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Innovative payment tools to counteract supply chain troubles

As companies deal with global supply chain disruptions, demand for faster payments and merchant loans may increase in the coming months according to a recent article in the American Banker. Furthermore, a slowdown in production and supply difficulties contributed to the decline in GDP growth in the previous quarter, presenting operational challenges to many companies.

Steve Murphy, director of Mercator’s Commercial and Enterprise Payments Advisory Service, said, “The faster suppliers get paid, the more liquidity they have to keep goods moving and creating more goods by paying their own suppliers.” In addition, utilizing efficient payment services may help match purchases with available inventories to assist businesses managing tight cash flows.

Bank of the West in San Francisco officially launched a tested product called TreasuryNow last week. TreasuryNow enables companies to facilitate payments, remittances, and collections of payments in a centralized treasury management system. In addition, TreasuryNow helps banks speed up transactions and provide transaction flexibility.

Furthermore, Stanton Miller, Head of Treasury Solutions, Bank of the West, commented that the supply chain may suddenly open and give businesses the opportunity to make a purchase. In order to complete the purchase transaction, it is essential that businesses have the funds readily available to make the payment.

TreasuryNow consists of a dashboard, ACH payment trackers, domestic wires, cross-border wires with tracking, and integration with ERP systems to control routing and approvals. It also supports the Clearing House’s RTP rail, enabling executed or pre-arranged business-to-business payments on short notice, synchronized with available reserves or goods.

The supply chain crisis arose from the pandemic and increased mandates on production of goods to help mitigate the economic slowdown, such as electronic devices for many additional home offices. Delays in the supply chains brought attention to payment processing speed (which includes reducing the time between clearing, posting and settlement) and the need for real-time payments, where goods can be released timely as payments are cleared, according to Gareth Lodge, a senior payment analyst, Celent.

Lodge further stated that if companies have the ability to reconcile payments in real time, their ERP system can systematically activate payments for orders. Currently, this process can be handled by SWIFT Go (introduced in July), a new international payments system using gpi to enable cross-border transactions between businesses and banks from a central system. Historically, the flow of payments and acknowledgements took weeks. The enhanced system will now be able to process those same payments almost instantaneously.

According to Deutsche Bank, payments via SWIFT gpi increased from 30% of international SWIFT payments in 2018 to 70% in 2020 and 90% in September 2021. In addition, more than US$420 billion is sent through gpi daily from banks.

As noted in the American Banker, Ethosha Thurman, Chief Marketing and Solutions Officer for the intelligence spend and business network at SAP, stated that, typically, “Buyers want to pay later and suppliers want to collect earlier.” The COVID-19 pandemic has increased this typical payment/receiving challenge, creating potential for improved innovation and payment options.

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