Businesses need to pay and get paid. It’s really that simple on one level. But of course, there are details to attend to and business cases to be made as AP automation and payments digitization continue their momentum. As Bottomline and Strategic Treasurer prepare to repeat the extensive B2B Payment Survey this year (link to registration here) I thought it would be useful to take a look back, see how last year’s data and predictions became reality (or not) and make some observations about the current state of B2B payments. I have a list of them to share. Happy to hear your observations as well at our LinkedIn page.
The API economy is growing and going as promised. Last year 72% of firms ranked APIs in 1st or 2nd in terms of having an impact on their business in coming years. From what I can see APIs have made innovation easier and more accessible for companies that have thrown the digital switch.
If they’re built the right way, they can simplify communications between partners as well as consumers. If they’re not working or they’re too complex that means developers lacked the documentation to implement it. So, if your APIs have good documentation, good software development kits (SDKs) and good developers, good APIs are the ticket to better business payment innovation. The “built by developers for developers” approach is important right now. The API economy will continue to be a key concept in the industry and will be important as we move on to embedded finance.
AP and AR integration is becoming an agile solution for banks and non-financial companies. In 2021 51% of our respondents said they didn’t receive payments according to terms; 46% received unusable remittance information. Automation can go a long way toward fixing both problems. So far this year we've seen a lot of AP and AR companies partner, and we've seen mergers and acquisitions in this space become more common. Accounts payable and receivables are coming together.
It all adds up to embedded finance. I define embedded finance as the ability for customers to make payments through companies that aren’t banks. APIs are essential for embedded finance. We've seen a lot of embedded finance offerings out in the market, where it's just a one stop shop for using your accounting system to make payments. From there, you're managing your invoices. It is definitely something I feel that our AP automation users are experiencing because if you look at it from an AP automation perspective, our customer is using an accounting system which is often an ERP system, but then they're using a separate procurement system. And they’re paying via ACH with their bank. They might even be doing invoice automation with another third party. So, imagine as a user having to log into all these systems built from separate policies and procedures. That's where I think embedded finance comes into play. If I am able to offer that one stop shop to my customer, I have a better user experience, higher retention rates and better customer satisfaction.
AI and ML continue to merit investment. Last year, 56% of our respondents expected AI to impact their business. I expect that number to increase in this year’s survey. We've invested a lot in machine learning and AI automation. Why? It gives us access to essential data instead of manually requesting it from third-parties. Now bring that into AP automation. An ML system may be able to pick up patterns in your company’s vendor AP automation process and then recommend ways or auto-apply rules for new as well as existing vendor invoices. AI and ML help our customers automate repeatable manual processes and improve efficiency.
Security, fraud and risk mitigation continues to be top of mind. Of course, all companies would say they’re concerned about this issue. I think the 52% of companies who said they had heightened concerns about fraud might have underestimated its potential especially in this time of remote work. For me, the key for AP and AR departments is in making sure the right software is always available, accessible, adaptable and auditable at all times.
Paper checks are still a problem. About 40% of businesses still rely on checks, so there's still a lot that needs to be converted into electronic forms of payment. There are other issues, like the ones I’ve listed that are important, but this is still at the core of AP automation’s business case.