Welcome to the year of digitized accounts payable. You may hear an echo attached to that sentence. There have been many years that were supposed to mark the needle moving from analog to digital when it comes to paying and getting paid. I do believe this year is different.
When we talk about 2023, the conversation moves from “do I need to automate my AP systems and processes?” to “how do I scale my automated systems and processes?” And this conversation is taking place in a truly dynamic landscape, which is one of the reasons businesses need to change their operations. In general, the entire payments industry is going through a great transformation. There’s the transformation from paper to digital. There’s the transformation from occasional automation to complete and consistent automation. All of which will be driven by the following five market dynamics:
The rising cost of inflation and economic uncertainty will put pressure on companies, their customer/vendor relationships, and how tightly they manage their working capital. I can’t tell you exactly how much inflation will affect the economy and I can’t tell you the degree to which a recession will affect business and consumer spending patterns. I can tell you that digitized AP takes the pressure off overloaded personnel and inefficient systems. Any company that wants to address economic instability without it is doing so with one hand tied behind their back. We have truly moved to a post-pandemic phase of payments. The focus for corporates in the pandemic was to ‘keep the show on the road’ with the need to adapt to remote working. And during that time finance leaders needed to be flexible, sometimes at the expense of running a tight risk-controlled environment. Since hybrid and remote-working are set to stay, companies are likely to revisit their AP systems and processes to ensure they’re fit-for-purpose, possibly leading to the adoption of payment-factory or payment network environments.
Check usage will continue to decline as options for digital payments become increasingly accessible.. A check is limited to information about payer, payee, transaction amount and account details. Additional communication is required to complete the transaction on both the payer and receiver sides. The combination of digital payment networks and software options are becoming more prevalent and accessible delivering ease of payment along with required communication for both parties. Lets be real though, checks are not going away completely. We have many customers in the Paymode-X network that still use checks to either pay or get paid or both as checks will continue to fill the gaps in payment relationships where digital connectivity and software are not available. Paynode-X is here to help customers accelerate this journey and close these relationship gaps.
Customer-first expectations (for consumers and businesses) will rise on ways to pay and get paid. And speaking of customer first … We’re talking about the ubiquity of payments here (virtual cards, ACH, check, etc), based on the customer’s preferences rather than that of their suppliers. Suppliers will therefore need to accept payments from several sources. More and more, customers want an ‘Uber-like’ experience from service to settlement. We’re likely to see more API-driven adoption or embedded finance experiences where companies will partner with technology providers rather than building or extending their own platforms/solutions.
Ecosystem consolidation. We should expect to see payment networks consolidate, bringing together payers and e-vendors onto single platforms. There’s likely to be more collaboration among tech providers than having them build their own, driving what is best for the customer and taking advantage of the benefits, such as rebates. Payment networks will have to provide value for both sides of the network to get the true “network effect”. This will improve the value for the supplier and increase supplier acceptance as well as providing value to the payers (e.g. cash flow improvements, risk reduction and increased efficiency).
More emphasis on network strength. Choosing a long term partner for your AP digital transformation is not an easy decision. This is your lifeblood – how you pay and get paid. The network you connect to needs to be fraud-proof, UX-friendly and future proof. The value of the network needs to be measured by its scale and connectivity to both payers and receivers, alignment to banking partners, strategy for growth that aligns to your AP journey and operated by a team you can trust.
The Bottomline: Companies should rely on networks to operate their pay their payables or receivables program at scale through digital transformation. With the economic pressure lurking in the background, it may mean you have to build the plane while you’re flying it. It’s a hard thing to do, and will take a strong network and a reliable track record from your partner.