The payments landscape is experiencing unprecedented change. The pressure is on for businesses to anticipate where drivers of change will come from and prepare accordingly.

DRIVERS OF CHANGE

We asked financial decision makers what they think will impact business payments in 2019, and for the first time, mobile payment technologies topped the list. Innovation in payment technology has been on the radar since the start of the Payments Barometer in 2016 but the higher ranking this year confirms an important trend in the changing business landscape.

The industry is heading in an increasingly ‘mobile first’ direction. The rise in importance demonstrates a recognition among financial decision makers that the time has come to fully embrace mobile payment technologies. This is an opinion shared by regulators. Major initiatives in UK payments, such as Open Banking/ Payment Service Directive II (PSD2) and the UK’s New Payments Architecture (NPA) have been designed to make it easier for businesses and consumers to use tablets and smartphones to manage multi-bank payments and cash more efficiently. Organisations will need to have a strategy for mobile or lose competitiveness.

Last year Brexit was top of the list. In 2019, changes to the trading environment continue to be considered a significant influence, coming a close second on the list of drivers of change. Since the last Barometer in 2018, protracted Brexit negotiations have created a vacuum with no clear guidance on how regulations currently governing the UK are likely to change. In the absence of political closure, businesses have had to make their own decisions on how best to ride-out the uncertainty and ensure payments and trade still flow across the European Union and beyond.

Alongside this, there continues to be an awareness of regulatory changes to UK payments. This has consistently featured near the top of the list of drivers since 2016 reflecting the pace of change in the industry. The financial decision makers we spoke to told us they are looking for guidance on how to navigate the growing number of options. There is an opportunity for solution providers and banks who can educate payment service users on the requirements and benefits these changes will bring.

Security and payment fraud prevention is another consistently important driver of change. No surprise given the pressure banks, and increasingly corporates, are now under to act. Cyber fraudsters are continuing to win the battle, and organisations that fail to secure payments will get left behind as they become bigger and, more likely, susceptible targets.

Looking across all the top drivers of change in 2019 highlights a need for expert advice and an easy to use solution set which insulates business payment users from change, while enabling them to achieve maximum benefit from new payment schemes and techniques.

THE CONSUMERISATION OF BUSINESS PAYMENTS

Almost two thirds (64%) of financial decision makers we spoke to cited mobile payments technology as a major influence on payment processing in the UK, with one in six (17%) predicting it will have the greatest impact of all drivers in 2019.

The prominence of mobile could be viewed as evidence of an increasing “consumerisation” of business payments. With half (47%) of British adults aware of the mobile payments’ services available to them today, and one in four (26%) agreeing that mobile payments could help them better manage their money, it’s no wonder that payment techniques developed for consumers are increasingly influencing business payments.

changing business landscape

Whether it’s from the perspective of businesses adapting their processes to support mobile payments for their customers, or today’s Finance Director or Treasurer yearning for their cash management or payment offering to work in their hand, it’s clear that expectations of speed, convenience and efficiency have been raised by the onset of mobile technologies.

A look at business priorities for the next 12 months supports this. Smooth management of cash into the business is a key focus for financial decision makers in Great Britain. One in three (34%) selected improving cash forecasting, cash collection or cash visibility as their company’s top priority when it comes to payments over the next 12 months (more on this later in the report). What’s clear is that mobile technologies that can support quicker and easier management of Accounts Receivable are likely to make the priority list for ongoing investments.

UPCOMING PAYMENT INITIATIVES

While the majority of financial decision makers (63%) agree that regulatory changes will impact payment processes in 2019, their attitudes to upcoming payment initiatives differ.

Many don’t feel as prepared for regulatory changes as they could be. Almost one in three say they are either hardly or not all prepared for the UK New Payments Architecture (NPA) or Open Banking/PSD2 (31% and 30% respectively).

Conversely, around two thirds of financial decision makers say they do feel ready; 67% feel prepared for Open Banking/PSD2 and 65% say the same for the adoption of ISO 20022 formats.

What lies behind these differences in readiness?

Financial decision makers who are not prepared for upcoming payment initiatives feel uncertain when or where to start. Poor understanding of the benefits that regulation will bring or how to implement initiatives is leaving them feeling lost, and in most cases, looking for support.

Arguably the industry has not done enough to educate businesses on regulatory changes. As a result, one in three financial decision makers who are not prepared feel no urgency to implement payment initiatives like NPA or PSD2 (38% and 32% respectively). Yet these initiatives will bring significant change to all businesses, with compliance deadlines looming.

Interestingly, a lack of comprehension and perceived urgency is not limited to small businesses, highlighting an inbuilt inertia in larger organisations and corporations to change.

For financial decision makers claiming to be well prepared, there could be some false confidence in place. While some payment initiatives (e.g. New Payments Architecture and Overlay Services) are in their infancy with limited information available, these changes have the opportunity to transform current models accepted in the industry. Data pools previously locked away in secure data vaults at the bank are accessible for the very first time – in real-time – for authorised parties to check balances and make payments. The impact is potentially significant, but the power of the possible is yet to filter through to many updated service charters across the industry.

Often business payment operations and processes are deemed mission critical and are only changed where absolutely necessary, with a clear business rationale. While the more optimistic and entrepreneurial organisations will use the changes to reshape customer offerings and experiences, there is a risk many businesses will approach new payment initiatives as a compliance burden with minimum effort and investment to comply.

Part of the responsibility falls to solution providers to equip businesses with early notice of changes and recommended ways to implement such, but with minimum impact to ‘business as usual’, and maximum benefit for processes and performance.

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 full 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.