It’s such a complicated time in the payment industry, with a minefield of regulation, innovation, collaboration and fraud prevention. You can be forgiven if you’re not up to date with every current payment trend.
This episode on the Payments Podcast will go over the most important payment trends to track over the next few years to ensure that even if you’re not up to date with every trend, you will be for the ones that will matter to your organisation.
Rich Williams: The payments industry is a minefield of new regulation, innovation, collaboration and fraud prevention. With so much going on, it’s fair to say that organisations of all shapes and sizes could be forgiven if they’re not quite on the money when it comes to staying abreast of changes, and identifying what’s important, what’s not, and what needs to be done by when.
Hello, I’m Rich Williams, host of the Payments Podcast. In this episode, I’ll be chatting to Ed Adshead-Grant, General Manager of payments for Bottom Line, about the most important payment trends to track over the next one to two years. Hello Ed, and thanks for joining me today.
Ed Adshead-Grant: Good morning Rich.
Rich Williams: So, Ed, given there is all this change pending and in-progress already, can you summarise for us some of the key themes that are emerging when it comes to business payments in 2019?
Ed Adshead-Grant: Absolutely, thank you. I’ve come with a shortlist of five today. We like to go through the flavouring of payments, as I call it. Always good to catch up with regulation, and then the age of the Fintech, that’s now upon us, partnerships, which are essential, in open economies, and a bit of a wild card, if we have time, about sanctions and fraud-checking.
Rich Williams: Thanks Ed, that’s a nice little shortlist for us there. If we look at these in a bit more detail then, beginning with using your terminology, the flavouring of payments? Is it safe to assume that this is one of those new overlay services that we’ve heard about in the UK?
Ed Adshead-Grant: It is. It’s certainly linked. Some people might have heard about this ISO2022 jargon, but yes, it is linked, it’s in consultation now, under the badge of enhanced data.
Rich Williams: Got you. So, when is this service set to go live, how will it work, and what will the benefits to corporates be?
Ed Adshead-Grant: Well timeline, we’re talking around 2021, 2022 time frame. This is all about adding the data to the payment. So, corporates can indeed pull out some benefits. So, we do have like this holy trinity in the industry, and this triangle of the invoice, the payment and then financing behind it. This definitely brings those together, certainly the invoice and the payment.
So, what does that mean? Well with that extra data you have things like reconciliation, that becomes automated, it cuts out a lot of wasteful time in the back office. It’s easier to check for criminal activity. Tax activity can have straight-through processing, can be much more effective. So, lots of benefits.
It would show up in things like, in the future, clicking on your bank statement, and up pops your payslip or your invoice, something like that. So, lots of change to come. When I say flavouring of payments, to me that’s like a vertical flavouring.
I can see champions of certain mini-ecosystems popping up like school payments or maybe shipping payments where all the shipping documents are associated with the payment or pharmaceuticals have a certain industry bunch of documentation that comes with the payment, to make it a complete transaction.
Rich Williams: I guess that ties in quite nicely then with the new payments’ architecture, the initiative that’s set to replace BACS and faster payments in 2021 and 2022. Would that be fair to say?
Ed Adshead-Grant: Yes, spot on.
Rich Williams: On that note then, what do businesses and corporates need to know right now about this?
Ed Adshead-Grant: I’d say right now the word is phasing. This is going to happen in phases. There’s a lot of activity. You’ll hear about activities like confirmation of payee, requests to pay and these data enhancements, but the important thing to bear in mind is that there’s new models that will emerge, a number of models. They could be aggregation models that brings all the data onto one screen. It could be straight-through processing improvements, like mentioned, with invoices and payments coming together.
It could be advice and analysis with the machine learning and artificial intelligence blended into it, you can have comparison advice on screen. Probably another exciting area is just the bucket of still to be invented as all these changes come through.
So, I would say business and [corporates 0:04:43] right now, I would encourage you guys to innovate and look at this stuff, and not just comply. Maybe it’s one example. We know, in the industry, and some metrics that have been created on this, that up to one-third of payment card volume is at risk with some of these changes, where you can pay direct, by the bank accounts.
So, we’re having early conversations with airlines and with the car retail industry, just to see how they can use these changes to improve their models. So, exciting times.
Rich Williams: So, it sounds then like the playing field has opened up for much more competition hopefully with that more innovation? Are we only talking about financial institutions here, or corporates as well?
Ed Adshead-Grant: Oh, definitely both, both and together. This is a world of sandbox’s, APIs, SDKs, development portals, all of these technical terms buzzing around. What does it actually mean? Well, everything now is moving to real-time. So, one fun exercise is just to put real-time in front of everything you have in the office. So, real-time payroll, what would that mean? Could people be paid daily or weekly, rather than the monthly cycles that are often in place?
Real-time cash flow, real-time disbursements of loans or insurance payments. So, with real-time, new models start to emerge. New models with different risk profiles, different liquidity treatments and positions. It gets quite exciting around where the world will go now that this is possible for corporates to open up the age of Fintech.
A probably final thought on that is, you do need to look at what you have inhouse and perhaps what partnerships, or what other help you can have to try and create some of these new models.
Rich Williams: I suspect that with everything going on here that not everyone will be able to tackle all these changes as quickly or in such an agile fashion? What are you actually seeing happening on the ground at the moment, Ed?
Ed Adshead-Grant: Well yes, similar to this word partnerships, I just mentioned. It’s definitely more activity, people working with each other in new ways. So, I would say you need to make your bets on this. It’s a time where revenue can be shared, and some intellectual property shared to expand into new markets.
I see it as tech in and tech out, as another viewpoint. So, technology in is enhancing your product and your service charter, and tech out is more distribution channels, where again you could partner and collaborate to get your solutions out there.
So, we’re in business payments. That means digital payments. There shouldn’t really be borders. These payments should be interoperable globally, and trend towards a single standard. So, partnering up with new organisations, new Fintech houses seems to be a sensible way to go strategically.
Rich Williams: As we know, there are often unintended consequences at these times of significant change in the industry. What else would you pick out from our buffet feast today, as one to watch out for?
Ed Adshead-Grant: Yes. This is always an interesting area. With change, there’s definitely the unintended consequences. I guess, speaking with regulators one of the ones I would highlight today is the inhouse sanctions that are starting to emerge. Corporations are looking to bring sanctions, AML checking inhouse more and more. Why is this? Well with the new models, and one of them is called a TPP, a third-party provider, we have the ownership of transactions moving away from banks.
They’ve had to open up their secure vaults of data and these TPPs, authorised TPPs, can make payments and balance enquiries on behalf of an organisation. So, I quite like the term ‘Know your transaction’, KYT, that takes it right down to the next level, beyond KYC. Corporations cannot depend on banks only to pick up any dodgy transactions, bad players, bad actors on the field.
They can work with this new breed of TPP, but they also have a responsibility to know exactly where their payments are going.
Rich Williams: So, Ed, you’ve covered a number of themes there from regulation, partnerships, and the flavouring of payments, to the larger role of Fintechs and the need for corporates to know, where exactly their payments are going. Bundling it all together, what would be your top three takeaways for a corporate listening to this podcast today?
Ed Adshead-Grant: Top three Rich, I would say, first of all, treat this as opportunity. This isn’t just compliance, and this is really a mindset. If you can see the opportunity ahead, the regulators want innovation, that’s part of their driver behind some of these changes. So, treat it as an opportunity. Secondly, let’s hear from the voice of the corporate.
Sometimes in banking and payments, the voice of the corporate is lost, but it’s a great time to reach out to Fintech partners like ourselves who want to hear what problems there are in the market to solve, now that we have a new landscape, with all these themes coming through.
Then thirdly, just get educated. There are a plethora of webinars, podcasts like these, new alerts from subject matter experts in different organisations, where you can easily get schooled, and plan the way forward.
Rich Williams: Without a doubt then, it’s going to make for an interesting time over the next few years, whether you’re a financial institution or indeed a corporate. Ed, thanks for sharing this insight with us today, it was great chatting to you.
Ed Adshead-Grant: Thank you, it has been a pleasure.
Rich Williams: For more podcasts and all things payments, please do check out the Bottom Line payments podcast on iTunes or visit our website.
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