Embracing tools such as open banking and embedded finance means treasurers can offer new ways to pay, and even financial services, to customers while enhancing transparency over cash flow and delivering process efficiencies through automation.

Treasurers have to keep the ways in which their businesses are being paid top of mind. With the plethora of digital payment types and innovations that have emerged in the past decade, treasurers should strive to understand how to ensure as many of their likely ‘end customers’ as possible will settle their invoices. The pressure is on to keep acceptance rates high while delivering a smooth user experience and frictionless customer journeys.

The good news is that, while this all requires work, the benefits of delivering a seamless digital payments experience for customers also provides several benefits for treasurers and their organisations.

Open to innovation

Much of the innovation in the payments space can be traced back to the jolt provided by the regulatory sphere in the form of open banking, alongside PSD 2. While the advent of open banking may not have delivered the big bang that some were hoping for, it has enabled a new payments channel to emerge.

Mike Elliff, CEO, Payit and Tyl by NatWest, enthuses: “Open banking is potentially transformational. It’s a key new technology that allows direct account-to-account connectivity. It’s a compelling alternative to the card schemes, while providing strong security and transparency for consumers and at potentially lower costs for retailers and merchants. It also makes embedded payments easier because APIs can be used to build in those capabilities.”

Open banking means that corporates can initiate payments without card or background information in either direction. Instead, they just need contact information to initiate the payment.

“We’ve seen some brilliant use cases,” adds Elliff. “One of the best known is the ‘delay repay’ scheme that UK train companies use. As the name suggests, travellers whose journeys have been delayed by a set amount of time, such as 15 minutes, can submit a claim for repayments. Once a claim is assessed and is deemed eligible, the train company can send out the repayment over an open banking link and the claimant can receive the money immediately. That drives customer satisfaction – it really can change a frustrated customer into a brand advocate.”

Setting out a digital stall

Being a brand advocate is something new for treasurers to consider, as e-commerce and digital marketplaces mean companies now have a more direct link to their customer base. Indeed, treasurers are now in the spotlight because customer engagement and experience, through ease of payment on the marketplace, is critical. “We’ve seen an explosion in e-commerce over the past few years,” notes Elliff. “For treasury teams, this means they have to be more focused on payments now than they ever used to be.”

While marketplaces are more prevalent in the B2C arena and have a significant influence on B2C payments, B2B payments will follow the same trajectory over a period of time, in a similar way that real-time payments adoption in B2B followed the B2C template.

Ritu Sehgal, Head of Transaction Services & Trade - Commercial and Institutional, NatWest, outlines what this means for corporates: “Digital marketplaces can showcase a wide array of products and different sets of sellers on the same platform. That means a great customer experience and excellent customer engagement is imperative, regardless of whether the flows are B2B or B2C. It’s all about understanding what your end customers, suppliers or other business customers want and how you drive that through a marketplace.”

Integration is a vital consideration in this respect. How many clicks on the website does the customer have to make on their payments journey, for example? Are they connecting to multiple payment methods? What is the conversion rate? How secure are the payments?

“Corporates should consider how they manage fraud while keeping the sales velocity,” adds Sehgal. “FX also plays a role, especially in B2B – how do they integrate payments in different currencies? Do they have providers that can access multiple geographies? How do they manage currency volatility? These are all crucial considerations.”

Weighing up the options

Understandably, which types of payment channels to offer customers upon checkout is another area of consideration for corporates with an e-commerce presence. “The variety of different payment options is something to be embraced,” believes Elliff. “In an ideal world, companies would give customers a choice and offer as many different ways to pay as possible. In reality, it’s a trade-off because now there are online checkout carts with five or six different choices. There might be a card option, a wallet option, a pay later solution, and pay by bank, all making the checkout screen quite busy. Companies must try to figure out how they get the balance right.” Working with the right partners, whether it’s tech platforms, banks or other third-party providers, could solve this issue.

Another hurdle for businesses to navigate is how they integrate all the various options into a single platform. “Having a digitally advanced treasury management system (TMS) and integrating internal systems are important steps to reap the benefits of changing payment options,” explains Sehgal. “Investing in platforms where clients can interact with the business can be vital. Integrating various payments options while retaining an easy-to-use interface could be key. But there is no ‘one size fits all’ as priorities may differ from industry to industry. For example, a retailer might be spending all their energy on the user interface and focusing on ‘cart velocity’ to ensure there are fewer basket abandonments, but for some other industries, delivering a seamless refund or compensation experience could be the priority.”

Against this complex backdrop, corporates must be prepared to weigh up how ready their systems are to handle various payment options. Can they offer buy now, pay later (BNPL), for example? If they want to promote an open banking-based pay-by-bank-account option over a card payment, are they set up for the workflows attached to real-time payments and associated information that comes with it? Being able to adapt to the new reality is essential.

“A further consideration for corporates is how they drive adoption rates once they have chosen and implemented different payment options,” states Sehgal. “The idea of leveraging payment methods to potentially increase customer retention and market share hinges on how they drive adoption rates. Is it through reward programmes or through incentivising in a different way? Is it through the visibility on the user interface? These are the calculations that corporates need to make.”

With the array of payment options available on the market, corporates should ideally assess those which best tie in with their strategy. Understanding that when they are making their selection, a range of payment options can benefit them, rather than be a disadvantage.

“From a treasury perspective, the key element is getting the balance right between choice of instruments and streamlining workflows,” notes Elliff. “There’s no doubt that the primary objective everybody has is maximising acceptance because an increase in acceptance has an impact on profitability relative to transaction costs. But then a secondary concern is those transaction costs and how you bring down some of the friction and costs involved. That’s where we’ll see open banking become an exciting alternative.”

Finding the best channel

Astute treasurers will work with their providers to develop the best possible payment channel for their customers and ensure that these channels have the correct checks in place for the payment to go to the right counterparty. And when it comes to sending payments as opposed to collecting them, the business’s priorities are primary, even for one-off payments.

“If it is a cross-border payment, FX will likely play a key role as well,” comments Sehgal. “Just thinking about how currencies are managed, the collection and payment destination, and whether the payment provider can service these geographies with absolute cost and time transparency is vital.”

Bearing that in mind, there are several additional considerations for treasurers when it comes to finding the best payment channel. “There are multiple ways of sending payments for corporates to consider,” adds Sehgal. “It could be bulk batched payments or file-based single payments in real-time. How is the corporate connecting to its banks to make those payments? Is it SWIFT, machine to machine, or through a portal interface? These all play a role, depending on the scale and business priorities.”

Unleashing automation in payments

Regarding technologies supporting innovation in payments, it’s hard to ignore AI’s potential in the space, particularly regarding one of the topics most likely to keep treasurers awake at night: payment fraud.

“Among the biggest challenges facing digital payments is fraud – which is evolving to become more and more sophisticated. AI is going to be a potent weapon in that battle,” predicts Elliff. “The abilities of AI could be a key element of risk management, both for payments businesses, but also potentially for large retailers and merchants going forward. AI could detect outlier payments, pick up sanctions-related issues, automate as much of that as possible and have it move in real-time for instant payment verification. As such, AI could also be a valuable tool for treasurers.”

Indeed, AI’s ability to automate treasury processes points to the broader trend of digitalisation in the function. Many payments innovations are helping to support this approach. “My focus in this new era of payments is automation, rather than the specific technology underpinning it,” reflects Sehgal. “APIs enable automation. Some host-to-host systems, even if they’re file-based, are leveraging automation. AI and machine learning (ML) could help with invoice management, credit decisioning, data insights and automated reconciliation. Anything that’s automating manual processes is important.”

Automation is a win-win in the world of e-commerce and marketplaces – it can help to improve the customer experience while delivering cost efficiencies and minimising errors for treasurers. This is particularly important if a customer requires a payment back from the company for some reason.

“Claims management is one example where automation could drive value,” highlights Sehgal. “When a claim is received, the credit decision-making process can be facilitated through ML and AI. Before making a payment, treasurers can use Confirmation of Payee (CoP) to check that the payment will go to the right person, another point in the process where open banking technology adds value and prevents fraud. Finally, if the decision-making process results in a payment, this can be made via API for a real-time settlement."

Tomorrow begins today

With all the innovation occurring in the payments space, customer expectations have never been higher. For treasurers, finding ways to offer a great UX, the simplicity and safety of payments, and payment instruments that meet and anticipate customer needs, is essential.

“Corporates have to be future proof – it’s not only meeting customer needs today but anticipating where the payments world is heading,” Sehgal advises. “Payments without the underlying reconciliation data do not help achieve the overall potential. There will continue to be a lot of focus on instant payments, while open banking and open finance are here to stay. These are all important tools for any treasurer seeking to retain or enhance their market position.”

Elliff concludes: “Looking at all the innovations in the payments space, my advice to treasurers is to embrace them. Go and spend time with your banks, understand what payment innovations are coming, and explore how they could help your business – there’s nothing to lose. But being behind the curve could prove costly.”

All six-parts of our “Essential Guide to Treasury Payments and Embedded Finance” will be published on our dedicated Hub, so do regularly check this for new instalments. They will also be published on the TMI website, with whom we have collaborated on this series.