Now in its fourth year this annual index surveys over 400 financial decision-makers across Great Britain.

Cara O’Nions, Global Marketing Director, and Ed Adshead-Grant, General Manager of Payments discuss this year’s results, and what they mean in the ever-changing payment landscape.

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Podcast Transcript

Cara O'nions: So, the results are in. Now, in its fourth year, Bottomline's Business Payments Barometer analyses the latest trends and payment initiatives set to impact organisations of all sizes here in the UK. Last year we saw highlights, such as the impact that Brexit has had, as a driver of change on business payment activity and also things like how small to medium-sized businesses claimed that a slow payer ethic was actually one of their greatest payment challenges.

So, it will be interesting to see how this year's results compare. I'm Cara O'nions, I'm the Global Marketing Director here at Bottomline and I'll be speaking to my colleague Ed Adshead-Grant, who's our General Manager of Payments about what we've learned from the outcome of this year's results. So, Ed, can you tell us what we think we've learned, at a high level, from this year's report and where we see the direction of travel going, in terms of the future of payments here in the UK?

Ed Adshead-Grant: Sure, so yes, you're right. It's the fourth barometer that we have here and it's starting to show some interesting trend lines. We view this as the voice of the corporate. It's very important to us and often we go straight to the rank tables each year. So, this year there were three that came out top of the table. Mobile, the Brexit and the security, with regulatory changes a close fourth.

So, if I pick those up quickly, on the mobile, it definitely comes across as a mobile first year and we seen this at a lot of the trade shows, like Money20/20, where the consumer technology typically leads the enterprise technology and it's definitely a mobile year. People are moving around now in their office work. They expect to be able to approve and see cashflows and office finance outside the office. So, mobile is high up on the list.

On the Brexit, there is certainly uncertainty. What will be the new trading arrangements? Let's see what happens, but payments will still flow. So, that's the good news in this industry, and security, it's always been up there in the top three. So, for the last four years, I remember it being in the top three and sadly, more people are being hit with less recovery but perhaps we'll get there later on.

Cara O'nions: So, it's interesting, Ed, you know, thinking about the future of payments, one of the things you've touched on there is, obviously, mobile and this increasing consumerisation of business payments. Is that a trend you will expect to see further accelerate as we move into next year?

Ed Adshead-Grant: I think it is and a lot of the regulatory work actually supports that. So, one of the biggest areas in the report is the open banking and the PSD2 pieces, which aren't fully understood yet, but was triggered from the consumer world and is actually a massive opportunity for corporates. It's interesting that in the Netherlands, as an example, recently, they did a large TV campaign. A national campaign for the coming of PSD2 and frankly, it was quite a disaster.

In the home, in the consumer home, they didn't really understand what was going on. It sounded like access to your bank accounts, giving up passwords and privacy, which it absolutely isn't. The communication needs to improve on this, but in corporate land, in the enterprise, it is a big opportunity where corporates can take control of the data. That's probably the biggest area of interest that we saw coming through in this year's report.

Cara O'nions: And I think one of the things we also saw there, Ed, as well is that whilst corporates are pretty much aware of PSD2 and open banking and these new initiatives, there's still a huge amount that can be done by organisations like Bottomline, for example, around the education piece and the opportunity that sits in that space.

Ed Adshead-Grant: It's true. I mean, there's never been a greater need for a trusted business advisor. So, even on our very first solutions we've brought to market, for example, our account visibility where we brought in some open banking functionality with some of the swift data flows, so that a treasurer can see everything in one place. We still need to explain exactly how that works, how the security protocols work.

It is safe, it's efficient and can introduce all kind of benefits when you sit down and look at the control that it adds to the typical finance director or treasury in their function. So, lots of communications ongoing. I think it's the start of the journey, really, with open banking.

Cara O'nions: Absolutely. So, cashflow is king for a lot of these organisations and obviously, payments are a critical part of that. What do you think we've learned this year from the way organisations deal with payments on a large scale in general in today's landscape?

Ed-Adshead-Grant: Well, do you know, the biggest statistic for me when we looked at our data this year was 92% of payers admitted to paying late. It's just incredibly ingrained in their routines and there's no technical reason for that. Another finding this year was that 90% of corporates, by the end of 2020, have access to and use real-time payments. So, there's no technical reason for slow payments, there's no regulatory reason.

We've had the duty to report out since 2017. It may not be working effectively yet, might need bigger teeth to enforce. There's certainly no regulatory reason and probably biggest of all, there's no financial reason. If organisations are really smart on their payment terms, how they schedule their payments, how they manage early discounts, supply chain finance, there is no need to claim that the cheque is in the post somewhere.

So yes, 92% was a big learning on late payments this year.

Cara O'nions: Yes, it's a very, very high number and as you say, there's no reason why this should continue to happen. So, it'll be interesting to see how that moves when we do the survey again next year and particularly as we move closer to ubiquitous usage of real-time and faster payments here in the UK.

Ed Adshead-Grant: And I think in a world of emerging collaboration, with all this open data era where partners are working with each other more and pinging each other's solutions on a real-time basis, it kind of works counter that payments are withheld and I can see that behaviour slowly changing. I hope fast changing, but I think it will be slow still.

Cara O'nions: So, you also mentioned that fraud and risk was high on the boardroom agenda again. What can you share from the report on this?

Ed Adshead-Grant: Well yes, we watch this very closely. So, this year the number of affected corporates has tripled. We're up to 45% of corporates that were interviewed on this sample of data actually being hit by some type of fraud. That's a big hike. Furthermore, the actual amount, £250,000, just short of £250,000 as an average now, is the hit on fraud and the recovery is small. It's 20% or less of these funds is actually recovered.

So, all the wrong kind of directory figures there. We've got bigger numbers, more people, less recovery. It's not in a good place. One of the fastest-growing areas is authorised push payments. So, I would recommend people researching the APP fraud. It's big in the Pay.UK agenda. We have something called confirmation of payee that's coming out, to try and counter those heavy numbers, but it is an area that does need attention.

Cara O'nions: I think the thing that shocked me as well, Ed, is that we're not just seeing this in large organisations, as you know. Part of the sample of this year's report, we spoke to smaller businesses and we're seeing smaller businesses being hit by comparable levels of fraud and, of course, for a smaller business, those hits are even more devastating in terms of their ability to recover and the increase of insider fraud.

So, again, I think a disturbing trend, but one where I feel the industry is making good progress, in terms of offering out solutions that help businesses, both large and small, to really manage the fraud risk within their organisation.

Ed Adshead-Grant: It is, and the technology's there and not that expensive. It's consumable now. So, the best practice is still the same. It's real-time transaction monitoring, user behavioural analytics. Some of these screen replays now that you can do. We were talking about multi-layer security.

These are just common practices that would encourage all of the corporates to look into, to buy in that extra insurance and make sure that the reputational risk is not there, in terms of a public fraud or just loss of funds.

Cara O'nions: And, as you say, these are cost-effective solutions that can be implemented, even in the smallest businesses, right?

Ed Adshead-Grant: Absolutely.

Cara O'nions: So, what surprised you this year, Ed? Anything in the report where you kind of sat back and went, "Wow, I really wasn't expecting that."

Ed Adshead-Grant: Yes, I think the curveball this year is the sanctions. It's a really interesting area. This is where we're talking about OFAC reports, the UN, EU, HMT reports. So, what we found was that three out of four organisations actually want to abdicate the responsibility for sanctions to the banks and let the banks check that these payments haven't gone to a sanctioned entity or person.

And although 3 out of 4 want to do that, 87% want to know that their payments are not going to a sanctioned entity. They would want to know. So, there's this willingness to know, but there's not a willingness to take on the accountability for the payment.

So, that's a bit of a mismatch and the trend we're seeing more broadly outside the report is that corporates are looking to have an in-house solution to see that their payments are good and they're going to good [actors 0:10:53] and not a sanctioned entity.

So, we've spoken to regulators about this trend, they've been pushing this now and also, with some of the changes, we've mentioned open banking briefly, but we have this thing called a third-party provider and this TPP entity, under open banking, will actually make payments on behalf of in the model. So, when they're making payments on behalf of a corporate, they're that much more removed from the banking world.

So, banks just won't, for the longer term, accept responsibility all the time on these sanctioned payments.

Cara O'nions: That's going to be a very interesting shift, I think, in the payments landscape, in the next year or so.

Ed Adshead-Grant: I think it will and I think the risk managers are starting to see this happening. We've got a few court cases that are coming through. We've seen some 50/50% share of costs between bank and corporates and I can see 100% of the fines and sometimes jail time is sadly involved coming through over the longer term.

Cara O'nions: Wow. So, some interesting times ahead, I think. To pull all of this together, what would you say are the priorities over the next 12 months for a typical UK corporate who's reading this report and reviewing their payments operation or their payment strategy?

Ed Adshead-Grant: Well, I would probably start with the fact that everything's going real-time. This is the start of a new era in payments. So, we found here that 90% of companies have access to real-time by the end of next year. So, that allows whole new models to pop up, be it real-time payroll, literally on a daily basis, or real-time disbursement of loans. Your whole service charter can evolve now that everything's real-time on the payment side.

That bleeds into the open banking regulation that supports real-time. So, if you can get your head around the opportunities behind open banking and PSD2, then you're in a good place, rather than just seeing it as a compliance gig where you have to do the minimal and you tick boxes. So, I think the masters of the treasury area, the smartest guys on the circuit, will look at the opportunity, see what they can make the most of and drive their operations ahead.

With the final thought around compliance, there is a compliance gig here that's emerging and I think it's the sanctions that we just mentioned. So, that is an upcoming trend that we do need to keep an eye on, so that the corporate has it under control.

Cara O'nions: So, lots of opportunities it seems like. Also, some significant challenges, but some interesting reading, I think, once again, in this report and we're going to be sharing it, as you know, more widely in the coming weeks. So, that's all we've got time for today unfortunately. Thank you for joining me, Ed.

Ed Adshead-Grant: Thank you, Cara.

Cara O'nions: Please keep an eye out for other episodes in this podcast series that we've got coming up, which will feature different sections of the report. There's a lot of detail to go into and we want to share that with you. For more information on what we've discussed today, don't forget to read the full 2019 Bottomline Business Payments Barometer, which you can download on the Bottomline.com website.

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