I am excited to join the MPC community and share my thoughts on industry trends and innovations. Over the past few years, my writing focused on B2B payments and the gaps in payments processes. In my experience, the key to transforming B2B commerce comes from understanding the manual processes that inhibit growth, drive cost within a company. Most of the time, decisions around AP/AR are driven by company history, fear, and legacy systems that are cumbersome to change.
The critical problems for B2B companies seeking innovation come from a few different areas, for example:
– Checks are expensive to process
– Using humans to hand-key invoices, purchase orders, and check/remittances into ERPs is time-consuming
– Most ERPs or AP/AR automation solutions lack line-item, SKU level data, are using humans in the background, or both
– From SMB to enterprise companies, everyone needs better data and payments reconciliation abilities
Two recent articles I wrote address some of these issues. The first ‘The Check is in the Mail’ and Other Funny Myths about B2B payments” addresses a few misconceptions about B2B payments and digitization. While B2C payments have become more streamlined and cheaper, the same is not true for B2B. Most payments in the B2B space are manual, on paper, and late. Moving from analogue processes and systems to digital is the best way for companies to manage spending and grow their bottom line. Unfortunately, the adoption of digital solutions is slow and key players in the industry lack the agility to deliver the “What’s next?” in payments innovation.
The second article, “Unpacking Digital Transformation: How to Create a Payments Strategy” discusses how companies can ask data-driven questions to formulate an optimized strategy. When a company is focused on “digital transformation” (i.e. companies creating an eCommerce presence when in-person and in-store sales declined) but neglects payments, customer experience suffers. Buyers are bringing their B2C expectations into B2B transactions, and the diversity of cost-effective payments options simply is not there. Creating an online store for B2B buyers that cannot track those purchases in an ERP or accounting system simply creates more manual work; there are better ways to do business.
The payment industry continues to see new B2B innovations from start-ups and disruptors. Current collaborations amongst industry players include ISO20022 standardization, real-time payments, line-item level reconciliation, and 1-click bill pay. What’s surprising is that US fintech organizations received $14.2 billion in investments during the first half of 2018, according to The Pulse of Fintech by KPMG. Another interesting fact is that 2 of the top 3 fintech deals completed in the US during that year were payment companies. This trend points to a continuous move-in payments evolution, which is sure to grab the attention of community banks.
From faster payments to AP/AR automation, there is a paradigm shift in the payments industry. Payments, which were initially seen as a supportive product, have become an integral part of a financial institution’s organizational strategy. The recent boom in non-traditional payment service providers is placing pressure on financial institutions to develop a more connected relationship with their customers, especially businesses. Once a bank has its corporate organization strategy, a payment strategy that complements its objectives should be implemented. Digital payments strategies should be considered as a supporting cast to the organization’s overall strategic plan. While the core strategy points the bank in the direction of the goal, the payments’ strategy propels that strategy forward. In short, having a payment strategy that feeds into a strategic plan helps to hasten its execution.
The market clearly demonstrates that traditional banks need to prioritize, establish and update B2B payment strategies to remain competitive. For more thoughts on how banks and other PSPs can identify their place in the digital payments’ development spectrum, continue following my column here and my other writings on Coruzant Technologies.
Angela Murphy, Ph.D.
Vice President, Business Development, Coruzant Technologies
Dr. Angela Murphy has experience in artificial intelligence, financial technology, and the global payments industry, building on her skills as a storyteller and rhetorician. She engages at the intersection of strategy and insight to drive results for her clients. In her current role at Photon Commerce, she helps run a team that uses artificial intelligence and machine learning to solve complex problems in the payments industry. Dr. Murphy received her Ph.D. from the University of Kansas, and currently resides in Kansas City with her husband, Brock, and German Shepherd rescue, Roscoe.