The landscape of B2B payments is witnessing a rapid transformation, propelled by technological advancements and the emergence of new payment providers and channels. Take a trip on the B2B payments highway to see the evolution.
THE PAYMENTS HIGHWAY: A CONTINUOUS EVOLUTION
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Historically, the bulk of B2B payments involved manually printed and mailed checks, a process fraught with inefficiencies, high costs and a heightened risk of errors and fraud. While the shift from paper checks has been gradual, the need to modernize payment processes and systems has never been more imperative.
Organizations previously encumbered by disparate systems and multiple banking relationships faced significant challenges, including a lack of automation, insufficient controls for approvals and routing, and diminished visibility over outgoing payments.
The past: Manual, costly B2B payments
Recognizing the manifold advantages of centralizing and standardizing payment processes, businesses are increasingly adopting measures that heighten control, diminish expenses, enhance visibility of cash flows and lower fraud risks. They are also adding real-time fraud detection services to help with incessant monitoring to catch fraudulent activities as they happen. These consist of the use of machine learning algorithms to sift through vast datasets for anomalies and a multi-layered approach to ensure comprehensive coverage against fraud. Additionally, companies are recognizing the benefits of APIs, which can help simplify bank connectivity and offer broader and easier access to the payment ecosystem.
Although checks persist in the U.S. for B2B transactions, their usage is waning. According to the 2022 AFP® Digital Payments Survey Report, checks now represent only 33% of B2B payments in the U.S. and Canada, marking a 9% decline from 42% in 2019. The migration towards virtual card programs supported by vendor enrollment services not only eliminates the costs associated with payment execution but also liberates accounts payable staff from the labor-intensive vendor registration process.
The present: Streamlining and optimizing payment processes
With an AFP survey indicating that over 75% of businesses anticipate utilizing real-time B2B payments within the next five years, the urgency for companies to adapt and leverage the latest payment solutions is paramount. The future heralds a continuum of innovation in payment channels, real-time transactions and sophisticated strategies for fraud prevention. To remain relevant and competitive, businesses must proactively modernize their payment technologies, ensuring they are not only prepared to navigate the dynamic payments highway but also poised to seize the myriad opportunities that lie ahead.
In the rapidly evolving payments landscape, standing still is not an option. Embark on your journey to modernize and future-proof your payment systems today to ensure your organization stays ahead in the race.
Looking ahead: The future of payment innovation
Modernize Your Payment Processes Today
By transforming your payments technology to today’s digital standard, FIS can make sure you adjust to the demands of tomorrow.
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Adoption of automated reconciliation solutions has been driven by margin pressures, the regulatory landscape and the emerging remote work environment.
THOMAS
WHAT LEADING FIRMS ARE DOING:
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R
C
G
RUN – streamline business operations and ensure efficiency.
CONNECT – build deeper, lastingrelationships with customers.
GROW – identify and leverage opportunities to generate revenue.
Match rates: Straight-through processing is contributing to match rates of 90% and above, replacing moderate rates of 50-60%
Technology: A single third-party software solution is replacing a patchwork of vendor offerings and in-house built applications
Operational approach: Centers of excellence are replacing fragmented processes
Exception handling: Escalation and execution management are fully automated, with processes clearly defined, replacing ad-hoc management
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Self-service by the business unit and configurable reports are key characteristics of today’s reconciliation solutions.
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Thomas continues his morning of calls and meetings, all the while staying in contact with his regional team leads and direct reports about the status of the Pharma’s immediate liquidity position. Because some payments take days to post with the various banks around the world, the treasury operations team needs to monitor payments across thousands of accounts at Pharma.
So far today, more than 1,000 debit notifications have come into the treasury department via Trax. This information is translated to aggregated cash flows that are posted by the payment factory into the cash position worksheet of the treasury tool used by Thomas’ cash management team. This is essential for Thomas and his analysts to monitor and manage the company’s cash position at all times.
KEEPING AN EYE ON CORPORATE LIQUIDITY
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Thomas begins the first of the day’s conference calls in preparation for the end of the fiscal quarter. At the same time, his treasury ops team is mandating all approved payments to counterparties throughout the globe, sending payments in a variety of methods to integrate with the systems and needs of Pharma’s various partners, brokers, and vendors. Payments are validated and routed to the appropriate banks through eBanking channels, like the SWIFT network, EBICS or even open banking APIs, where real-time communication with banks is crucial.
SENDING PAYMENTS VIA MULTIPLE PAYMENT TYPES
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Real-time payments made immediately to banks equipped to receive immediate funding.
Cross-border payments delivered to partners and parties in other countries in accordance with applicable regulatory requirements.
ACH payments delivered in 1-3 business days to banks and financial institutions, including brokers, around the world.
ACH, Cross-Border,
and Real-Time Payments:
Thomas and Pharma must keep a close eye on the company’s liquidity ratio and its overall solvency so that they can liquidate against their investments or initiate short-term borrowing to fund the accounts.
WHY IS REAL-TIME LIQUIDITY MONITORING SO IMPORTANT?
Thomas has wrapped up his day in the office and is on his way to the airport for a long flight to New York to meet with leadership in the North American region. In the taxi, Thomas’ treasury operations team manager, Leo, calls to tell him about an important incoming wire that was made by a customer.
Trax picked up the transaction as soon as the
bank sent the credit notification, and the treasury operations team was alerted that the money was available. Thanks to the Trax interface to Pharma’s general ledger (GL) system, the transaction was immediately posted in the business unit’s GL.
UNEXPECTED TRANSACTIONS POSTED
TO GL AND SUSPICIOUS OUTGOING WIRES
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Manually matching transaction details, verifying balances and identifying any discrepancies was a labor-intensive process that required significant effort, making it prone to errors.
Trax also alerted the team to two outgoing wires to pay invoices to a partner in Hong Kong. These were flagged as suspicious transactions because the bank account details of the beneficiary were different than the ones historically used for paying the Hong Kong partner. Therefore, Trax intercepted the payments and put them into a waiting queue for further investigation.
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The Future
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Track the evolution of reconciliation to understand where we’ve been and where we’re going.
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The Past
The Present
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Keeping an Eye on Corporate Liquidity
Sending Payments Via Multiple Payment Types
Managing Payroll Before the Day Begins
Meet Thomas
Simplifying Global Corporate Payments
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Unexpected Transactions Posted to GL and Suspicious Outgoing Wires
Monitoring: Automated daily reports with detailed status tracking are replacing limited reporting and indicators
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