In the minds of many, blockchain is synonymous with cryptocurrency. However, the technology can be much more than a framework for crypto transactions. B2B blockchain could serve as a powerful solution to the longstanding challenges businesses encounter in sending, receiving, and recording payments.

This transformative shift is already underway for the one million businesses that have migrated to the Paystand platform. The company recently acquired Teampay, and the two companies collectively processed over $10 billion in B2B transactions since their inceptions. That’s roughly 2% of a market that’s expected to grow by more than 40% by 2028.

“Blockchain is going to be a game-changer,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “Sending payments over legacy rails and structures, also known as correspondent banking, is costly and opaque. I’m very bullish on blockchain shedding some of its tie-in with crypto and making a mark on the B2B rail space.”  

DeFi in Traditional Spaces

Consumers have long benefited from seamless and accurate payments through peer-to-peer (P2P) platforms like Venmo. Meanwhile, businesses have grappled with outdated accounts payable (AP) and accounts receivable (AR) processes that can be inefficient and expensive. Paystand aims to bring the P2P experience to business payments.

The company’s network is built on the Ethereum blockchain, which allows for reliable and quick payments with no fees. According to Paystand CEO Jeremy Almond, adding Teampay to the fold, “not only revolutionizes payments and creates a seamless, fee-free B2B network, but also ushers decentralized finance into traditional spaces.” 

Bold Moves

Paystand hopes to offer relief for B2B customers who have suffered under persistent inflation and high interest rates for some time and are looking to cut costs. To capitalize on that environment, the company has made several bold moves beyond the Teampay acquisition.

It recently bought full dynamics integration with Microsoft Dynamics 365 Business Central, and the initial application for Dynamics users will be Paystand’s ability to streamline AR.  

Bodine, who examined the role of B2B blockchain in his recent report, Movements in Global Payments and Banking: 2024 Edition, noted: “As it moves away from crypto, blockchain will be extremely influential. Particularly in cross-border payments, where the situation is ripe for a new way to send payments. Then comes cross-continent and cross-ocean.”

The post Blockchain-Based B2B Platform Aims for Venmo-esque Experience appeared first on PaymentsJournal.

A successful payment acceptance policy encompasses flexibility, convenience, and, above all, economic efficiency. However, it can be hard to hit all of these marks in an ever-changing payments landscape.

During a recent PaymentsJournal webinar, Mike Passifione, Vice President of Payments for Billtrust, spoke to Albert Bodine, Director of Commercial Enterprise Payments at Javelin Strategy & Research, about what it takes to build an effective payment acceptance strategy. They discussed automation, dynamic pricing, and why businesses like to pay with credit cards.

Creating a Policy

The first step of any payment acceptance policy is identifying the target audience, timing, and locations for accepting payments. This could be at the point of sale, during cash-on-delivery transactions, e-commerce or in B2C and B2B environments. Ideally, you want to maximize your chances for customer engagement. And having the necessary technology to adhere to a policy becomes extremely important. Having a written policy that lacks full execution is the equivalent of not having a policy.

Despite the desire to satisfy customers, it’s essential to adhere to established protocols. “As an example, a rule of mine is I do not take a credit card payment for a late payment or from a customer over the phone after they’ve been invoiced,” Passifione said. “If I were a sales rep in that scenario, and I’m trying to please my customer, I might make an exception to that rule to get the money in the door and deal with the backlash later.”

Policies must strike a balance between meeting suppliers’ and buyers’ needs. As in any relationship, both parties must benefit. It’s the technology that will enforce this balance, rather than relying solely on your employees. . This approach sets the stage for success for your both your business and for the accounts receivable team.

Digitizing and automating the payments experience offers immense value, allowing you to consider the types of payments you prefer, such as ACH, card, check, or electronic data interchange—and how they are processed. Then, you can evaluate the types of cards and formats you accept, keeping in mind that each buyer may have preferences for interacting with merchants or suppliers.

It’s important to consider the costs associated with accepting each type of card. Can you establish rules that allow you, as a supplier or merchant, to benefit more from these transactions?

“You can say, ‘Yes, I’ll take that card, but I prefer if you pay me within 10 days of my invoice,’” Passifione said. “If not, I’m going to push you towards ACH, because that’s what makes sense for my company.”

Surcharging, too, has grown more popular in recent years in the B2B space. It can be the most punitive way of conducting a transaction because there is an impact on the buyer.

“The surcharge is an interesting development,” Bodine said. “When we originally came to market with virtual cards, the value proposition was, ‘I’m going to pay you in net 10.’ As the supplier, I’m going to be more OK with paying 200 basis points for those funds than they would be if it was net 30. When you go into a buyer-initiated payments scenario, you take that control away from the supplier being able to pull the payment when it’s ready. I have been seeing more surcharging as a direct result of buyer-initiated payment.”

Providing Options

According to Passifione, suppliers and merchants have many ways to control their costs and their acceptance policy without turning to a surcharge program. “A lot of folks are very happy to pay 250 basis points if it means they will get paid within 5 or 10 business days,” he said. “It’s a bit more of an equal playing field. There are things you can do around negotiating terms, as well. A Custom Rate program could get you even more card spend and grow your network.”

Many players in this space are eager to grow card spending, and more collaboration is taking place. “But they need to do it somewhere in between the traditional cost of a very expensive downgraded credit card and the much cheaper ACH,” Passifione said. “A perfect touchless payment that they can apply cleanly, somewhere in between that cost, starts to make a lot of sense for suppliers. I think that’s ultimately where we’re going to see a lot of B2B spend grow in the future.”

Bodine added that with dynamic discounting, it comes down to choice. “I find that suppliers are sometimes willing to pay for different choices,” he said. “The net 5 might be a lot more expensive than the net 15, but they might have the remittance data that goes along with the suit. That’s how you get to a more balanced relationship between suppliers and buyers.”

Differences Across Businesses

Across the buyer spectrum, you may work with enterprise buyers who engage with enterprise customers, often utilizing EDI, ACH, or wire transfers. Midsize customers typically access an online portal for invoice selection and payment processing, while some—particularly those from larger enterprises—opt for virtual credit cards.

Then there are smaller businesses. “In the building material space, as an example, a lot of small to medium-sized construction businesses need the float, and they want to use their credit card to make payments,” Passifione said. “They’re relying on that card issuer and the float and the rewards they get. As you get into the enterprise world, they may prefer to pay with a virtual credit card, but they don’t have to run their business and can quickly pivot to ACH.”

Despite advancements, more than 40% of B2B payments still occur with checks. However, checks pose significant fraud risks due to the exposure of bank account information.

“We should be encouraging buyers to move to an electronic fashion,” Passifione said. “We’re creatures of habit. We’ve been sitting in that 40% range on check usage for what seems like for 20 years. I’m hopeful that changes dramatically over the next 10 years.”

This issue is crucial not only because of fraud concerns but also because of inefficiencies. “Something we talk about constantly is the fact that we can figure out ways to reallocate your employees so that they are doing things that are beneficial for the business,” Passifione said. “They should not be stuck in a room trying to reconcile a $1 million ACH payment that came in the bank because you can’t find any remittance. There are tools to solve for that. These individuals should be doing more thought leadership, higher-impact opportunities, and dealing with higher-impact items that can help you grow the business.”

The post Beyond the Check: Smart Strategies for Managing Payment Acceptance appeared first on PaymentsJournal.

Cognizant of the rise of credit-push fraud, Nacha has approved a new set of rules aimed at addressing it. Credit-push fraud uses social engineering and email phishing attacks to deceive someone into sending funds to a criminal-controlled account, whether through a compromised business email, vendor impersonation or payroll fraud.

In a recent PaymentsJournal Podcast, Michael Herd, Executive Vice President of ACH Network Administration at Nacha, and Brian Riley, Director of Credit & Co-Head of Payments at Javelin Strategy & Research, spoke about how the new rules establish a base level of payment monitoring on all parties in the ACH Network. They discussed how the changing payments landscape has made these rules necessary and the next steps for organizations to take.

Changes to the System

The Nacha membership began this journey late in 2022 with the publication of a new risk management framework that identified frauds resulting from attacks such as business email compromise or vendor impersonation. These resulted in payments being pushed out from the account of the victim to the account of the criminal. That propelled the desire for stronger action against credit-push fraud.

At their core, the new rules raise the bar for fraud monitoring and transaction monitoring across all ACH participants except consumers.

“This was an expansion of focus for us from the perspective of ACH risk management,” Herd said. “Our objectives were to not only reduce the successful incidents of those types of frauds but to improve the ability for recovery after those types of frauds and payments have occurred. Everyone has a role to play in fraud mitigation and detection and recovery. All parties have a basic-level requirement to monitor transactions. It would no longer be acceptable to do nothing.”

One of Nacha’s key targets is payroll impersonation fraud. This involves an ordinary worker being spoofed into providing payroll portal credentials to a scammer. As a result, the worker’s Direct Deposit  gets rerouted to a fraudster’s account.

The rules are broad-based, and to some extent all financial institutions and ACH processes will be affected. But many of the participating organizations already conduct robust fraud monitoring. Although the impact to those groups might be minimal, others that are not doing much in this area today will have a bigger lift to become compliant.

For the first time, this rule set defines a role for the receiving financial institutions with respect to transaction monitoring. Under the current Nacha Operating Rules and Guidelines, receiving financial institutions do not have an explicit role in monitoring this type of fraud. Their obligations are simply to post transactions on a timely basis and make the funds available to accountholders. Although these rules don’t shift any liabilities for transactions, receiving institutions will have requirements for transaction monitoring, which means many of them will have additional work to do.

The system is designed to look for red flags such as payroll transactions going into an account that looks like a mule account, or someone no longer receiving their regular payroll deposit. One of the rules creates a standard description for payroll transactions to make that kind of monitoring easier for the receiving institution.

“We’re following the flow of a payment from origination through the sending institution and then through to the receiving institution at the point of the receipt at the account,” Herd said. “It is intended to follow the flow of the transaction and have all the parties to it performing some level of transaction monitoring.”

Once a credit-push payment gets to a receiving account and the funds are available, the fraudulent actors are going to try to move that money elsewhere as quickly as they can. Time truly is of the essence in detection and recovery.

Fraud Happens Before the Payments

It’s important to remember that the payments are not the fraud. The fraud happens when an organization is phished or spoofed. The payments are typically authorized; the treasury or the payroll function has approved them and wants them to be issued. From the perspective of the payment network, they look like any other type of authorized payment.

With consumers changing their transaction processes more often than ever, heightened scrutiny has become increasingly necessary. 

“When I look at myself versus my millennial children as an example, I haven’t seen a physical paycheck in 35 years,” Riley said. “They’ve all been Direct Deposit. And I’ve used the same bank for 30 years. But then I look at my millennial kids, and they go from fintech to fintech to bank to fintech and can move their destination bank account more times in a year than I have in my life.”

Nacha sees an opportunity to raise the bar to try to help identify these instances and aid in recovery. “Let’s say you’re the payroll office,” Herd said. “You have obligations to be able to validate changes within a payroll system. Should you just take anybody’s word that payroll should now go somewhere different? There should be some type of validation of that change order for the payroll. The same is true with vendor payments or the classic instance of the CEO saying, ‘Issue an emergency wire transfer somewhere.’”

Those transactions require validation and verification through different channels. The financial institution that processes them might be able to detect the change, or when a payment comes into an account, it might be able to detect when a mule account is suddenly receiving these new payments or a very large payment.

Next Steps

Information about the rules is already available on Nacha’s website. Anyone can sign up at no cost to receive Nacha rules information, regardless of membership. The organization will have additional resources available at its annual payments conference in May, and it will be hosting webinars on these rules changes and providing fact sheets.

The post A Step Forward in the Fight Against Credit-Push Fraud appeared first on PaymentsJournal.

The Reserve Bank of India’s directive to Visa and Mastercard to halt all card-based business-to-business payments in the country has begun raising questions. Although no official answer has been given, experts are speculating it is related to a crackdown on Know Your Customer (KYC) regulations.

The RBI, India’s central bank, confirmed that the decision will not affect all corporate card payments; only commercial transactions routed through third parties. If the RBI had suspended all B2B payments, it might have been seen as a move intended to curtail credit card challengers to its UPI instant payments system, but that is not the case. It’s worth noting that in India, as in Brazil, instant payments via domestic networks are the most popular form of payments, far exceeding credit cards.

In India, a subset of fintech firms operate in a category called “business payment solution providers” (BPSPs), enabling payments to merchants that do not accept card payments for a fee. The targeted companies appear to all be fintechs that are not in compliance with India’s payment regulations.  

Searching for an Explanation

So far, the RBI has declined to explain why it has placed these restrictions, reportedly withholding information even from the affected companies. “Visa received a communication from the RBI on February 8, in what appears to be an industry-wide request for information on the role of business payment solution providers (BPSPs) in commercial and business payments,” a Visa India spokesperson said in a statement.

Some news sources are asserting that the RBI is primarily concerned about money flowing through merchants without strong KYC protocols. Indian news channel NDTV obtained a document from the RBI alleging that one of the card networks had created an arrangement with intermediaries to create an unauthorized payment system. The intermediary would accept card payments for commercial payments and then route the funds via digital payments to non-card-accepting recipients.

“The primary institutions that should take note of this are financial institutions or card schemes that sponsor fintechs via banking-as-a-service plays and BIN [Banking Identification Number] sponsorships,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “KYC is a big problem in these scenarios, because the fintechs add another link in the chain and decrease visibility, but the sponsoring entity still has full responsibility for KYC policy.”

The post India Stops Some B2B Payments, and Many Ask Why appeared first on PaymentsJournal.

Embedded payments have been a mainstay for consumers for several years due to the rise of digital payments via smartphones and mobile apps. As consumers continue to enjoy the speed, convenience, and security of such payments, the business-to-business (B2B) space has been lagging behind.

That is not to say that many businesses are content with this; on the contrary, more businesses would like to see embedded payments featured highly within the B2B payments space so they, too, can benefit from the speed, convenience, and cost efficiency.

During a recent PaymentsJournal podcast, Daniel Artin, VP of Strategic Partnerships at Boost Payment Solutions, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed what embedded payments look like within the B2B ecosystem, why they are growing, the market opportunities available, and how to select the right payments partner to begin incorporating embedded B2B payments.

Defining Embedded B2B Payments

Embedded payments originally centered on such use cases as consumers hailing a ride using the Uber app or ordering groceries via the Instacart app. Both platforms offer fast and convenient ways to pay for products and services with a simple tap on an iPhone, with no need for entering credit card information.

Within the B2B payments arena, businesses are demanding the same perks that come from embedded payments, including enhancing the customer payment experience, automating the processing of payments, and providing protection against fraud.

“When you talk about embedded B2B payments, it’s always within the context of embedded finance, which as we know has become sort of the buzzword, the flavor of the month within the payments and finance sphere,” Artin said.

“So for those nascent audience members listening, we define embedded finance as the integration of financial services and tools primarily to non-financial software platforms. Think of this as incorporating banking, lending, sometimes even insurance into various (software-as-a-service) providers and platforms.

“I’ll be focusing on embedded payments, particularly in the context of B2B payments, which I believe is the edge case of embedded finance.”

Said Bodine: “I see in my research that embedded finance, open banking, it’s really going to be the major disruptor to the legacy banking system. Certainly, things like correspondent banking and getting away from the notion that you have to go through your bank in order to make a payment.

“These are very important, interesting times for the world of B2B payments.”

Embedded B2B Payments on the Rise

As businesses continue their expansion across the world, large multinationals as well as small and mid-market companies are taking their enterprises to a global level. As they move toward a more digital ecosystem, the complexities amplify, especially for back-office processes.

“And of course, we can’t forget to mention the impact of COVID,” Artin said. “I really believe consumer (tendencies) begets B2B. What we saw during those three years was almost a fast forward in the mind of the retail and the regular consumer of wanting simplicity, wanting digitization, wanting a seamless experience and businesses also caught that wildfire.

“What we’re seeing is businesses starting to have a desire and almost demand to move away from an analog swivel chair process into more of a seamless digital experience from a holistic level.”

Even with businesses ready to digitize B2B payments, there are still some businesses that happily embrace the old ways of operating. Bodine recounted a conversation he had with a wholesale restaurant provider.

“We got into the subject of payments, and I said, ‘What does your daily payments file look like? Are you sending a batch file?’” Bodine said. “He went into his drawer and took out a stack of checks about that thick, and I said, ‘Do you mean to tell me that you’re still receiving checks as a primary mode of payments?’

“He said, ‘Absolutely. It’s 90% of how we are paid.’

“It might be that particular industry, but it reminds me of a statistic that still 33% of payments made globally are made by paper check, which every time it comes out of my mouth, it just boggles my mind.”

Artin attributes business’ use of legacy processes to inertia. Businesses that have been writing checks, fulfilling procurement orders, and paying invoices in the same manner for decades seem to have embraced the status quo and feel no urgency to make changes.

The Market Opportunity for Embedded B2B Payments

As B2B payments become more digitized, the opportunities for embedded payments will grow significantly as companies seek a more seamless payments experience.

“In the U.S., depending on which report you’re reading, it’s anywhere between 25 to 27 trillion (dollars) in total addressable market for B2B payments,” Artin said. “What we’re seeing right now is that embedded payments make up roughly 5% of that, so about 2.6 trillion.

“And over the course of the next five to six years, we see that growing considerably upward of $7 trillion, a 170% increase.”

For those SaaS companies debating on whether to incorporate payments into their platform, Artin contends there’s a “first-mover advantage to be gained.”

Companies that adopt payments stand to boost customer lifetime value. Plus, it’s an effective strategy to diversify revenue streams, not only from subscription-based models but also from a basis-points viewpoint. Through the integration of payments, the transaction volume alone will give valuable insights to the sales team, equipping it with a valuable toolkit to help land more clients.

Where Adoption Is Happening

As much as businesses would love to have embedded B2B payments mirror the consumer side, a long road looms ahead. For one thing, B2B transactions are significantly more complex. There are so many moving parts within the B2B space, including invoicing, reconciliation, handling multiple parties, and risk management. Moreover, the amount of money being processed is also considerably higher within the B2B realm.

“While the demand is high, it’s a slow-moving train,” Artin said. “I think one of the narratives that’s being pushed out there is that you’re going to see in the B2B world, at least in the near term, exactly what we saw in the consumer world, which is almost invisible payments.

“If you think about getting into and out of an Uber or booking a payment on an Airbnb, or buying groceries on an Instacart, it’s going to be a long time for us to mirror that type of engagement and automation in B2B.”  

Adoption of embedded payments is happening within the accounts receivable space, where previously the focus was on collections and deductions. Businesses are now implementing a “mosaic” of accounts receivable modules. Artin explained that the order to a cash system can now be featured on the tech stack.

He also mentioned adoption within the freight and logistics space, as well as in healthcare. Manufacturing and health insurance claims are also seeing an increase in adoption.

Selecting The Right Payments Partner

Naturally, the B2B space has its own nuances and complexities. Therefore, partnering with a solutions provider that has expertise in the B2B space is a must. Solutions that have served the business-to-consumer (B2C) space will simply be the wrong fit.

“Incorporating a payment facilitator model is a best suggested route here—partnering with an established B2B payment facilitator,” Artin said.

“Here’s a few selection criteria that I would consider. The first: Do they have a track record of playing in this playground, playing in the B2B space? Do they have a developer software layer? Do they have a streamlined onboarding process?

“Once you get customers bought in, are they going to be waiting 2 1/2 weeks to get a congratulations letter that they’re now part participating in the program? Do they have a reliable and accessible customer support?

“Are you going to be resorted to a 1-800 number or a generic listserv or are you going to have real folks in there that can handle issues that are inevitable about coming up? Is there a robust compliance management system?”

Artin said working with a flexible and nimble partner is paramount. Businesses must ask whether their partner can conform to any shifting conditions.

In addition, partners must be able to take into account that all businesses have their own accounting systems and their preferred methods of settling funds into their accounts, whether it be gross settling or net settling. Are they able to offer seamless reporting?

“The good news is that the fintechs that are still out there are really healthy,” Bodine said. “Most of them, because they’ve had to apply austerity measures, they are profitable. They’re actually really good acquisition targets for that reason.”

“Right now, more than ever, I think it’s an ideal opportunity for any forward-thinking SaaS platforms that are out there to consider embedding payments into their platform,” Artin said.

“It’s not an encouragement. It’s a must, and if you’re looking for that sort of expertise, there are folks out there that can help guide and coach you to make sure you’re making the most educated decision.”

The post Embedded B2B Payments: A Forward-Thinking Strategy for Long-Term Growth appeared first on PaymentsJournal.

Effective financial management is a critical factor for small businesses seeking growth. Tailored and automated tools, data insights, and guidance from accounting firms have become keys to scaling operations as businesses expand their footprint.

Intuit QuickBooks is at the foundation of small business growth. From accounting to payroll and payments, access to capital and acquiring customers, the QuickBooks platform helps owners better manage their business finances while also enabling accounting firms to deliver actionable advice that spurs client growth. To that end, the QuickBooks Connect conference, held this month in Las Vegas, presented several advancements to the QuickBooks platform that help accounting firms manage their client roster more efficiently.

A New QuickBooks Online Solution for Accountants

One significant announcement was the introduction of QuickBooks Ledger, a new low-cost, subscription product designed exclusively for accounting professionals to help them serve all their clients on one standardized platform, including those with basic accounting needs, such as year-end tax filing. 

For clients who don’t need frequent, ongoing support from an accountant, QuickBooks Ledger offers automated bank feeds, bank reconciliation, financial statements, 1099 tracking, and a seamless transition to tax preparation.

The sweet spot for QuickBooks Ledger is small businesses looking for an accounting solution that will grow along with them. The product is fully integrated and accessible through QuickBooks Online Accountant, allowing accountants to manage end-to-end workflows for their clients from a single place.

The days of manual data entry and reconciliation are also long gone. QuickBooks Ledger allows for financial transactions to be seamlessly synced. With a connection to the client’s bank account, business bank transactions can be flowed into the solution automatically, saving time and greatly reducing the chance of entry errors. And because automation is leveraged, and the tedious act of manually inputting the data is no longer necessary, accountants can now work on higher-end value services.

QuickBooks is looking to ensure that businesses are equipped with the right tools, regardless of whether they’re just starting out or scaling up. In fact, if a business’s growth requires an upgrade in accounting software and services, an accounting firm can easily transition their QuickBooks Ledger client to a more robust QuickBooks Online solution to meet their more complex, ongoing needs. 

Scaling Up

QuickBooks also announced several additional enhancements that support accounting firms who serve larger, more complex businesses. 

As businesses scale their operations, they need features that address their more complex needs. QuickBooks is rolling out new advanced roles and permissions for small businesses and the accountants who serve them to provide more granular and customizable access to sensitive financial data. For accounting firms, they will be able to manage what their teams can see and do within their own firm’s books and on behalf of clients, choosing a role that limits access or views to banking, sales, or expense data.

As a business grows and hires more employees, they also need to have more control over who has permission to perform sensitive tasks and have access to confidential data and information. QuickBooks Online Advanced, designed to serve more complex, growing businesses, will include controls for who can view, create, edit, or delete transactions and access accounting features like reconciliation, registers, and journal entries. Soon access controls will also apply to reports, managing who can view or customize different financial reports, sales reports, receivable reports, payroll reports, helping to avoid unnecessary mistakes and exposure.

Accountants serve businesses at various stages of maturity, and the tools they leverage should meet the unique needs of each of their clients. Having a robust solution that addresses the evolving needs of day-to-day business tasks and operations helps save time and drive greater efficiency for accountants. QuickBooks works alongside accountants to ensure its ongoing innovations continue to provide a solution that scales with the needs of their clients.

The post How Intuit QuickBooks is Providing Tools for More Effective Financial Management at Every Stage of Small Business Growth appeared first on PaymentsJournal.

Business-to-business (B2B) buyers get just as frustrated about the purchasing experience as consumer-to-business buyers do. In the end, everyone just wants a seamless journey before, during, and after the payment has been made.

A new study by TreviPay, a global B2B payments and invoicing network, revealed that B2B buyers seek the trifecta when it comes to the perfect customer experience: choice, convenience, and customization.

Key Payment Preferences

In its findings, 72% of B2B buyers said they’re loyal to businesses that offer their preferred payment method.

When it comes to making larger purchases, trade credit or invoice terms is their preferred payment method. Interestingly, 85% of respondents said they would buy more if given this option, and that’s because of the transaction limits associated with using credit cards.

B2B buyers also want merchants to move beyond manual processes and instead integrate with an enterprise resource planning. Some 80% of respondents said that it was at least “very important” that merchants offer this.

Finally, 78% of B2B buyers expressed their desire to customize the purchasing experience, including setting up spending limits, limiting purchases to preapproved SKUs, or including required PO numbers.

“As is often the case, consumer experiences set the tone for what happens in the B2B world,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “Enterprises are starting to demand consumer-like payments experiences that are frictionless, expeditious and error-free. And they want to be able to execute payments without the intervention of the legacy banking system.”

“More and more we will see open banking strategies that embed financial tools into platforms more focused on user interface and user experience than they are on ledgers and accounting,” he said. “Stay tuned as well as instant payments start to gain momentum and payments, even very large payments, start to be transacted from the palms of people’s hands.”

On the Road to B2B Payments Modernization

As consumer payment modernization continues to mature and adoption of faster payments increases, B2B payments modernization is still in its infancy. Many businesses within the B2B space are still using paper checks and invoices, making the transition out of these legacy systems more difficult.

But the tides are changing, an RPMG survey reported last year that more than 90% of suppliers preferred digital payments and invoice information instead of traditional paper checks.

By adopting a more digital B2B payments ecosystem, businesses have a more comprehensive view on their funds movement. And within this new framework, businesses will be better equipped to mitigate payment fraud.

The demand for faster payments and the increased costs of manual processing will inevitably drive more businesses to modernize their current B2B payments infrastructure in time.

The post B2B Payments Should Emulate the Customer Payments Experience appeared first on PaymentsJournal.

As business travel continues its long road back to pre-pandemic spending volume, businesses are increasingly pivoting from corporate credit cards to virtual credit cards. With the ongoing digitalization of business-to-business (B2B) payments, virtual card products can be embedded within an organization’s travel software, enterprise resource planning software, and B2B payment platforms.

That said, physical cards are not obsolete. In fact, travel-and-expense (T&E) corporate cards are expected to see general growth. Procurement cards will see the weakest area of growth among corporate cards.

In the report, International Commercial Credit Cards: Market Review and Forecast, 2022-2027, Ben Danner, Senior Analyst of Credit & Commercial at Javelin Strategy & Research, delves into the latest trends in commercial credit card spending on an international level, why virtual cards are growing in popularity, and the latest innovations affecting the commercial credit card industry.

Latest International Trends on Commercial Credit Card Spending

Several factors informed Danner’s findings, such as business travel spending, the gross domestic product of the various regions covered, and conversations with industry stakeholders.

The Western Europe (including the EU and the UK) and Asia-Pacific regions have seen corporate cards drive much of the spending. Due to increased digitalization, the highest growth will be seen in virtual card use, beginning with Western Europe, followed by the Asia-Pacific region.

Instant payments could pose a threat to commercial cards in the future, Danner believes, particularly when instant payments systems become connected in a true cross border payments scenario.

Corporate cards have been a steady fixture in the Latin American and Caribbean (LATAC) region and that continues to make up the majority of spending, followed by purchase cards. Virtual cards make up the smallest portion, with a lack of supplier acceptance remaining a problem.

Danner noted that for last year’s report, the estimated overall commercial card spending growth rate for Central and Eastern Europe, the Middle East, and Africa was 15.3%. However, that was lowered to 10.1% overall from 2022 to 2027. This can be tied to the ongoing conflicts: between Russia and Ukraine, in Sudan, and in the Middle East between Israel and Hamas. These conflicts will directly affect business travel to those areas of the world and subsequently card spending.

Although overall virtual card growth rates are high in Eastern Europe and the Middle East, the volume is still lower than in other regions. This was also the case with the LATAC region.

In contrast, virtual card growth rates in Asia Pacific and Western Europe were estimated to be lower than other regions, however, these regions hold most of the virtual card volume.

The growth in virtual cards, Danner explains, can be attributed to growth in online B2B marketplaces, trends in digitalization, and fraud prevention capabilities.

Why Virtual Cards?

Why are more businesses adopting the use of virtual cards? Virtual cards offer businesses more security, more control over spending, and a seamless integration within their accounting and expense management systems.

“Virtual cards are not a copy of a physical card. They create their own unique virtual number, and so the card is something that only exists for whatever parameters you set it for,” Danner said.

“If I’m a program administrator, sending out five employees to the UK, I can set their virtual cards to have a certain spend limit, and the card itself will just turn off in a day. I could even set it to only function with certain merchants.”

This, Danner says, can also mitigate against internal fraud.

Although virtual cards provide the ultimate in spending management card controls, the reality is that many suppliers are not equipped to accept this form of payment. The cost and complication of setting up virtual cards for suppliers can be extensive.

With virtual cards allowing businesses to control and manage business spending, coupled with an increasingly digitalized B2B payment ecosystem, we should expect the adoption of virtual cards to grow.

The Latest Innovations Affecting the Commercial Credit Card Industry

Convenience and security continue to be the driving forces behind the adoption of the latest in B2B innovations. One of the most prevalent trends is the uploading of corporate travel cards into employees’ mobile wallets. Without having to worry about losing a physical credit card, employees can travel with ease and simply tap their phones at checkout, saving time and without a hassle.

Finally, with card tokenization embedded in mobile wallets, employees can rest assured that fraudsters will not steal their credit card information through traditional card skimmers.

Given these and other perks of usage, Danner believes that this trend will only continue to grow internationally.

The post Virtual Cards Are Gaining Ground in B2B Payments appeared first on PaymentsJournal.

More businesses are seeking commercial strategies that can help them strategically engage with fintechs. The key to success lies in understanding their own risk profiles, leveraging available resources, and staying attuned to the evolving capital markets.

Last week, Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, spoke at the CPI Global Summit about the strategies businesses should explore. PaymentsJournal recently sat down with Bodine to discuss the current state of the space and get a glimpse into an upcoming report.

What was the impetus for the presentation at CPI Global and the upcoming research paper, “Commercial Payments Growth and Fintechs: Partner, Buy, or Go Organic?”

Well, the impetus is the $120 trillion of payments and transfers that occurred between businesses globally in 2022. On each one of those transactions, somebody is collecting fees. So organizations are trying to figure out—as it continues to grow beyond that point—how to get more in that game.

It’s the most asked question by my corporate clients, and that’s how we got to the subject matter. We’re also on the cusp of getting to cross-continent instant payments, which could make the upward trajectory even steeper.

Do you find yourself recommending more partnering, purchasing, or building something internally?

My answer is always either “it depends” or “I don’t know,” and so that brings up the next set of questions for me, which relate to risk profile, operational resources, and capital sources.

First, are you a risk-averse organization or do you operate more like a private equity or venture capital firm? They’re two vastly different things. I typically find that banks are more risk-averse and not necessarily because they want to be risk-averse—it’s because they’re in the most extreme regulatory environment.

With operational resources, what kind of resources do you have internally? Do you have a skeleton staff that is really focused on maintaining existing systems and infrastructure, or do you have capacity that allows you to pursue additional things?

And then, finally, as we all know, capital markets have been pretty tight lately. So it depends on whether you’re having to do some type of borrowing.

There has been a slowdown in funding for startups over the past year. How has that affected commercial payments fintechs?

It has affected it in a very good way, and the reason being is that money is not free anymore like it was during COVID-19, when the base rates were almost at zero. People were easily able to access capital. VCs and private equity were practically throwing capital at fintechs.

The fintechs that don’t have financial acumen have either been flushed out of the market or are about to be flushed out of the market.

I would also say that valuations have become far more accurate, and that’s not great for investors that were in seed rounds during COVID times; the cap tables may have been adjusted. The value of what they hold may not be as great as it was, but I think overall it’s a very good thing. Certainly, if you’re shopping for a fintech, now is a really good time to look if you have the capital because the valuations are far more accurate.

What have you been suggesting to corporate clients relative to acquisitions?

It’s really easy to buy something, and it’s really hard to integrate it. I had some very eye-opening experiences being on the integration side of M&A. And that can be very difficult if sharp due diligence is not done on the front end. We’ve all experienced the scenario where somebody goes to one of the bigger conferences and they come back and I say, “We have to partner with this fintech or  we have to look into buying this fintech.”

I got to the point of saying, “Well, that’s fantastic. Here’s some homework for you, including a list of questions or some due diligence.” My suggestion would be that you have very tight plans around how you assess either partnering or acquiring or whatever approach you’re going to take, and don’t stray from it because the ad-hoc scenarios are rarely successful.

You’ve covered a lot thus far. Any final thoughts?

Whether you’re looking to partner, buy, or go organic, understand why you’re doing it on the front end. There is a vast difference between doing something to remain relevant and doing something because it’s a nice shiny toy.

An example is, you go and pursue a fintech in a new market because your competitor is doing it. Well, the fact that your competitor is doing it doesn’t mean maybe operationally that you’re suited to doing it or perhaps or even culturally suited to doing it. That’s different than, for example, if you are a bank that does not have at least receive capability for either FedNow or RTP right now. In that case, I would say you’re at risk of not being relevant pretty soon. So that’s the difference. It’s a very big difference between shiny toys and relevance.

At the end of the day, well-documented plans. Don’t stray from those plans. Ad-hoc scenarios rarely work, and if you don’t have the resources internally to do this type of thing, then surround yourself with experts that do this kind of thing for a living.

The post Tailoring Commercial Strategies in Evolving Capital Markets appeared first on PaymentsJournal.

Fintechs are celebrated for offering sleek payments solutions, yet they often cling to outdated manual processes for back-office tasks. The primary offender: Excel spreadsheets.

Because of the manual nature of data entry, relying on spreadsheets can have serious negative consequences, including costly mistakes. Manual processes also don’t scale up well to take advantage of the new wealth of data available.

Automation is the key to addressing these issues and ushering in an era of efficient reconciliations and reporting within the payments industry. Automated systems can process vast amounts of data and generate reports and dashboards in real time, thus reducing operational risk. By shifting the focus away from manual data manipulation, teams can dedicate more time to understanding and analyzing data and inspiring more informed business decisions.

In a recent PaymentsJournal podcast, Marc McCarthy, Chief Commercial Officer at Kani Payments, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the benefits of automating back-office processes and how automation not only ensures data accuracy and compliance but also unlocks valuable insights and cost-saving opportunities.

The State of Reconciliations and Reporting

Payments reconciliation is a complex task in the payments industry, with the need to match countless transactions across various platforms and networks. The process is essential to ensuring the accuracy of financial records, complying with regulatory requirements, and detecting discrepancies or fraud.

Traditionally, companies have relied heavily on spreadsheets and internal systems to handle these tasks. However, the sheer volume and diversity of data—often coming from multiple sources—make manual reconciliation error-prone.

“Approximately 25% of spreadsheets globally contain errors,” McCarthy said. “From a management perspective, the accuracy of the data I receive as a C-suite member is crucial for making decisions that shape the company’s direction. My daily choices heavily rely on the reports I receive, so if I lack confidence in their accuracy, it distorts my understanding of the company’s path forward.”

Spreadsheets are the original backbone for many companies, and as a result, some organizations are reluctant to move away from them.

“It kind of works, so why fix it? We come across that sort of that sort of approach a lot,” McCarthy said. “My rebuttal to that would be: ‘Why do you think a process that you set up 30 years ago is fit for purpose today?’”

There’s also a perennial problem with legacy technologies: When they break, there’s no one left who knows how to fix them. “Trying to find the programmer who put this Excel sheet together is the same kind of challenge as finding a COBOL programmer to fix my legacy code,” Riley said. “It’s like speaking Latin or Greek. It’s archaic language, undocumented, and not a way to run a business, that’s for sure.

“A major U.S. network is being fined by the CFPB for inaccuracies in interchange processing over a seven-year period. When things go wrong, do you want to present outdated, untraceable Excel code to the lead regulator of the jurisdiction? Using an industrial-strength, proven system is a much better way to face off with a regulator in any region.”

Today, organizations are no longer equipped to fully lean on manual reconciliations, especially when they are handling a plethora of data.

“Digital payments are expected to reach nearly $15 trillion by 2027,” McCarthy said. “With the volume of payments that we’re going to see over the next decade or so, it’s just impossible to assume that a spreadsheet is the right way to go.”

Automating the Back Office

Many third-party companies, including Kani, help organizations automate their reconciliation and reporting. Although current systems are primarily rules-based, artificial intelligence and machine learning capabilities will soon become standard, drastically improving accuracy and efficiency in reconciliation.

For midsized financial institutions, the conversion process can take as little as a few weeks.

Reconciliation may sound like a one-time process, but according to McCarthy, it’s more than that. It takes data, validates it, and places it into a common data model, making information from various sources consistent.

“This allows us to view data from different sources like Visa, Mastercard, FIS, and others in the same way, making it easy to create reports and perform analytics,” McCarthy said.

Kani offers 35 different reports for different teams, including accounting, management, and compliance—all tailored to the teams’ needs. “The real value of Kani lies in its user-friendly interface, making it easy for users to find whatever information they need. We can send reports automatically by email, all within one platform,” McCarthy said. “If you were to replicate all these functionalities yourself, it would take a long time.”

Savings from Automation

For many business owners, the return on investment for automating back-office processes may not be clear. But that’s because the resources spent on maintaining and repurposing are greater than most think.

“In the UK, our surveys found that around 700,000 hours per week are spent on reconciliations. A medium-sized business typically spends about 3.6 hours on this task, which I think is very conservative,” McCarthy said.

“I recently spoke to a large bank about their QMR reports, and they initially mentioned that only two or three people were involved. However, when we had our first meeting to discuss their requirements, a staggering 20 people showed up. This illustrates the hidden cost of these processes and the fact that there are far more people involved than we initially realize.”

Many companies feel that they should automate internal processes in-house. But according to McCarthy, this is a tedious and needlessly expensive process.

“If you attempt to build an in-house solution, it would take at least six months and require a minimum of three skilled engineers,” McCarthy said. “They would be developing something already available off the shelf from Kani that costs less than developing it in-house.”

Conclusion

The payments industry is undergoing a transformative shift toward automation and efficiency in reconciliation and reporting. Manual methods are increasingly obsolete, unable to keep up with the rapid growth in digital payments.

Working with a fintech reporting and reconciliation firm like Kani Payments can help businesses not only streamline their operations but also harness the power of data for better decision-making and forecasting.

The Kani team will be at Money20/20 in Vegas from Oct. 22-25!

Come and chat with the Kani team at Money20/20 in Vegas—they’ll be at booth 13520. If you’d like a demo of the platform, you can book one here:

The post Modernizing Reconciliations and Payments: The Urgent Need for Automation appeared first on PaymentsJournal.