As consumers, we love how technology makes life easier for us. Facebook reminds us when our friends have a birthday. Alexa helps us easily reorder supplies when we’re running out of something. We can order personalized coffee drinks with our phones that are immediately ready upon arrival. Text messages alert us when unusual activity occurs with our banks.
It’s a list that grows longer every day as the convergence of voice, big data, and machine learning change our lives dramatically and rapidly, with vendors already knowing what we want or need before we can even imagine it ourselves.
As finance professionals, we operate in a parallel universe of complicated, manual processes. 66% of corporates originate payments with 3+ banks, and 36% use more than 10 institutions. Each one of those banks has multiple software applications we must log into, learn and use – no easy feat. In addition, more than half of business payments are still made by printing, signing and mailing checks and manual spreadsheets are still widely used to forecast cash flow.
Despite the fact that we download the same data and make similar payments each day, week and month, our systems act like they don’t know us at all. Everything is more difficult than it has to be, made worse by the fact that the back office finance and treasury functions are the last place companies tend to make investments.
It might seem as though business payments operate in the relative stone ages, but make no mistake. Driven by smartphones, demographics and available technology, the next wave of innovation in business payments is coming, such as Amazon’s recent announcement about Alexa for Business, new voice-activated tools for the workplace.
The pace and number of new technologies that will impact the business payments landscape can be confusing. Here’s a quick download on what these technologies are, how they’re being used to move the needle in consumer payments and what that might mean for you in the coming year:
An API, or application programming interface, is software code that allows two software programs to communicate with each other. An example of how API technology is used by consumers is when a personal budgeting application imports financial data from banking and investment accounts to present an aggregated view. One regulatory initiative in the UK, called PSD2, is mandating that banks must make their data available to certified third parties using API technology. Most industry observers believe that this will continue to accelerate innovation and make financial technology less siloed and more valuable.
Defined as “any voluminous amount of structured, semi structured, or unstructured data that has the potential to be mined for information,” big data is the holy grail for successful businesses trying to extract value from the large amounts of data they receive every day.
Think about when you’re shopping online and Amazon points out what “other customers like you have also purchased…” That’s a perfect example of using the insights from big data to provide value, as are “data lakes” that store information about common issues and fixes to answer technical problems.
Machine learning is a type of artificial intelligence that allows software applications to become more accurate in predicting outcomes without being explicitly programmed. The basic premise of the technology is to build algorithms that can receive input data and use statistical analysis to predict an output (within an acceptable range). In the consumer world an example would be the ability of retail outlets to use a certain combination of demographics and behaviors to predict which customers are more likely to purchase a new television set and using that information to target ads to those individuals. The use cases in the business world are equally powerful and include applications learning how fast each of your customers normally pay in order to predict cash flows with greater accuracy.
Voice technology is perhaps the most recognizable of the emerging technologies. Simply software that responds to voice commands, it’s already a staple in consumer life, with people asking their “digital assistants” everything from “what’s the weather today?” to “reorder diapers.” Voice technology saves us time by eliminating the need to type every interaction. It also keeps us productive when our hands are busy doing something else.
As its sophistication has grown however, its value in business is being tested, starting with Alexa for Business. Use cases will start small, with the technology being used to run conference calls and the like. But as adoption grows, so will its application.
So how does all of this impact the world of corporate finance?
Imagine you log in over a cup of coffee in the morning and your daily cash position is ready for review without any human involvement. Without any typing, you simply tell your computer what you’d like to see and what actions you’d like to take.
Sound a little like Star Trek?
API technology will enable your accounting software and your bank to exchange information and create an up-to-the-minute cash position and cash flow forecast report. Big data and machine learning will cut your staff time in half because your financial systems will have learned how fast your customers pay and what outgoing payments are expected and typical for your company based on multiple variables (day of the month, current cash position, and expected cash inflows). And with voice technology, your applications will become smart enough to interact with you as seamlessly as a member of your staff.
What could you accomplish in such a world? How fast will you be promoted when you can increase cash flow at half the cost – how much more strategic will your role become?
The changes that are knocking on the door of the payments industry can only be imagined. One thing, however, is for certain. It’s a revolution we all need to be prepared for if we plan to compete.
Of course, this will raise new concerns as well. Where does your data live? Who do you trust to guard it? With electronics instead of paper, and decision-making instead of typing, how do your workforce and workplaces change? All topics for future discussion…
Erin Oswalt is an industry editor for SmartPayments.com. She has more than 20 years of payments experience in banking and financial technology focused on product innovation, revenue management and product marketing.
Erin’s particular expertise is in commercial banking, corporate payments, and digital technology.