2025 Payment Trends: What’s Next for Banks?

The Payments Podcast by Bottomline

Episode Transcript

Owen McDonald (host): Welcome to The Payments Podcast. I'm your host, Bottomline Managing Editor, Owen McDonald. When is digital banking more than digital banking? When it's got a massive B2B payments network built in. As digital banking for business gains popularity, it needs not only killer use cases but unique capabilities.

That's the trend on tap for today's discussion. To talk it out, we're very glad to welcome back Jessica Cheney, Vice President of Product Management and Strategic Solutions at Bottomline. Jessica has forgotten more about commercial banking and B2B payments than most of us will ever know, making her the ideal guest. Jessica Cheney, Vice President of Product Management and Strategic Solutions at Bottomline, welcome back to The Payments Podcast.

Jessica Cheney: Thanks, Owen. Happy to be here.

Owen McDonald: Let's kick right in, Jessica. ACH and same-day ACH payments are ubiquitous and familiar in B2B, but now we've got this new link up of digital banking and private B2B payment networks. It's kind of a very new idea. In what ways is the old reliable ACH model being improved upon by commercial digital banking with embedded B2B payment capabilities? Walk us through this.

Jessica Cheney: Sure. First, ACH has been a staple in commercial payment due to its reliability and cost effectiveness. But traditionally, users don't typically take advantage of some of its more advanced offerings, such as integrated remittance data and same day settlement capabilities. Commercial digital banking, when combined with an embedded B2B payment network like Bottomline's Paymode, enhances that traditional ACH in a couple of different ways. 

First, streamline payments and automation. Businesses can manage all payment types, including ACH, virtual cards, and checks through a single automated platform, reducing manual processing and errors. Some people's favorite, fraud mitigation and security. Integrated security measures, including vendor validation, account verification, minimize fraud risks compared to that standard ACH. It can offer faster, more reliable payments. Embedded B2B networks can offer enhancements like Bottomline's Premium ACH, which ensures guaranteed funds and can often reduce day sales outstanding or DSO for vendors.

We've come up with a really unique way of new revenue generation. By leveraging Premium ACH and virtual card rebates, businesses and banks can earn additional revenue that traditional ACH lacks. Improved data and reconciliation. Enhanced remittance capabilities allow for better reconciliation, reducing operational inefficiencies for both payers and vendors. So, I think all of those kind of incorporate the differences between traditional ACH and an ACH with an embedded B2B network.

Owen McDonald: And I'm going to come back to some of those points that you just made and get a little more detail on them in a moment. But, this new configuration, so a B2B payment network combined with digital banking, what does this configuration do especially well, Jessica? For example, how does the combination of commercial digital banking and a B2B payments network help banks to mass enable customers for digital connectivity? What are some of the main benefits along those lines?

Jessica Cheney: Yeah. The integration of a commercial digital banking platform with a business payment network accelerates customer adoption of digital payments, at scale in a couple of ways. I'll talk about this, but the fundamental way is something that I call, you know, just refer to as broader applicability. Many standalone, closed-loop B2B networks have membership qualifications on payers, such as requiring them to have over $50,000,000 in annual revenue or $30,000,000 in accounts payable spend before a bank or fintech will attempt to recruit them to participate in a network. This is somewhat understandable as traditionally these standalone networks are high touch selling and require a lot of effort on the part of a treasury salesperson at a bank.

The combination of a commercial digital banking solution and a B2B network can expand this reach to a much broader set of payers because it's embedded within a business tool that they use every day and doesn't necessarily require a high touch, high expense sales process, which brings me to my next point on mass enablement as an integrated solution. Frictionless enrollment. Businesses can self enroll directly from the digital banking portal, eliminating a complex onboarding process. By embedding payment capabilities, instead of relying on separate payment solutions, businesses can make digital payments seamlessly within the existing banking interface.

Owen McDonald: Right.

Jessica Cheney: We also take advantage of mass adoption and network effects. By connecting to an established network of vendors, for example, Paymode has over 500,000 vendors in its network. Businesses can quickly switch from checks to digital payments for a large portion of the vendors that make up their accounts payable. I mentioned this before, but fraud reduction and compliance. Embedded networks offer built in vendor validation, KYC and AML compliance, and secure ACH delivery, reducing overall risk, which leads to the applicability to a broader amount of people.

Also, as I mentioned before, this is a unique revenue growth opportunity for banks. They can monetize ACH payments that wouldn't necessarily, traditionally have generated a lot of revenue, capturing additional transaction fees and rebates. Because it has a broader impact on operational efficiency for businesses, customers can reduce those AP costs. They can improve their payment timing. They minimize errors, and it just makes digital connectivity easy and a valuable transition.

Owen McDonald: Right. I'd like to hear you spend a little more time on this concept of embedded payments transforming commercial digital banking, that whole landscape. Is the timing of this and the application of this, for example, you've mentioned the fact that Bottomline is doing it. Is that why Bottomline has decided to do this now, combining digital banking with a payments network? In what ways is this a net improvement over other solutions that we're quite used to? Like, you mentioned, various types of ACH. But if you got right to the heart of it, this is what? It's faster. It's safer. I mean, how would you summarize that?

Jessica Cheney: Sure. Yeah. Embedded payments really is an industry trend or focus right now that is revolutionizing how commercial banking is really used today by enabling payments to be processed within a business's existing digital workflows, eliminating friction, and a disjointed customer and operational experience. I think that's really the heart of why embedded payments are becoming more and more prevalent in our conversations in the industry. Key transformation areas include, I think this is more of a mental picture, but shifting from thinking about payment processing to payment orchestration.

Now banks and fintechs are no longer just facilitating payments, but they're embedding them within broader business applications. That leads to enhanced efficiency and connectivity. Businesses can streamline and execute and reconcile payments within a digital banking platform without having to go to external tools. There's one place to go. It's greater monetization opportunities, and by embedding payment networks within an existing online banking experience, banks can drive revenue growth through transaction-based fees and rebates but also offer better customer retention and engagement.

Offering embedded payments within digital banking strengthens the bank's value propositions to their customers or reduces customer churn. Bottomline's integration of Paymode with digital banking aligns to these industry shifts, and it provides our banks and their businesses with a modern scalable business network that enhances efficiency, security, and revenue generation. So that's why Bottomline has chosen to focus on this shift in the industry to embedded payment.

Owen McDonald: Right. And we've mentioned this idea about revenue generation a couple of times. And as we discussed the benefits that vendors are seeing, from having B2B payment networks embedded in a digital banking platform, talk a little bit more about this ability to generate revenue from payments.

Jessica Cheney: Sure. I think part of this conversation that we really haven't focused on much is, what's in it for these vendors. Vendors benefit significantly from embedded B2B networks, particularly in the following ways. I mentioned this before, but it is very true. 

Faster payment receipt. Payments processed through networks, like Paymode, can ensure faster settlement, which for a vendor reduces their DSO. Guaranteed funds. Solutions like Premium ACH provide a more secure and reliable way for vendors to receive funds compared to standard ACH. That can lead to improved cash flow. Vendors can predict and manage cash flow more efficiently when payments arrive on time, especially with complete remittance data.

Fraud reduction. Vendor validation and secure ACH delivery can reduce fraud risk associated with unauthorized transactions. A lot of time people focus on fraud reduction from the side of the payer, but fraudulent or misdirected payments also cause a lot of headaches on the vendor side of transactions. Streamlined reconciliation is a huge benefit for a vendor. Consolidated guaranteed remittance information reduces the manual effort in tracking payments and matching invoices, so cash allocation can happen, much easier, much faster.

From a bank's perspective, embedded B2B payments in digital banking allows them to generate revenue from, and this is just summarizing some of the things I said before, but transaction fees. Banks can earn their share of some of these network fees, which comes in the form of rebates. Whether that's coming from a virtual card rebate or an actual rebate in an ACH payment. But really two other areas help banks generate revenue. These are new sticky product offerings to their businesses, to their customer base, that drive more value to their customers.

I was having a conversation with one of our banking partners the other day, and he said, it's been a long time since I've been able to offer something to all of my business payments online that I would consider a new innovation, and this really does do that. It lets me offer something new to a large number of customers through my online channel. So, it really helps banks enhance their relationship position with their current customers. That enhanced relationship position obviously has its opportunity for upsell and cross sell of other bank solutions as well, but it also allows for more deposit growth. 

As businesses shift to more digital payments at particular banks, they tend to bring more and more of their balances to their banks. So that allows their banks to generate deposit growth, and really that's kind of this great, engagement circle. Once you have a new opportunity, you have more engagement, more engagement drives, more opportunity at a bank. So, this is a great win for a banking channel to offer.

Owen McDonald: Right. A flywheel effect, you might say. Last question. You've mentioned this a moment ago, but I just want a little more detail on it. The role that independent validation of vendor information plays in enhancing security for digital business payments of the type we're discussing, how does this new configuration do that better?

Jessica Cheney: Yeah. That's a great question, Owen. And we have for a long time been talking about how do we reduce fraud without having any type of regulatory push to do this. Outside of the U.S., confirmation of payee and validation of beneficiary information is much more prevalent from a regulatory perspective. Here in the U.S., we don't have that yet, but independent vendor validation is a critical component in securing digital business payments because it really can prevent fraud by verifying vendor credentials and account details before payments are processed, businesses can reduce risk of fraudulent transactions.

It almost goes without saying but by building in KYC and AML checks ahead of the payments process really can help financial institutions meet other regulatory requirements ahead of when payments are actually being originated. But at the point of payment origination, vendor validation ensure payments are sent to the correct account, minimizing costly misdirected transactions regardless of if they're fraudulent or not. Just misdirected transactions can be costly, for both payers and vendors, especially when they cause very large reconciliation issues and headaches. Having vendor validated information also can enhance trust and confidence between these two trading partners.

Businesses and their vendors can transact with greater confidence knowing that these payments are going to be verified and are going to legitimate recipients. And unlike traditional ACH payments, which rely on payers getting vendor bank account information correct, B2B networks like Paymode which validate vendors before facilitating transactions, really help in creating that trust and confidence between those two trading partners because they are reducing overall fraud risk. 

I think it's really important that by embedding vendor validation into digital banking platforms, banks can protect their customers from fraud. They improve their overall compliance, and they strengthen their reputation as trusted payment providers when they can wrap all of that together.

Owen McDonald: Well, it's a lot but this is clearly the evolution of B2B banking and payments, a new revenue stream for making and receiving business payments. A new service that your clients can offer their clients. Speed and security, guaranteed remittance information, hyper efficient digital operations. It's nothing less than the future of B2B banking and payments. Stay tuned on that front. 

A heartfelt thanks to our friend and a very smart woman, Bottomline Vice President, Jessica Cheney. To our wonderful audience, thanks for listening. Hit subscribe. Catch us again on your favorite podcast platforms, including Apple and Spotify. Bye for now.

Owen McDonald: The Payments Podcast from Bottomline.