The 4th Payments Barometer can be summarised as the beginning of the end of a payments era.

BUSINESS IN REAL-TIME

The global demand for real-time, always-on experiences in the consumer world has started to spread into the heart of business banking and business payments which were traditionally reliant on batch systems.

New regulatory regimes to encourage the unlocking and linking of data elements (like linking invoices to the actual payment) will support the emergence of new innovative models. This will enable smarter use of data by banks and corporates, better decision making, more efficient supply chains and higher performing businesses.

The typical corporate will soon enjoy many more choices for their payment operations, without being slave to a single banking system or proprietary system. Tech giants prove to be valuable case studies, as they have been better able to use their data to anticipate and guide their customer’s needs and tastes. This makes it easier to delight their customers with personalized products and services, at the right time and in the right place.

EMBRACING CHANGE

Industry advice on the next set of corporate investment is key. The businesses which can see the opportunity and modernise its offerings to add real value to their customers will compete and do well. Those that treat the oncoming changes as merely compliance will miss out on new ways to enhance their financial operations.

An underlying objective of Brexit is to allow UK businesses to diversify and broaden their trade relationships outside the EU. In building these new markets overseas, UK businesses will need to develop new bank relationships and familiarise themselves with new ways to pay and collect funds. They should seek advice from solution providers with expertise in international payments.

New payment schemes, technology developments, in-country currency accounts, fixing forward foreign exchange rate contracts, SEPA and the fast-expanding SWIFT gpi initiative are all ways that greatly improve the speed and efficiency of cross-border payments. They also improve the transparency of fees and the ability to track payments and receive confirmation that the beneficiary has received the funds correctly.

PROTECTING AGAINST FRAUD

The fight against fraud continues to evolve and challenge legacy practices in many organisations, which may rely on simple employment checks when colleagues are first employed. The average loss has increased to £240,092 in our survey with recovery rates moving in the wrong direction. The necessity of ongoing checks all the way down to a transaction and behavioural level is the only way to manage the ongoing risks effectively.

PAYMENT INITIATIVES SET TO SHAKE UP THE PAYMENTS LANDSCAPE

The arrival of Open Banking and PSD2 introduces a whole new player, called the authorised Third-Party Provider (TPP) into many business transaction flows. This moves the traditional bank custodian of data further away from the payment activity. We believe the commercial mix of risk:reward will start to force corporates to make their own in-house sanctions and anti-money laundering (AML) checks on the payments they are handling, rather than abdicating to the banks for back end alerts.

We will also see wider adoption of Distributed Ledger Technology (DLT). At present numerous use cases and proofs of concept are being developed. In some cases, these are at last beginning to convert into live, full production platforms. Scaling up will take time, but in 3-5 years we can expect to see industrialised use of DLT. The more encouraging use cases are less about crypto currency payments, and more about areas like digital identity, Know Your Customer (KYC) and supply chain finance. That’s because DLT is particularly valuable where current processes are slow, complex and manually intensive, and especially where there is a significant usage of paper documents. It is these use cases which offer the greatest upside potential in terms of efficiency gains in cost, speed and reduced risk.

THE NEW NORMAL

Altogether, the world of business payments is moving at an increasing speed towards a digital world where documents link to the payment transaction and an open banking world where visibility and real-time activity is the new normal. It is the beginning of the end of an era for analogue mindsets or as the optimist may conclude, the end of the beginning for a smarter world of business payments in the UK.

For more thoughts about the future of UK business payments, including further insight into priorities over the next 12 months, view the full “2019 UK Business Payments Barometer” or listen to the podcast episode here.

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Posted by Ed Adshead-Grant

Ed Adshead-Grant is an experienced Fintech expert in the global Payments and Cash Management industry, driving secure business payment solutions in ACH, Card, SWIFT, Faster Payments, Blockchain, Cyber Fraud & Risk Management and more.