The payments industry has undergone more change in the past few years than it has in the preceding few decades. The rise of instant payments, the arrival of fintechs, the consumerization of payments, and the onset of open banking have driven significant shifts in the business payments terrain.

In a recent PaymentsJournal podcast, James Richardson, Head of Global Product Solutions at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how businesses can revolutionize the way they pay and get paid.

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Searching for Watering Holes

Two of the most common business payment themes on the minds of chief financial officers are how to solve for fragmented technology and how to integrate fragmented processes.

“Generally speaking, corporates believe there are smarter ways of solving for business payments than the technology that’s accessible to them provides,” Richardson said. “They’re rationalizing their vendor relationships and looking for more meaningful strategic partnerships to help them streamline business payments.”

Many large corporations simply don’t have the staff to pursue new revenue streams. Though they realize fintechs can address those gaps, companies are often unsure how to proceed. Fintechs can also be uncertain how to position themselves to businesses.

Optimizing business payments is that much more difficult because of the sheer amount of information available to companies. It can be tough for businesses to get tangible insights into what is changing in their industry.

“They’re looking for sources,” Richardson said. “They’re searching for the watering holes where they can find the latest on the industry, because it’s critical to find out what the best in class is doing. It used to be businesses could speak to their bank and get all the information they needed. Now corporates have more multibank relationships than ever before.”

Companies recognize that they should be more independent and less reliant on their bank. Financial institutions and fintechs have rushed to offer solutions, fueling competition. The competition has been beneficial for businesses because they now have an array of solutions to choose from.

A New Wave of Change

In European markets, there are more payment types, a situation that creates choices for customers and companies. As more options become available, U.S. CFOs must consider the most effective way to modernize payments. It could mean moving from paper-based payments to electronic payments or making cross-border payments more effectively.

The ability to modernize through connected solutions is greater now than it has ever been, but adoption has been slow. According to a 2022 AFP Payment Survey, over 90% of U.S. businesses accept checks for incoming payments, and 86% use checks for outgoing payments. In most cases, it’s not for lack of better options; it’s because that’s the way things have always been done.

“Cracking the behavior is critical,” Richardson said. “Frankly, it’s a cultural thing. It’s already being done in other countries, but over the next few years, moving away from checks will be significant to overcome for U.S. companies. Once that happens and CFOs’ eyes are opened, they will see a new wave of change within their organizations.”

Though many businesses don’t want to process paper in and paper out, they are concerned about fraud. That means checks might stick around.

“We aren’t likely to see a government mandate in the United States where checks would be completely mandated out of the payment system,” Bodine said. “That means we aren’t likely to see an eradication of checks until there is a concerted effort by the largest corporations in the world to get rid of them.”

Navigating the Fraud Crossroads

The complexities of fraud have brought companies to a tough juncture. Criminals now operate as if they are businesses, and if an organization is targeted, it’s not by chance. Bad actors are looking for weaknesses. If they find one, they will conduct deliberate, purposeful attacks.

“The opportunity for corporates is to actively search out best practices and not become the laggard,” Richardson said. “If you’ve got your head in the sand with fraud, you run the risk of getting hit twice. One, it’ll affect your cash flow because you’re making slower payments. Two, fraudsters will prey on those that are the weakest or the slowest to move. You don’t want to be in that category.”

In addition to outside threats, businesses must be aware of insider fraud, which can hurt an organization just as much. To mitigate that threat, businesses should create a culture where the company’s money belongs to every employee. It’s everyone’s responsibility to make sure those funds are safeguarded.

Employees should know it’s appropriate to challenge suspicious transactions. It will become even more important as tech develops and criminals have better tools. Although new technology can increase fraud risk, it can also mitigate it. For instance, business payment networks can provide absolute verification of the relationship between the account sender and the account receiver.

“Fraud prevention should be a priority, but it’s also an ongoing process,” Richardson said. “That’s when it’s important to have those watering holes, to check your sources to find out the latest on fraud prevention. More knowledge makes corporates more independent. It’s critical if they’re thinking about a broader payments structure that reaches beyond their own shores.”

Rapid Time to Value

If companies embrace the technology that’s available as a service solution, they will find it won’t take long to get up to speed. Partners can quickly connect solutions that will optimize a company’s payments systems.

“Partner, partner, partner with an exclamation point,” Bodine said. “The data shows that if you want to see improvements in efficiency, costs, and long-term sustainability, it’s best not to attempt payments modernization internally.”

Payments partners can now onboard businesses in days or weeks as opposed to months or years, so there is a rapid time to value. Though some U.S. companies may be cautious, the businesses that modernize their payments systems soon will be best positioned to reap the rewards.

“Recognize the payments landscape has changed quite significantly,” Richardson said. “It’s a smaller world now. But if you look at what other countries are doing, you’ll be encouraged about what’s coming your way.”

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