Economic uncertainty drives 2023 business payments strategy for finance leaders

In our last post, we took stock of our 2023 payments outlook for financial institutions, identifying key trends to watch. Faster payments and new regulations set the scene. For business executives, the picture isn’t so simple. The lurking threat of reduced consumer spending complicates any 2023 forecast, and the “great unknown” is bringing associated issues to the forefront. We see three general areas that our subject matter experts focused on that can best serve any business payments outlook in these unsettled times. They center around digitization, fraud and financial crime and data analytics. 

First up, any business that wants to compete efficiently this year must continue its digital journey, even though economic conditions would tempt some more cautious finance leaders to consider postponing its priority. Digitization must continue in all departments, from AP and AR departments through operations to the CFO’s office. Bottomline’s Tom Dolan, General Manager of Paymode-X, says 2023 goals for next-level AP automation should reach beyond rudimentary integrations and aim for scale. He notes that digitized AP is built for flexibility and efficiency for companies even as the world changes around them. Paper to digital is just part of the journey. But the right partner should be able to help futureproof and accommodate the evolution of an AP department. 

“The strength and flexibility of the network are critical,” Dolan said. “Digitization means greater payment acceptance and automates the relationship between those who are paying and those getting paid. Receivers can get a significant share of their payments through the payment network with a clean settlement and remittance connectivity to their ERP on the receiving side. Relying on networks to do this at scale will enable those companies to operate efficiently through this transformation.”

Dolan notes that any network needs to have correlating fraud detection and prevention capabilities. Let’s cover insider fraud in the first instance. It has been nothing short of an explosive issue worldwide, certainly for banks. It is a dangerous financial and reputational threat to any company, and economic uncertainty is a big reason behind that. Financial instability on a personal level can lead an employee who was a high performer before the cost-of-living crisis to become a suspect during it. Why? At least part of the answer can be found in the classic Cressey fraud triangle of “pressure, rationalization and opportunity.” Certainly, all three are front and center for the employee battling higher prices and shrinking expendable income. 

So, insider fraud is a big heads-up regardless of your business size or industry vertical. Beyond internal fraud, company executives face several varieties of payment fraud which continue to pressure existing fraud defenses, from authorized push payment fraud to business email compromise to identity theft. However, there is good news on both sides of the Atlantic. The “counter-fraud triangle” should look to continuously educate employees, close potential process loopholes, and update fraud prevention technology. New and effective technologies are available to mitigate payment fraud. And one of the best examples is the UK’s adoption of Confirmation of Payee (CoP). 

CoP for business gives companies a new automated tool to ensure that payments are directed to legitimately owned bank accounts. Closing another gap against fraudsters, instant and batch transactions are automatically verified via direct-to-source bank account checks rather than via intermittently updated third-party bank account databases. CoP for Business offers a viable alternative to traditional bank account verification methods. 

It addresses a critical issue. In 2022, 29% of companies interviewed in the Business Payments Barometer admitted they were victims of fraud, claiming a 10% increase in fraud losses versus 2021. Unsurprisingly 81% of financial decision-makers in North America and 70% in Great Britain agreed they should be doing more to mitigate fraud. 

“So, beyond what banks offer, it’s on companies to ensure their payments are safe and legitimate. CoP for Business gives them peace of mind and the arsenal needed to wage war on financial fraud,” said Bottomline’s global head of platform and transformation Colin Swain. “Uniquely, CoP has over 90% bank account coverage, meaning fewer manual checks for corporate fraud teams. With the UK’s Payments Systems Regulator (PSR) forecasting CoP bank account coverage to extend beyond 99% by October 2023, the benefits for companies are clear to see.

Finally, we have the fuel that drives the payments engine: data. Data will drive the solutions to the first two trends mentioned here. The correct data analytics will make it easier to raise a red flag around suspicious transactions and user behavior. It will also allow internal functions like AP and AR to be more accurate. Data gleaned from digitized back-office systems can add transparency and balance to AP and AR functions, and extend toward the goal of making B2B transactions as easy as consumer payments. Perhaps most notably, during times like this, when cash management forecasts are so critical, data creates real-time visibility for cash positions. As Rita Hubner, Vice President for Solutions Consulting and Advisory Services at Bottomline, says, a lack of real-time analytics can adversely affect payment schedules and threatens to reduce overall cash. And for an organization dealing with internal and external change, that’s a dangerous position. 

“Often the finance team will be drawn upon to be subject matter experts when the organization is transforming,” Hubner said. “Looking forward and implementing systems in that realm require command of the business and financial processes to implement the end state properly. How data get presented, what data is needed, what dashboards make sense, what payment patterns exist — these all lay into the next phase of finance transformation.”