Payments have increasingly become a major priority for senior finance managers. Treasurers are more often collaborating with different business functions in order to better drive value. Traditionally, the perception of payments and collections by corporates was much different than the one held by banks; however, the rise of financial crime, SEPA, and the onset of fintech disruption have all led to increased collaboration and innovation.
Swedish financial services group Nordea recently published a new study called The Future of Payments 2017, which explores key innovations in payments that have taken place in recent years, as well as emerging solutions that have the potential to challenge and transform domestic and cross-border payments in the future. According to Nordea, finance managers and treasurers need to gain a better understanding of the opportunities for paying and receiving cash more quickly, securely and predictably. In this way, these organisations are able to then provide a better experience for suppliers, employees and customers. Opportunities like these are crucial toward building robust, flexible supply chains, leveraging new business models, and boosting competitive advantage.
Traditionally, treasurers and finance managers of mid-sized and large corporations tended to have relatively little involvement with payments and collections, with the exception of treasury flows, intercompany transactions as part of an in-house bank or netting structure, and large amounts such as tax and dividend payments. But this is all changing quickly. Now, many senior finance managers are either responsible for, or significantly engaged with, payment factories, credit and collection functions, and shared service centres (SSCs). In its report, Nordea has identified five ways that treasurers and finance managers can improve payments and collections, outlined below:
- Sharing of experience in centralization • Treasury and cash management centralisation, including payments and collections, is a growing trend among corporations of all sizes. Treasury’s experience in centralised processes, technology and banking relationships can make a very valuable contribution to payment/collection centralisation initiatives.
- More complete visibility of cash and liquidity • By understanding and influencing the payment and collection dynamics of the business, treasurers and finance managers can better influence cash visibility, working capital, liquidity and predictability of cash.
- Sharing of implementation and integration experience • The considerable experience of treasurers with respect to implementing business-critical financial technology, policies, and processes benefit the corporation by fostering greater security, efficiency, and cost-effectiveness.
- Consolidation of banking relationships • By staying connected with the payments and collections activities across the business, treasurers can engage with banks to avoid fragmentation in systems, processes, formats, and commercial terms.
- Facilitation of business innovation • Treasury and SSCs are always in search of new ways to bring added value to their organisations. Driving intelligent choices for payments and collections better enables the organisation to engage in new business models, work with customers and suppliers more creatively, free up credit limits more rapidly, and ultimately, to do better business.
Banks and corporate customers generally have very different perspectives on payments and collections. The Nordea report emphasizes the notion that, the better that banks and technology vendors understand the wider supply-chain context of payments and collections, the challenges that their corporate customers face, and the opportunities to enhance competitiveness, the more likely that emerging innovations will support corporates’ commercial, operational, and strategic objectives.
Collaboration is imperative to reconciling different perspectives and achieving meaningful payments innovation, but this has proven difficult to achieve in practice. Different corporate participants have different priorities, but each is seeking to maintain its own competitive advantage. This can make determining who should lead and invest in payment initiatives quite difficult. Likewise, regulations and cultures differ across markets, and innovations in one market are not necessarily applicable in another. Three drivers are now driving a new move toward collaboration, namely: the introduction of Single Euro Payments Area (SEPA), financial crime and cyber fraud, and fintech players that are emerging in the competitive landscape.
To read or download to complete report Future of Payments 2017 Report by Nordea, click here.