency pay-outs. Virtual accounts, especially those with multi-currency capabilities, are supporting international business growth. Online marketplace sellers, or those looking for wider internationally opportunities, will increasingly leverage these accounts. Traditional bank accounts, which are costly, cash-flow intensive, and lack flexibility, will increasingly become a thing of the past.

Very effective for small value on demand payment, virtual cards create an easy way to pay and to be paid by this almost instantaneously. Insurance claims, for example, can be made more efficient by virtual card payments, with faster payment speeds resulting in a faster response for on-the-spot remediation.

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A More Transparent Future

SWIFT’s Global Payment Initiative (gpi) provides businesses meaningful insight into the journey and timings of their payments. Payments sent through payment providers that use SWIFT gpi are trackable and provide transparency to costs and FX conversions being applied through the intermediary bank network. SWIFT gpi can cut across local settlement schemes with a low value cross border payment service. The trackability of this method will create a real differentiator against local payment schemes, for a while at least. This feature is particularly compelling for B2B cross border payments as it offers visibility all the way down to the payor/payee relationship. SWIFT’s start will catapult others to match, with more granular visibility becoming the norm rather than the exception.

This view on the future of B2B payments is just a snapshot. API connectivity through host platforms, embedded solutions, and data will shape future innovations. Business demands will remain the same – reduce friction, drive efficiency, and offer value and visibility for the costs incurred. The successful payment providers will be the ones who offer connected and transparent solutions that meet these needs.

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