CTMfile spoke to two payments experts from Bank of America Merrill Lynch (BAML) about some of the biggest payments challenges for corporates treasurers. The nature of payments is transforming rapidly as real-time payments are ushered in via initiatives such as SEPA Inst, while open-banking legislation (PSD2) is preparing the landscape for multi-bank apps for corporates. Treasurers need to keep up with the pace of change but there are basic priorities they can't lose sight of.
Ambar Morshed, BAML's treasury product manager, corporates for GTS EMEA, underlines some of the key features corporate treasurers need in their payments services: “There are several challenges day to day but treasurers really want to create a frictionless process. They want reachability and they also need certainty and delivery of the payment. Speed is also key in the payments process, so instant payments in the B2C space are important for retail and commercial companies.”
Real-time for treasurers
For corporate treasurers managing B2B payments, instant or real-time payments are less important. Ad van der Poel, BAML's head of core cash management for GTS EMEA, notes that the important thing in the B2B payments environment is getting liquidity into accounts at the end of each day. He adds: “If real-time payments become the norm in B2B payments, then treasurers might have to match that with real-time liquidity management too.”
In any case, the uptake of real-time payments is becoming prevalent and van der Poel notes some interesting developments. Some countries, such as his homeland the Netherlands, are embracing the SEPA instant payments initiative (SCT Inst) and it is replacing Sepa Credit Transfer as the prevalent payment format.
Van der Poel adds: “Another issue is that when companies allow clients to pay in real-time, the customers then expect service in real-time. This is OK for on-demand services such as Amazon or Uber but it's not possible for companies that don't have a business model suited to a real-time service. So a lot of companies will need time to adapt to how they handle and offer real-time payments to customers.”
Reach vs. speed
Traceability, fee transparency, speed, reliability and 24/7 access are some of the main payment challenges for treasurers. BAML's Morshed says the bank is focusing on solving some of these challenges through developing technologies, while several industry initiatives are now working towards improving the corporate payments environment. Among these industry initiatives are SWIFT GPI, which promotes greater speed and traceability in cross-border payments, while Ripple's blockchain-based technology also enables instant cross-border payments in real-time. Currently Ripple is able to achieve global payments within seconds but it is not yet ready to provide the reach and scalability of GPI. BAML has been working with both SWIFT GPI and Ripple. Van der Poel explains that: “Our corporate clients are asking for GPI because they need the payment process transparency that it offers.” With regards to the blockchain alternative to SWIFT, Van der Poel adds: “Ripple is interesting but distributed ledger has the challenge of reachability and scalability. You need a community to achieve that.”
Innovating with APIs
In the short-term, Open Banking and PSD2 will begin to make a difference for corporate treasury payments. PSD2, which came into effect this year, allows third-party fintech companies to offer services that access bank account data with authorisation from the account owner. Van der Poel believes the real benefit of this is on the corporate side. He says: “Corporates have multiple banking relationships and they want bank-agnostic solutions to access all their accounts.” He also adds that the API model is being used by banking clients themselves, particularly those with consumer-facing business models: “Companies are using APIs to embed transactions in their business. Take, for example, the auto industry, where some manufacturers are working on systems whereby payments for tolls, parking, petrol – or even ordering a pizza – can be made through a system embedded in a car.”
While this kind of innovative embedded payment system still sounds very futuristic, Morshed is reassuring that BAML is still very much focused on how to use payments technology to address the day-to-day services their clients rely on.
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