PhotonPay, the stablecoin-powered operating system for global payment infrastructure, unveiled its dual-rail recurring system.

Designed for emerging agentic commerce use cases, the system enables businesses to manage recurring payments across both fiat and stablecoin rails through a single integration. By abstracting the complexity of underlying payment protocols, it allows teams to focus on building and scaling AI-driven products while handling cross-border payment flows in the background.

The Intelligence Surge vs. The Infrastructure Gap

The digital economy is undergoing a structural shift. According to the 2026 SaaS Management Index¹, spend on AI-native applications has surged 108% in the past year, while large enterprises have scaled their AI SaaS expenditure by an unprecedented 393%. Yet, as the subscription economy approaches a $300 billion global market, the underlying payment infrastructure remains tethered to legacy banking constraints that are increasingly misaligned with the speed of AI.

The friction is most visible in cross-border commerce. Current estimates² indicate that 20% to 40% of subscription churn is caused not by product dissatisfaction, but by passive payment failures. For AI platforms operating globally, traditional credit card rails often trigger a cascade of declines due to rigid risk filters, currency conversion errors, and bank-imposed limits—frictions that are antithetical to the borderless, 24/7 nature of agentic commerce.

The Three Structural Frictions of the AI Era

To enable seamless agentic commerce, businesses must overcome three entrenched infrastructure limitations that current payment gateways fail to address:

1. Systemic Cross-Border Inefficiency

Traditional payment gateways remain optimized for the low-frequency, high-friction transaction models of the past decade. Their risk-scoring engines, designed for human-triggered commerce, often misidentify the high-frequency, low-value patterns typical of AI subscriptions as fraudulent. This results in excessive false positives, creating “invisible churn” that can suppress global conversion rates by up to 25%³.

2. The Stablecoin Continuity Gap

Historically, stablecoin payments have been treated as isolated, manual events rather than continuous financial flows. The absence of a native, programmable recurring billing layer has forced AI enterprises to rely on “one-off” invoices, creating massive friction in user retention. For the high-value, Web3-native segment, this lack of automation isn’t just an inconvenience—it is a break in the economic lifecycle that prevents AI platforms from building stable, predictable revenue streams on-chain.

3. Operational Fragmentation & Reconciliation Overhead

Current market solutions often force enterprises into a “dual-stack” reality: managing fiat through legacy gateways while handling digital assets via isolated non-custodial wallets. This infrastructure fragmentation creates deep operational silos, compelling finance teams to perform manual cross-chain and cross-bank reconciliation. As AI enterprises scale into multiple jurisdictions, this complexity becomes an exponential tax on growth, leading to reporting inaccuracies and liquidity bottlenecks.

Stablecoins as a Structural Component

Stablecoin-native payments address infrastructure frictions at the protocol level. Unlike credit card rails, on-chain transactions operate independently of banking authorizations—eliminating the primary drivers of involuntary churn, such as card expirations and arbitrary issuing-bank declines. For subscription-based enterprises, this transition secures the 2% to 5% ⁴ of monthly revenue typically lost to passive payment failures.

The structural advantages extend beyond reliability to fundamental economic efficiency:

• Cost Optimization: Stablecoin processing achieves high-margin efficiency with average fees of approximately 0.8%, a significant reduction from the 2.9% + $0.30 standard of legacy card networks⁵.

• Unrestricted Global Reach: By enabling any wallet-holder to subscribe, the infrastructure unlocks high-growth markets where traditional card penetration is low, yet Web3-native demand is accelerating.

Product Capabilities: Three Layers, One Protocol

Layer 1: The Consent Layer – Seamless Authorization

The core of the dual-rail experience begins with a singular, on-chain authorization. Once the user completes this initial step, the PhotonPay OS initiates recurring charges automatically, requiring no subsequent wallet re-signing. By mirroring the “set-and-forget” convenience of traditional credit card subscriptions, this layer transforms stablecoins from a fragmented, one-time payment tool into a reliable recurring billing infrastructure.

Layer 2: The Execution Layer – Adaptive Rail Selection

At this layer, the PhotonPay OS neutralizes the friction between diverse business models and the underlying payment rails. It provides the programmatic flexibility required for Agentic Commerce, ensuring that value movement is as dynamic as the AI consumption it supports.

• Adaptive Consumption Models

The engine natively supports fixed-tier SaaS subscriptions, high-frequency API-call billing, and token-based usage. This allows AI enterprises to align their revenue capture directly with real-time compute consumption.

• Autonomous Tier Escalation

Through dynamic tier billing, the OS automatically upgrades plans as usage thresholds are met. By removing manual intervention, PhotonPay ensures uninterrupted service delivery while maximizing lifetime value (LTV).

Layer 3: The Intelligence & Compliance Layer – Unified Reconciliation

The final layer leverages the Dual-Rail architecture to provide a single, compliant interface for global liquidity. It treats fiat and stablecoins as interoperable components of a unified corporate treasury.

• Unified Liquidity Intake

The OS dissolves the boundaries between legacy card networks and on-chain rails. Enterprises can capture value in any form—leveraging optimized fiat authorization rates or the borderless velocity of stablecoin-native settlement—through a single, integrated protocol.

• Unified Compliance Interface

All cross-rail activity is consolidated within a centralized dashboard, establishing a “Single Source of Truth” for global operations. This intelligence layer enables one-click export of audit-ready reports, ensuring adherence to regulatory standards across Hong Kong, the UK, and North American jurisdictions.

The Foundation: Stabilizing the Speed of Commerce

At its core, a stablecoin is value reimagined for the digital age—combining the stability of sovereign reserves with the boundless efficiency of blockchain. By removing geographic friction and the constraints of traditional banking hours, stablecoins synchronize the velocity of capital with the speed of information. This is more than a tool; it is the structural evolution of global finance.

“As commerce evolves towards AI-driven automation, the underlying economic interface must become programmable,” said PhotonPay Founder and CEO Lewison Chen. “At PhotonPay, we are integrating fiat and stablecoins into a single, seamless environment. Our goal is to provide the reliability of traditional finance with the agility of digital assets.”

Data Sources

¹ Zylo (2026): 2026 SaaS Management Index, reporting global SaaS market size of $408 billion in 2025, projected to reach $465 billion in 2026; AI-native application spend surged 108% year-over-year, with large enterprise AI SaaS expenditure up 393%.

² Aurpay (2026): Subscription economy data, estimating global subscription economy approaching $300 billion; 20%–40% of subscription churn attributed to payment failures.

³ Stripe (2025): Global Checkout Infrastructure Report. Analysis of authorization rate decay in high-frequency, cross-border SaaS billing.

⁴ Recurly(2025): State of Subscription Report. Statistical analysis of passive churn caused by credit card expiration and declining bank authorization rates in cross-border commerce.

⁵ Worldpay from FIS (2026): Global Payments Report. Comparative analysis of crypto-settlement efficiency vs. legacy card network Interchange and Scheme fees.

The post Fueling Agentic Commerce with Dual-Rail Recurring Billing appeared first on PaymentsJournal.

International wires have long been the default for B2B payments—an entrenched system that works, but few would describe as optimal, given multi-day settlement timelines and high fees. But as stablecoins gain traction in cross-border transactions, businesses are starting to ask a more fundamental question: Can we replace wires altogether?

In a PaymentsJournal Podcast, Avinash Chidambaram, Founder and CEO of Cybrid, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed what would need to happen for stablecoins to become the default mechanism for B2B payments. What’s exciting as well is the possibility of even more use cases across payments, treasury, and remittance. “There are all sorts of things you can do better that you don’t consider to be a problem,” Wester said. “But maybe with new technology, we can do things that you didn’t even know were possible.”

Structural Inefficiency

Wires work well enough—they move money from sender to recipient, which meets the core need. What most enterprises don’t see, though, is the complex web of systems and intermediaries behind these transactions; they simply build their processes around bank-based payments.

Over time, layers of intermediaries have made these systems deeply entrenched and difficult to replace. In the past, this made sense. Moving money across borders and oceans was a treacherous game, and paying a little extra for trust and security was a value-add rather than a painful cost. Now, however, times (and money movement) have changed. Organizations have access to tools that enable simpler, more streamlined alternatives with built-in trust.

“The inefficiency isn’t just technological, it’s structural,” said Chidambaram. “Whether it’s correspondent banks, clearing houses, processors, [or] compliance, these experiences that are happening in the background between banks cost both complexity and time, and are hugely inefficient.”

Looking for Improvement in B2B

Alongside new technology came new expectations of transparency; companies want to track their payment from the second it leaves their account to the moment it lands in a recipient account. However, this is simply not possible with wire transfers. Stablecoins, on the other hand, offer complete traceability—and enterprises are taking note. They can verify, often in near real time, that funds have been received. This visibility is driving growing interest as businesses see clear operational benefits.

“Most enterprises are focused on their core business and then they say, ‘OK, well, can I improve some of my operations and finance as a separate thing?’” said Chidambaram. “Now a customer can go into our platform and say I want to make a payment to this invoice and upload that invoice. We can automatically pull the funds from a customer’s account to fund the payment transaction, convert that to stablecoins automatically and then send stablecoin to the recipient’s wallet.”

“That can improve B2B payments from two contexts,” he continued. “First, it’s just faster. Secondly, you can see that it’s settled—that [your recipient] actually received the funds.”

Improving the User Experience

For the longest time, a major barrier to broader digital asset adoption, including stablecoins,  has been poor user experience—complex interfaces and high stakes for errors.

Firms like Cybrid are beginning to address these challenges across retail, commercial, and enterprise payments. The experience now goes beyond accessing a wallet to include greater visibility into transaction status and fees.

The secret sauce is in programmability. Stablecoins by nature can be programmed—a payments team member can set up rules or triggers, which then guide how payments operate. For instance, payment terms. For instance, if you have to pay a supplier every month, you can create a programmable rule that ensures money lands on time, avoiding late fees or penalties and ensuring business continuity. But the use cases go beyond pre-determined rules and can become dynamic as well.“We’re starting to see people adopting ERP tools that have intelligence built into them,” said Chidambaram, “Where they can say, ‘Hey, your inventory is running low. Or you need to make these payments. Here are all the payables that you have.’ And over time, we’re finding that people are actually wanting to wait as late as possible to make those payments.”

Keeping Existing Workflows

Accounts payables and receivable teams already operate within established workflows in fiat currencies like the US dollar or Euro—for payroll, invoicing, and more—and are unlikely to overhaul them entirely. The good news, though, is that stablecoins operate in the background. When you make a payment, the recipient receives their local currency automatically (or stablecoins if they choose, but it’s not required). All the while, the business sending those payments benefits from speed, cost efficiency, and transparency.

“You’re going to have an organization that says: ‘This is how I do payroll for my local employees, but I need to do this other thing for my contractors overseas and this other thing for my suppliers,’” said Chidambaram. “Some of them might have taken only wires then, but are now accepting stablecoins. They have the ability to pick which rail makes the most sense to solve the problem.”

These benefits are especially relevant given the growing complexity of payroll, including irregular schedules and cross-border payments. Stablecoins could play a key role here. For example, enabling early wage access models that allow workers or suppliers to receive funds ahead of traditional pay cycles.

“You get paid every two weeks because, in our brains, that’s how you get paid,” said Wester. “That goes back to direct deposit, which goes back to you had to have a check, and that goes back to all sorts of things that go into the processes. Same thing with AR/AP and so many of our payment processes at the corporate level. Now we can rethink a lot of those things.”

Something Better

For the foreseeable future, stablecoins will coexist with traditional payment rails. Both are necessary to support the trillions of dollars moving through global systems today. But as enterprises, suppliers, and payers grow more comfortable, a larger share of that volume is likely to shift toward stablecoins.

“Many people think digital assets and stablecoins are a solution in search of a problem,” Wester said. “I’ll say, well, you know, what you’re doing now is slow, costly, and inefficient, with layers that you can’t see. You don’t think of this as a problem, but maybe that’s because you didn’t know there was anything better.”

A key remaining hurdle is integration. Stablecoin payments are not yet embedded in most enterprise software platforms, where traditional methods like wires are still the default. But as vendors evolve and enable easier integration, stablecoins will become more accessible—unlocking even broader use cases.

“Banks, PSPS, enterprises, large and small, every one of them have been thinking about stablecoins,” said Chidambaram. “How do I go in my take advantage of this? What are the capabilities I need? Then that starts to unlock people’s minds: What else can I solve with this new payment rail?”

The post What Would it Take for Stablecoins to Replace Wire Transfers in B2B Payments? appeared first on PaymentsJournal.

When a shopper is tricked into making a fraudulent purchase, they expect recourse from their financial services provider. These guardrails are one of the reasons credit cards have become predominant in the U.S.—not only can consumers dispute charges after the fact, but many issuers proactively alert users when suspicious activity occurs.

Similar protections exist for ACH payments, but they are largely a function of the lag between payment initiation and settlement. With real-time payments, such as those facilitated by FedNow and the RTP network, this buffer disappears.

As both systems gain traction, particularly in B2B use cases, fraud prevention strategies must evolve to address payments that are instant and irreversible.

In a recent PaymentsJournal podcast, Darren Beyer, Chief Product Officer at Qolo, and Suzanne Sando, Lead Fraud Management Analyst at Javelin Strategy & Research, discussed how the convergence of faster payments and increasingly sophisticated fraud is fueling a full-scale redesign of fraud prevention architecture. It has also placed a demanding onus on financial institutions to implement highly precise risk controls while preserving the customer experience.

The Window Is Closing

As faster payments erode the traditional safety net around transactions, institutions must shift fraud detection to earlier stages of the payment process. In the past, organizations benefited from extended review periods, during which funds could be reversed if necessary. That capability is quickly becoming a thing of the past.

“In the world of instant payments, specifically around RTP and FedNow, you’ve got an instantaneous movement and settlement of money. And that’s where the problem lies, because there’s no longer time to pull this stuff back,” Beyer said. “There’s no window where you have an ability to say, ‘I really didn’t mean to send it’ or ‘I fat-fingered this particular account number.’”

“With that gone, it’s less of an opportunity for the people sending payments to fix problems, and that opens the window for fraudsters,” he said.

In this environment, striking the right balance between strong fraud prevention and a seamless customer experience is difficult, especially given the high expectations shaped by card and ACH transactions.

These challenges are accelerating the need for real-time decisioning, where firms analyze multiple data points to assess payment risk before processing. However, achieving high decision accuracy will likely require introducing some level of friction. While this may feel new in the context of real-time payments, methods like multi-factor authentication are already familiar to both banks and customers.

“Every time I log into YouTube, I get a six-digit one-time passcode,” Beyer said. “If I have to do that for YouTube, why is my financial institution not making me do that? They do when I log in, but if I’m doing a big payment out, shouldn’t the same thing be happening? Isn’t the ‘friction’ of getting a one-time passcode worth the extra two or three seconds it takes to put that into the website? I think the answer is yes.”

The challenge lies in applying the right amount of friction in an emerging payments model. This is where step-up authentication plays a key role. It allows institutions to adjust controls, enabling low-risk payments to proceed smoothly while subjecting higher-risk transactions to greater scrutiny.

Even so, introducing any friction into the customer journey can raise concerns for financial institutions.

“There has been an assumption that strong security will ruin the customer experience, but Javelin has found that good security can improve trust and adoption of certain payment channels and methods and new technologies,” Sando said. “Consumers and businesses want to know that their accounts and their money is protected and that they can trust the institution and the organizations that they choose to do business with.”

The Widening Technology Gap

Implementing safeguards that remain invisible to legitimate users yet highly effective against bad actors is no small feat, but the tools to optimize this balance are rapidly improving.

Artificial intelligence has been instrumental in advancing these capabilities, as it has across nearly every sector. However, many financial institutions have lagged in adopting these technologies.

“This is a scenario where it’s so rapidly changing the industry but the traditional players—processors and banks who are operating under a regulatory environment and are operating under an environment where you can’t inhibit people from getting access to their money—they have all these constraints,” Beyer said. “Fraudsters don’t, and they can just start playing with all these great new AI tools.”

“There’s always been a gap,” he said. “Fraudsters have always been ahead of the financial institutions and the processors, and the reason for that is they’re more nimble; they’re able to get things done quicker. If you didn’t have that gap, you wouldn’t have fraud.”

Unfortunately, this gap is not only persistent but widening. Rapid advancements in generative AI and the emergence of AI agents have enabled cybercriminals to scale both the speed and scope of their attacks.

“Bad actors can adopt those technologies quickly, and they’re incredibly creative. I don’t want to give them applause for that, but they’re incredibly inventive in the way that they take risks to use new technology,” Sando said. “It’s difficult for FIs to keep pace when it comes to the adoption of any innovation.”

“It’s no surprise that AI is a problem for criminal manipulation,” she said. “But we also know that it’s a huge asset for financial services that they could make great use of in terms of automating certain aspects of the customer experience. Or even the employee experience, for things that maybe used to be a manual review of transactions, or typical tasks that were completed during fraud investigations.”

Buttressing the System

AI has quickly become central to modern fraud defenses, given its ability to detect anomalies across massive datasets. However, the rise of real-time payments is fueling the demand for intelligent infrastructure that can function as an authentication layer within the payment flow.

This is especially critical in commercial environments, where overly restrictive controls can lead to false declines or delays—issues that can quickly escalate into serious operational and reputational damage.

Ultimately, faster payments are not just driving the need for better technology, they are forcing financial institutions to rethink their entire approach to fraud prevention.

“The organizations that are succeeding in instant payments are going to be the ones that can make the competent decisions on risk just as quickly as that money is moving in that real-time setting,” Sando said. “Fraud detection isn’t just this back-office function anymore, that just happens in the background without real knowledge of it. You have to highlight fraud detection because it’s now a critical piece of the payment experience.”

This shift in mindset is essential. The fraud threat is not going away, but institutions can take advantage of one constant: the pursuit of easy money often leads criminals down the path of least resistance.

“Fraudsters are always going to find a way, but they are fundamentally no different than anybody else in business,” Beyer said. “They have an ROI, their time is valuable, and they’re going to go where they can make the most out of their time. If your bank or your processor is tougher to get through than your neighbor’s bank or processor, they’re going to go to your neighbor.”

“Make your buttress, your fortress, your castle gate—all the armor that you’re going to put around your system. Make that better than your competition and they’re going to go to your competition,” he said. “You’re never going to get a 100% fraud-proof system. Fraudsters will always be ahead, but if you can make yourself better than the people around you, then you’re not going to be the target, they are.”

The post Instant, Irrevocable Payments Demand a Fraud Prevention Reboot appeared first on PaymentsJournal.

Ten years ago, the Federal Reserve sketched out a future for U.S. payments—one where money could move in real time, not days. What began as a roadmap has since reshaped the payments landscape, bringing that vision closer to reality.

The Federal Reserve’s “Strategies for Improving the U.S. Payment System,” helped set the industry on a path toward faster payments. Though not a formal mandate, it established real-time transactions as a clear objective for payments nationwide.

In the Instant, Faster and Same-Day Payments: Where Speed Is Grabbing Share report, Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research, looks at how that framework has taken shape over the past decade—and where faster payments may be headed next.

The Ten-Year Roadmap

A major impetus for the original paper was an acknowledgment of inefficiencies in payments, driven in large part by the more atomized nature of the U.S. banking system compared to other countries. Recognizing the growing need for certain types of payments to move faster, the Federal Reserve stepped in with a kind of manifesto—one that, while lacking legislative force, nevertheless outlined a route to instant payments.

“It was sort of a Kennedy-style ‘we choose to go to the moon by the end of the decade,’ kind of a thing, but it wasn’t prescriptive, and kept to broad guidelines,” said Thomas. “This was not going to be legislated the way the EU did it, it was more: ‘This is where we need to be to remain competitive, and we will trust wisdom of the market to get us there.’”

“This is not to say that providers saw this as optional,” he said. “Anytime a regulator speaks up on topics like this, there’s kind of an implied ‘or else’ in the background. The Fed described what they hoped to see in different solutions for different use cases, such as a need for consumer convenience on some things, and for real time funds movement, on the high-value stuff.”

Coming to Fruition

Ten years on, that ambition is being realized. The Clearing House’s RTP Network has been joined by the Fed’s FedNow instant payments service, and both have seen remarkable growth. RTP is now recording as many as 2 million transactions per day and recently set a new single-day value record of $8.36 billion.

While FedNow remains significantly smaller than RTP by transaction count, its early profile appears skewed toward higher-value payments rather than smaller-ticket flows. Average daily FedNow transactions reached nearly 30,000 in 2025, while total value rose to $853.4 billion from $38.2 billion the year before. Over the same period, average payment size increased from $25,376 to $101,435.

“Six or seven years ago, people at conferences would be asking: ‘How are we going to use this once it’s up and running?’” said Thomas. “The impression I got was that everyone was building out of a need to not be left behind, rather than any specific use case. When asked what real-time was for, I mostly heard ‘replacing some wire transfers, I suppose.’”

Banks are now more openly sharing where new use cases are emerging. There is a growing recognition that the market benefits from customer education, prompting institutions to actively evangelize new applications as they arise.

The Promise of ISO 20022

One key driver behind the expansion of these use cases is the ISO 20022 messaging standard and the richer data that accompanies each payment. This added information can reduce risk, support more rigorous controls, and provide the structured detail needed to automate downstream processes. In turn, payments can increasingly self-settle and self-allocate—automatically posting to the appropriate general ledger or budget lines.

“It’s not a chicken and the egg thing,” Thomas said. “One helped the other in many respects. You couldn’t have the level of instant payments that we’re looking at in the United States without a standardized language in place. It just wouldn’t work.”

Making Use of the Limits

Higher transaction limits on both FedNow and RTP have also contributed to growth. Last year, both networks raised their caps to $10 million, a move that appears to have unlocked a wave of new transaction types.

“That’s partly a function of ISO 20022, but it also reflects growing comfort among back-office processors and banks with the risks involved in moving large transactions with finality,” said Thomas. “It also has major liquidity implications. Banks need to help customers orchestrate funding in an environment where accounts can now be debited 24/7 for a growing set of payment types, rather than only during business hours.”

“And banks have to manage their own liquidity the same way, anticipating that funds can flow out at any hour,” he said. “In the past, when payments moved within a more limited business-day window, someone could manually shift funds between accounts to cover transactions as they were pulled. In a 24/7 environment, that kind of funding management increasingly has to be automated.”

Using All the Levers

Despite this progress, traditional ACH transfers are not being displaced so much as settling more firmly into their long-established role: high-volume, lower-value electronic payments where a one- to three-day settlement window is good enough.

ACH still accounts for the vast majority of B2B payment value. Its same-day variant is increasingly used for transactions where timing matters, but true real-time settlement isn’t necessary. Notably, average transaction sizes for Same Day ACH have been ticking up, while those for one- to three-day ACH have been ticking down.

“You’re seeing the slower stuff focused more on higher volume, lower value transactions,” said Thomas. “You’re going to want to pay the big bills absolutely last, and people are getting smarter now about which instruments best meet their liquidity goals.”

The primary lesson for commercial payments providers is to use all the levers at their disposal in concert with each other for maximum efficiency and performance. “That’s the big lesson,” Thomas said. “There are so many different options for payments now. Helping your customers with orchestration is the key.”  

The post How the U.S. Built Its Faster Payments Ecosystem appeared first on PaymentsJournal.

One of the biggest financial stories of the past year was the tariff war initiated by the United States. Despite shocks to global supply chains and economies, many nations weathered the storm surprisingly well.

A new report, One Year On: Tariff Impacts on U.S. Imports and What They Mean for Treasury and Payments, examines the impact of these tariffs in both the short and long term. The world adapted far faster than expected, minimizing the economic fallout. “If you told me what the tariff impacts could be, that the changes were going to be as fast and as severe as they were, I don’t think I would have believed you,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research.

Ready for the Shock

Tariff shocks don’t act like a single policy change—they ripple through economies as a mix of contractions, redirections, exemptions, and occasional miscommunication-driven surges across countries and commodities. Predicting the response was never straightforward.

Some analysts expected supply chains to either absorb the tariffs or find workarounds. That largely didn’t happen. Low-margin imports like electronics, toys, and apparel remained largely stable, even as tariff-driven costs rose.

“I was surprised both by the speed and the tight correlation between a tariff being introduced and the use of imports going down,” said Thomas.

The nations best positioned to benefit from this instability were those prepared for trade disruption. As prices surged on Chinese imports, for example, Vietnam quickly consolidated toy and apparel production, capturing new market share.

“Vietnam has been tooling up to do this for a while now,” Thomas said. “When the Chinese tariffs went up, Vietnam was ready as a quick substitute or last stop for the United States or one of the other supply chain providers in Asia. Those volumes are there to stay.”

A Lack of Chaos

The key lesson: supply chains adjust rather than simply pass costs along. Availability of goods remained mostly unaffected, highlighting supply chain agility in 2026.

“If this had happened 15 years ago, there would have been chaos,” Thomas said. “There would not have been enough toys in the shopping centers during Christmas. The world has changed in terms of last-mile shipping capabilities and graded data around the provenance of goods and their substitutes.

“It says something that you can have capricious tariff regimes being instituted, and we’re not seeing lineups at the electronics store,” he said. “We’ve had super-lean supply chains, so there hasn’t been a lot of slack in the system. Despite these completely non market-driven shifts, we still have the same goods available a year down the road.”

Some Changes Are Here for Good

Nevertheless, the tariffs left lasting changes. Many players realized they weren’t as indispensable as assumed, as substitutes arose almost immediately.

Going forward, supply chains may incorporate a “tariff risk” component, particularly long, complex sectors like automotive and aerospace. Governments are also reassessing regulatory risks as they encourage domestic manufacturing.

“You can see them looking to strike trade deals,” said Thomas. “But they will also try to message the durability of their trade deals and how much they can be relied upon not to throw up tariff barriers or regulatory intervention.”

A Lesson from Swiss Gold

Other lessons emerged from unexpected corners. In July 2025, the U.S. purchased $6 billion in Swiss gold in single month—compared with under $2 billion the year prior.

That was the result of an offhand remark, a poorly communicated intention in terms of tariffs. It became one of the largest trade swings of the year.

“That’s very telling in terms of the need for an efficient market and to have your intentions communicated effectively, because that was really just a broken telephone situation,” Thomas said. “It resulted in a pretty big supply chain inefficiency as well, if you’re talking about tripling your bullion purchase in a year. Some people probably got left holding more inventory than they particularly wanted to as a consequence of that.”

Thinking, Fast and Slow

Timing also mattered in negotiations. The UK, now outside the EU, lost out on pharmaceutical contracts as it lagged behind EU trade agreements, which instead benefited Ireland, Spain, and France.

“As you’re thinking about where the impacts are going to be, you want to think, what if the next guy who competes with me on a supply chain gets the deal done faster?” said Thomas. “A lot of people who manage payments and transaction banking for UK pharmas are probably looking at a big glut of inventory on hand and a cash gap as a consequence of the fact that they were slower negotiating pharma tariffs than the EU.”

On the other hand, some countries are slow-walking their trade negotiations, knowing that there’s every possibility that the tariffs will be reined in. Canada and Mexico are taking a measured approach, knowing that the USMCA free trade agreement is back on the table.

The Ultimate Stress Test

Even as tariff effects recede, commercial payments players see opportunities to offer solutions. Businesses will spend the comping year untangling prior adjustments, but they now understand there’s always a path through disruption.

Perhaps the clearest takeaway from the past year is the resilience of global trade.

“If ever you wanted to run a stress test on the global supply chain,” Thomas said, “I don’t know that you could come up with one better than this short of a world war.”

The post A Year of Tariffs: Looking Back at the Global Impact appeared first on PaymentsJournal.

Real-time payments have yet to become a true retail mainstay in the U.S., but trillions of dollars moved across the FedNow and RTP networks last year. Both networks recently increased their transaction limits to $10 million, dramatically expanding enterprise use cases.

The growing adoption of real-time payments will meaningfully reshape the B2B payments landscape. But it’s only one of several forces converging in what is shaping up to be a watershed year for commercial payments.

As Hugh Thomas, Lead Commercial and Enterprise Analyst at Javelin Strategy & Research, discussed in the 2026 Commercial & Enterprise Trends report, artificial intelligence-driven automation and the rise of more targeted, value-based pricing structures will also play defining roles in the next era of enterprise payments.

An Inflection Year for AI

Optimizing commercial payments flows—whether through automation or outsourcing—has long been a priority for finance leaders. Few technologies, however, offer the promise of AI.

Over the past few years, businesses across industries have invested heavily in AI capabilities. This year represents a critical litmus test: organizations are now expecting measurable returns on those investments.

Expectations have only intensified with the emergence of agentic AI, which has the potential to further accelerate automation.

“You’re looking at something now where so much of that work can be automated, where on initiation of a purchase you could begin to be provisioning an agent to go out and find goods or services that meet the criteria—find price points, look at all the tumblers that need to fall before you say, ‘I’m now ready to pull the trigger and make the payment here,’” Thomas said.

“The data has been around for a long time, the technology is just getting to the point where I think this year will be almost an inflection year in the payables space where you’ll begin to see some big case studies happening,” he said. “I’ve been interviewing people in the receivable space and they’re all talking about how well-suited AI is to managing customer interactions on their AR portals.”

In the past, accounts receivable processes required consistent human intervention—managing credit lines, reviewing invoices, reconciling payments, and handling exceptions. Generative and agentic AI now can substantially reduce time spent on these manual workflows.

That promise is compelling. However, implementing AI securely and responsibly requires strong governance, oversight, and iterative deployment. Progress will likely be incremental rather than instantaneous.

“I don’t know whether we’re going to see paradigm changes, but I think that this is going to be the year that there’s a more ubiquitous perceived need for AI in the payments mix,” Thomas said. “It’s still going to be a learning year, but there are going to be a lot of interesting case studies that happen. This is something where it moves from the theoretical to the practical and the applied.”

A New Real-Time Ballpark

Real-time payments are far more culturally entrenched in markets like India and Brazil than in the U.S., but domestic adoption is accelerating.

For years, RTP—operated by The Clearing House—was the only instant payments network in the U.S., which helped it grow from 60 billion real-time payments in Q2 2024 to around 481 billion in Q2 2025. FedNow, launched nearly three years ago by the Federal Reserve, has not displaced RTP; instead, both systems have expanded in parallel, with FedNow facilitating roughly 246 billion payments in Q2 2025.

“You’re in a different ballpark now, where you’ve got a higher average value and they’re seeing clear use cases where instant transfer of funds is required,” Thomas said. “The one that gets talked about a lot these days is housing down payments—moving from a wire or a cashier’s check to a real-time payment, where both parties can be sitting at their terminals and observe the money move from one account to the other.”

“It’s a great way to avoid a lot of steps versus handing a cashier’s check to a lawyer and having them affirm to the counterparty’s lawyer the funds are on their way,” he said.

Speed introduces new risk considerations, most notably fraud. In traditional payment systems, settlement delays provided time for fraud screening and dispute resolution. With real-time settlement, those buffers largely disappear.

While instant payments introduce unique risk management challenges, they also deliver powerful benefits.

“These observable instant funds movements are going to be where you’re going to see quick take-up,” Thomas said. “And they’ll drive the business case for investing in managing these new risk parameters. As real-time use cases become broadly known, the functionality will be expected of the smaller banks, and you’re seeing companies building out the functionality to offer this to the smaller providers at scale.”

Targeting Price-to-Value

As real-time rails gain momentum in B2B payments, card networks remain formidable competitors.

For years, leading credit card issuers have sought to replicate their consumer-market success in commercial payments. However, translating retail-based pricing models into the B2B environment has proven more complex than expected.  

“There are a million different kinds of consumer, but not much differentiation in how they want to pay for things,” Thomas said. “People either want rewards or access to credit, or they want to be as cheap as possible—and they tend to know the best way to meet their own needs.”

“As a consumer, if you go to a grocery store today, try and pay for it with a check—it’s not The Big Lebowski days, you can either pay with card or cash,” he said. “However, if you’re a business you can pay with ACH, you can pay with real-time payments, you can pay with a check, you can do direct debit, or you can use a card. Rarely would you ever do cash, but some people do. You tend to have a lot more options than consumers, and many of them turn on whether you want to pay now or later, and what sort of discounts or later payment options are available.”

Commercial payments operate under different economics, workflows, and value expectations. As a result, issuers face well-established alternatives and deeply embedded processes within enterprise finance teams.

Still, cards offer significant advantages in B2B contexts. Organizations can authorize one amount and settle for another within defined parameters, and chargeback rights provide strong recourse protections. From both a control and risk-mitigation perspective, cards remain one of the safest payment methods available.  

To gain broader traction in commercial payments, however, issuers will likely need to move beyond retail pricing frameworks and adopt models aligned specifically to B2B value creation.

“The pricing schedule for Visa and Mastercard used to be a six- or seven-page document for the United States and Canada,” Thomas said. “Now, it’s about a 30-page document, and most of the new pages are describing different types of B2B transactions—a page for different flavors of fleet payments, two pages for different flavors of virtual card payments, new tranches of card types and interchange schemes associated with them.”

“So, the networks are getting smarter about pricing, but the problem is they’re not seeing both sides of the transaction. They don’t know the full costs and benefits the counterparties are seeing by using the network, how much rebate the buyer may be getting, and how much it’s costing the supplier to accept cards,” he said. “These new pricing schemes are an attempt to balance the economics of the transaction without actually controlling the final costs; they’re designed to encourage maximum and sustained network use. Given the priority the card networks have been putting on B2B growth, one has to assume they’ll continue to tweak their pricing further to capture specific spend types where they can price to the value their solutions deliver.”

The post From Theory to Application: The Impending Transformation of Commercial Payments appeared first on PaymentsJournal.

Late payments are more than just a headache for businesses—they contribute to thousands of closures each year.

Data from UK fintech Funding Circle estimates that roughly 14,000 businesses in the UK fail annually due to the knock-on effects of delayed payments—the equivalent of 38 closures every day. With around 280,000 businesses shutting down in the UK in 2024, late payments were a factor in about one in 20 cases.

Collectively, UK companies are owed an estimated £26 billion in overdue invoices at any given time. The average affected business is waiting on £17,000—nearly $20,000—in unpaid bills. Unsurprisingly, smaller firms bear the brunt of these cash flow pressures.

“Slow and late payments are unfailingly one of, and often the single biggest reason, for small businesses to fail,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research. “This is true for every developed economy we have data for.”

Naming and Shaming the Late Payers

British financial authorities have taken steps to address the issue. The Reporting on Payment Practices and Performance Regulations 2017 requires larger companies to disclose details of their payment practices.

Businesses must report the share of invoices paid within 30 or 60 days, as well as their average payment times. Payment performance data must also be included in directors’ reports—similar in spirit to disclosure requirements overseen by the U.S. Securities and Exchange Commission—giving shareholders and analysts greater visibility.

“Our study from January shows how this legislation has been having a positive effect, driving down UK payment times in aggregate,” said Thomas. “But we’re also seeing that the trend towards faster payment and better terms compliance is not uniform, and that 30% to 40% of UK firms are actually paying slower and missing terms more often now than when the legislation was implemented. One hopes that ongoing efforts to identify and out slow and non-compliant payers will help with the issues cited by Funding Circle.”

Benefits of Transparency

Greater transparency helps suppliers make more informed decisions about whom they do business with. Over time, that could strengthen not just small businesses but the broader UK economy.

According to Funding Circle’s analysis, reducing poor payment practices by just 10% could generate nearly £1 billion in annual economic benefits. Fast payments would likely mean fewer closures, alongside stronger investment and productivity growth.

The post Late Payments Sink Thousands of UK Businesses Each Year appeared first on PaymentsJournal.

ACH is a critical part of the U.S. payment infrastructure, driving a significant portion of transaction volumes and supporting important use cases such as supplier payments, payroll, and many others. Despite competition from newer rails that serve similar purposes, ACH continues to grow at a remarkable pace.

In a PaymentsJournal Podcast, Radha Suvarna, Chief Product Officer of Payments at Finastra, and James Wester, Co-Head of Payments at Javelin Strategy & Research, examined why ACH payments have remained so resilient and valuable, and highlighted the benefits for financial institutions considering offering ACH payments to their customers.

Old Is New Again

When fintech is discussed in the context of modernizing financial services, there is often the assumption that “old” means outdated and “new” means superior. Even though ACH is considered a legacy rail, it’s still highly reliable. It was designed for a specific type of payment: high-volume, predictable transactions that need to be scheduled, such as payroll or bill payments.

“One reason ACH continues to grow is because we can do the planning for those predictable payments,” said Wester. “If you can plan for all of that beforehand, it becomes a great rail for handling those types of payments.”

A Modern ACH Payments Engine

Looking ahead, ACH must become forward compatible alongside other payment rails. Enabling forward compatibility allows the industry to leverage new technologies such as artificial intelligence and integrate them seamlessly with ACH driving improvements in areas such as fraud detection and automation.

So what does a modern ACH payments engine look like from an operational perspective? First and foremost, it must be cloud-native and modular. It should leverage modern technologies such as microservices and API-based capabilities to connect seamlessly with both upstream and downstream systems. The platform should also be architected to scale volumes up or down as needed, recognizing that ACH doesn’t necessarily need to run continuously throughout the day and has peaks in volumes.

“If we can scale the infrastructure up and down as necessary to drive more efficient total cost of ownership, that would be a significant value add,” said Suvarna. “It would be particularly effective in high volume throughput windows.”

Another important component of forward compatibility is the ability to test new use cases and enable fast experimentation. Smart routing between batch payments and real-time payments, for example, could be offered as a value-added service. To determine whether such capabilities create meaningful impact, organizations need platforms that allow quick testing, with the ability to fail fast or scale successful outcomes.

Financial institutions can rely on a modern ACH solution to integrate with cloud-native and API-driven systems, enabling faster and more efficient launches for new offerings.

It’s also important to note that while the ACH clearing itself has not yet transitioned to ISO 20022, many corporates are already using this for their submissions. A modern ACH platform needs to be able to both handle this, and the eventual migration of the clearing system, seamlessly while accommodating the complex workflows already built around ACH today.

Seeking ROI: Cost

The ROI from ACH can be viewed through two primary lenses: cost and revenue. On the cost side, the first consideration is infrastructure. Platforms built on open-source technologies and modern software stacks are typically less expensive than legacy systems.

The second cost driver is software maintenance and enhancement. As new use cases come up across corporate and retail segments, and as specifications continue to evolve, keeping pace with business-driven and standards-driven changes can be very expensive for legacy platforms.

“There are fewer software developers available to code in some of the older technologies like COBOL,” said Suvarna. “Which means there aren’t that many developers around to make the necessary changes for the foreseeable future. The specialized infrastructure roles where you have a person who really knows the system, those obviously become more expensive.”

The third cost area is operations. Today, exception handling and returns for ACH are often managed separately from other clearing systems. Consolidating these processes into a unified stack—and leveraging technologies like AI—can streamline operations.

“I’m not saying today you can’t deploy AI technologies and machine learning to identify payment repairs, based on the data coming from the legacy ACH capabilities,” said Suvarna. “But the more open modern stack makes it easier and faster.”

Seeking ROI: Revenue

On the revenue side, the primary opportunity for banks lies in differentiation through an enhanced user experience. Examples include offerings such as smart routing between ACH and real-time payments. A second opportunity comes from innovative use cases, where banks create differentiated value propositions around ACH that set them apart from competing institutions.

“When people start talking about ROI, I often hear them talk about revenue first,” said Wester. “But you have to be careful when you talk about system upgrades from a revenue standpoint. To sell it to your leadership, start with the inevitable things that need to be sunsetted and where you can find cost avoidance.”

Finding a Partner

Financial institutions embarking on this modernization journey need partners with experience across multiple implementation domains. A broad perspective helps identify dependencies, eliminate blind spots, and apply best practices. An experienced vendor understands the optimal path forward, knows where common pitfalls exist, and can guide institutions toward scalable, future-ready solutions.

“I like to use the phrase “fish don’t know water is wet,”’ said Wester. “Oftentimes, financial institutions have been running their systems a certain way for so long that they no longer look inefficient, just because they still work. A good partner can come in and say, here are the best practices, here are things where you might be blind to your own issues.”

Finastra, for instance, serves both large enterprise and mid-market client segments. They have built out Global PAYplus for large enterprises and Payments to Go for mid-market clients—both delivered on cloud-native platforms supporting modern ACH  clearing. This single, modern payment hub architecture supports multiple clearing types with a common user experience across all rails, and enables forward compatibility, positioning the platform to support future use cases as they emerge.

“At the end of the day, ACH isn’t about just technology modernization,” said Suvarna. “It’s a transformation of business processes around very critical infrastructure that serves many corporate and retail customer needs.”

The post ACH and the Path Toward Future-Ready Payments appeared first on PaymentsJournal.

Over the past two decades, payment systems in most developed markets have moved from slow, multi-day processes—like checks—to near-instant transfers between counterparties.  Yet, while buyers can now move funds in real time, many still delay payments, often to maintain cash reserves within their supply chains.

As Hugh Thomas, Lead Analyst, Commercial & Enterprise at Javelin Strategy & Research, explains in Faster Funds by Fiat: A Global Comparison of Payment Timing Regulations, it has fallen to governments to ensure that buyers’ desire to hang onto cash doesn’t unduly burden suppliers, particularly smaller ones.

Why Is This Happening?

The tendency to push out supplier payments longer stems from the global financial crisis. Financial analysts began evaluating companies more closely based on cash flow: how much ready cash they have, how much cash they generate, and how much can be extracted from the business at any given time.

Once readily available cash became an important fiscal consideration, companies had an incentive to delay payments to keep money in their hands as long as possible.

“There’s an ability to get paid by one party, then hold off on paying for your input costs and have that much cash on hand as a result of your supply chain,” said Thomas. “Large companies have tended to hoard cash more often in the past 15 years and that’s one thing that governments want to address.”

Another driver for government intervention, especially in developing markets, is high inflation. Brazil was one of the first countries to implement ubiquitous real-time payments, which makes sense given that its real interest rates have reached 30% to 40%. In such environments, if suppliers have to wait 60 days to get paid, they’re effectively selling at a 5% to 7% discount. It’s therefore unsurprising that regulators have mandated faster payment times in markets with high interest rates.

Finding the Formula

As a result, many governments are ensuring that suppliers have recourse when buyers delay payments. Some regimes offer fast-track arbitration system, allowing payees to resolve disputes through specialist arbiters.

In other regions, governments collaborate with local financiers to create a government-approved invoice discounting market. Regulators influence who qualifies for these programs and what financiers can charge, effectively accelerating supplier payments.

“That’s a way of speeding payment to suppliers without what I think is the worst thing you could conceivably do, which is to actually mandate how quickly a buyer needs to pay their suppliers,” said Thomas. “There are 100 different reasons why you don’t want the government telling you that you can’t let invoices age any longer than 60 days. If you’re an aerospace manufacturer, you’re going to have long lead times and a lot of elapsed time in your supply chain as people build custom parts. You wouldn’t want the same set of rules applying to an aerospace manufacturer as you would for a fast-food restaurant, where stuff gets dropped off every day.”

“Name and Shame”

Thomas highlights another effective indirect approach: the so-called “name and shame” scheme. Governments require public disclosure of how quickly companies pay their bills and how well they adhere to agreed payment terms. Under these rules, businesses must report how many payments are made within 30 days, 60 days, and the average time taken to pay. Australia and the UK have successfully used these schemes to reduce average days payable, improve days sales outstanding, and boost compliance with payment terms.

These initiatives also provide journalists with insights into which firms merely claim to support small suppliers but fail in practice. Australia has refined its approach to increase public exposure and encourage investigative reporting.

Publicizing the Findings

In the UK, disclosure is now required in companies’ directors’ reports, akin to the SEC requirements for U.S. firms, ensuring visibility to shareholders and analysts.

“You have to be a principal in the company to sign off on this,” said Thomas. “Your name’s going to go next to it saying, this is how our payment practices run. There’s some reputational exposure there, and some duty of care considerations. “

This transparency also helps suppliers make informed decisions. A supplier may discover that a customer only pays to terms 20% of the time, with an average payment period of 90 days. Even if 30-day terms are standard, the supplier can price in the likelihood of delayed payment, avoiding cash flow traps and negotiating more realistically.

“The UK has done a great job with this, but I’ve also been surprised to see the latest mandate to put these figures in the annual reports,” Thomas added. “That is them presumably saying we don’t think we’ve gone far enough in terms of addressing this problem.”

Two-Track Progress

Overall, Thomas sees progress as uneven. Roughly 60% of companies have improved since these payment initiatives were introduced, while about 30% have worsened—and in some cases, significantly so.

Nevertheless, governments recognize the importance of pushing payments to be faster. Businesses risk facing stricter regulatory action if they fail to comply with these initiatives.

“Maybe there’s something to the notion of taking on something like this to avoid the risk of taking on something more draconian,” said Thomas. “Doing this as opposed to finding the right balance of encouragement without coercion is going to be important.”

The post Late Payments? Governments Are Taking Action appeared first on PaymentsJournal.

Paying a supplier is a fundamental function for businesses, yet it’s often encumbered by a complex billing cycle. When the supplier is in a different jurisdiction, this complexity skyrockets, forcing organizations to navigate foreign exchange rates, bank intermediaries, local regulations, and opaque fees—all with limited visibility into where a payment is and when it will settle.

By contrast, stablecoin payments are immediate, transparent, and less expensive. Designed to maintain a consistent value and typically backed by U.S. dollar reserves, they combine the reliability enterprises expect from traditional currencies with the speed and transparency of digital payment rails.

In a recent PaymentsJournal podcast, Avinash Chidambaram, Founder and CEO of Cybrid, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, discussed B2B use cases for stablecoins and the future of this dynamic digital asset in enterprise payments.

No Longer the Wild West

One of the most important factors driving stablecoin adoption is increasing global regulatory clarity. In the United States, the GENIUS Act governing stablecoins marked a milestone moment, dramatically shifting how banks, B2B payments platforms, and remittance providers view digital assets.

Although regulatory approaches vary by region, the underlying value proposition of stablecoins remains unchanged. Their reserve-backed structure provides organizations with the green light to move forward.

“Globally, you’re starting to see this shift towards enabling businesses and retail customers to start using stablecoins as back-end infrastructure at the very least,” Chidambaram said. “The fact that it’s a stable crypto asset gives CFOs, treasury departments, and even regular retail customers a clear understanding of what the value of that token is.”

“For example, it’s basically a U.S. dollar when I’m sending a stablecoin overseas and it’s being converted into a Hong Kong dollar,” he said. “Now, you’re accepting the benefits of the blockchain and tokenization systems to affect very meaningful use cases and experiences for your customers.”

The combination of these benefits and improving regulatory clarity has rapidly shifted many financial institutions’ attitudes toward digital assets. Early adopters who recognized the potential of stablecoins and anticipated a more amenable regulatory environment are now prepared to reap the rewards of their foresight.

“There was a perception for a period of time that the larger field of crypto was kind of like the wild, wild west,” Wester said. “Yet, there have been companies over the last many years that saw the value of crypto, digital assets, stablecoins, blockchain, and tokenized assets—and were begging for regulatory clarity. They were saying that there’s an efficiency gain here; there are cost reductions.”

“What’s so surprising is how willing and able companies in the space were to say, ‘Now that there’s clarity, we’re happy to look at compliance; we are happy to look at regulation; we are happy to look at governance—because we were always willing to do that,” he said.

Unlocking the 24/7 Cycle

As more organizations consider stablecoins, the promise of the technology has become clear—especially in B2B payments. Built around 30-, 60-, and 90-day payment cycles largely designed to accommodate paper checks, traditional B2B payment infrastructure is ripe for disruption, and stablecoins are proving to be a game changer.

In cross-border payments, businesses have often been limited to sending suppliers a wire confirmation as proof of payment, despite being unable to guarantee when the transaction would actually settle.

These challenges are mitigated with stablecoins.

“Now, I can say: ‘From my blockchain wallet, I’ve sent you a payment that happens to run over stablecoins, and I can see on the blockchain that you received it,’” Chidambaram said. “By the way, both parties on either side of that transaction have been KYB checked—we know who they are. There are much lower transaction costs because there’s not a bunch of folks in the middle who are taking their pound of flesh, and lower FX costs.”

“The other thing is, you can now source stablecoins 24/7, 365,” he said. “It all runs on a blockchain. Minting stablecoins doesn’t stop at 5 p.m. If you are buying goods from another jurisdiction, you don’t have to worry about, ‘When does that bank open up over there? Did they receive the funds or not?’ You can start to operate your business on the 24/7 cycle.”

In addition, organizations can attach data to stablecoin payments, improving reconciliation, accuracy, and confidence in supply orders. This, in turn, delivers meaningful operational benefits across procurement and supply chain functions.

Stablecoins also enable more effective treasury management. Organizations can retain cash within the business for longer, paying for goods and services precisely when needed.

“I heard a statement a couple of months ago, and it drove home the benefit of this type of granularity on being able to send money, and that was: ‘Real-time payments don’t matter because I want to pay somebody tomorrow and know that they’re getting paid immediately tomorrow,’” Wester said. “I know that they don’t need to get paid for 30 days. I want to pay them on day 29 and hold my money as long as I possibly can.”

“It flipped the way that I was thinking about it because when you think about real-time payments, it’s, ‘I need to pay somebody immediately,’” he said. “No, I need the ability to pay them immediately, but I want to be able to have that flexibility and manage my money. If it’s 30 days, I want to be able to send it as late as I possibly can.”

The Programmable Value

This programmability of stablecoins is one of their most impactful features. It enables businesses to automate many payment processes that are currently manual and time-consuming, while also unlocking more sophisticated use cases.

“Some of our customers use us to onboard to investment products,” Chidambaram said. “Take a real estate inverse investment product for commercial real estate for example. You can raise money quickly in the sense that you have an investment opportunity, people can fund that investment using stablecoins from anywhere around the world using a Reg A, Reg D, or Reg S kind of structure.”

“There are also disbursements,” he said. “You can programmatically fund the investment and once the investment has been completed, you can programmatically fund the disbursements. You think about all the higher value stuff that we usually need a lot of people and operations to do, but now you’re able to program that into the token.”

While there are significant use cases for stablecoins, many organizations have been hesitant to adopt digital assets. However, companies don’t need to understand the intricacies of blockchain, cryptocurrencies, or tokenization to benefit from stablecoins. Payment providers have developed back-end infrastructure that manages every aspect of stablecoin transactions, allowing businesses to leverage the technology without added complexity.

“I’ve laughed a couple of times in the past when people talk about stablecoin payments versus other payments as though there is going to be some sort of a qualitative difference from the experience standpoint,” Wester said.

“Your company doesn’t have to be an expert in ERP solutions, you just use the ERP solution,” he said. “The same thing is going to apply once we start moving over to stablecoins. They’re going to start recognizing the benefit of faster, cheaper, programmatic money movement. It’s not going to require anything other than that.”

The Lumpy Path to Adoption

Although momentum behind stablecoins is building, broader adoption in payments still faces obstacles.

“I would love to say it’s going to be a straight line towards adoption, but I do think that it’s going to be a lumpy evolution,” Wester said. “There are still some things that need development, such as the user experience part and where stablecoins and digital assets fit within ERP solutions, banking solutions, and middle- and back-office solutions.”

“I would love to say it’s a rocket ship to the moon and in a year’s time, everybody will be adopting it, but it will take some time,” he said. “The next year is going to be interesting in terms of where we start seeing real development.”

While there may not be sweeping adoption this year, stablecoins are likely to continue gaining traction. As a result, businesses should begin strategizing how to incorporate stablecoins—alongside an ever-increasing number of payment types—into their operations.

One of the most effective ways to leverage stablecoins is through a payments orchestration platform, which routes transactions through the optimal payment type.

“As more people start to support their flavor of stablecoins, you’re going to start seeing organizations using platforms like us to say, ‘Here’s how I want to orchestrate a payment,’ and more of the value of cross-border payments will move onto stablecoins,” Chidambaram said.

“We’re feeling very excited about the opportunity over the next few years, as more companies understand what a stablecoin is and how it’s helping them meet an objective faster, cheaper, and with more control over their treasury,” he said. “More companies are going to start to embed infrastructure like ours to provide those back-office improvements in experience to their end customers.”

The post Stablecoins and the Future of B2B Payments: Faster, Cheaper, Better appeared first on PaymentsJournal.

The long-rumored BRICS payment system may finally be moving toward reality. A payment rail built on interoperable central bank digital currencies (CBDCs) has appeared on the agenda for the group’s summit to be held in India this summer, more than a decade after the idea was first floated.

Attention has shifted away from a proposed BRICS currency, to be called the Unit, which was bruited about last year. Logistical challenges and concerns that China’s yuan would dominate any shared currency have sidelined that concept for now, in favor of developing alternative payment rail to rival the Europe-based Swift network.

The approach under discussion would revive the BRICS Cross-Border Payments Initiative (BCBPI) concept, first proposed in 2015. Rather than creating a new currency, the system would link existing national CBDCs such as India’s digital rupee, China’s digital yuan, and Russia’s digital ruble. Russia has been banned from using Swift since launching its war on Ukraine in 2022.

Seeking Technical Solutions

As a founding member of BRICS and host of the upcoming summit, India is playing a central role in shaping the initiative’s direction. Home to the successful payment system Unified Payments Interface (UPI), India has consistently favored interoperable payment rails over currency integration.

The latest proposal relies on two technical mechanisms to simplify cross-border settlement: settlement cycles and foreign-exchange swap lines. Settlement cycles would allow countries to net trade flows over time rather than setline each transaction instantly, transferring only the final balance. Forex swap lines would enable central banks to temporarily exchange currencies if a country needs additional liquidity in a specific currency to settle its obligations.

A Mishmosh of Economies

The BRICS group—originally Brazil, Russia, India, China, and South Africa—now also includes Egypt, the United Arab Emirates, Indonesia, and others. Collectively, its members account for roughly 45% of the world’s population and about 35% of global GDP.

One of the system’s key challenges, however, is the limited economic commonality among its members.

“There isn’t really all that much trade between this group of countries,” said Hugh Thomas, Lead Analyst, Commercial & Enterprise at Javelin Strategy & Research. “My expectation is that they will continue to build spot solutions where they can find common cause on use cases and a willing audience, but business’s need for transparent systems in countries with independent regulators and a clear rule of law will keep most big flows on Swift.”

The post BRICS Puts Its Payment Rail on the Front Burner appeared first on PaymentsJournal.

ClearBank, the enabler of real-time clearing and embedded banking, has announced a collaboration with PhotonPay, an AI-powered global digital financial infrastructure provider offering payment solutions to businesses worldwide. Through this collaboration, PhotonPay’s business customers will gain access to a wider range of financial services, including virtual accounts, GBP collections, payouts, and Confirmation of Payee (CoP) functionality. 

Powered by ClearBank’s API-based banking infrastructure and real-time clearing services, PhotonPay will issue named virtual accounts and provide real-time connectivity to Faster Payments, BACS, and CHAPS to its customers. These enhanced capabilities will allow enterprises operating in the UK to benefit from faster settlement, more flexible liquidity management, and greater operational control. 

“Partnering with ClearBank represents a critical step in expanding our global payment infrastructure,” said Lewison Chen, Founder and CEO of PhotonPay. “With indirect access to Faster Payments, BACS, and CHAPS, our business customers can now enjoy quicker settlement speeds, stronger compliance, and seamless integration into the UK’s financial system. It also lays a solid foundation for our continued expansion across Europe. Moving forward, we will keep advancing localised payment capabilities in major European markets.”

“We’re proud to partner with PhotonPay, enabling them to scale with our next-generation banking platform,” said John Salter, Chief Customer Officer at ClearBank. “Indirect access to UK payment rails means PhotonPay can deliver faster, more localised services to their customers. We’re excited to support their growth and expansion across Europe next year.”

About PhotonPay

PhotonPay, an AI-powered financial infrastructure, was launched in 2015. Supporting over 10 global offices and operations in 200+ countries/regions, PhotonPay enables efficient, secure, and integrated global payments to drive business growth with infinite ambitions.

Trusted by 200,000+ businesses worldwide to overcome banking and payment challenges, PhotonPay delivers simple, scalable, and customizable solutions – including accounts, card issuing, domestic/international payments, and embedded finance.

About ClearBank

ClearBank is a purpose-built, technology-enabled clearing bank. Through its banking licence and intelligent, robust technology solutions, ClearBank enables its partners to offer real-time payment and innovative banking services to their customers.

ClearBank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN: 754568).

ClearBank Europe N.V. is authorised by the European Central Bank (ECB) and supervised by the De Nederlandsche Bank (DNB).

Visit www.clear.bank for more information.

The post PhotonPay Expands UK Local Payment Rails via New Collaboration with ClearBank appeared first on PaymentsJournal.

A single purchase request now triggers a web of approvals, data exchanges, and funding decisions that stretch far beyond traditional accounts payable and receivable processes. As AR/AP workflows grow more complex, banks and networks face a critical question: where do they truly fit in a value chain full of opportunity, but short on clarity?

To mitigate this uncertainty, Hugh Thomas, Lead Commercial and Enterprise Analyst at Javelin Strategy & Research, mapped the AR/AP value chain, outline the major players in the space, and examined how financial institutions can differentiate themselves in his latest report, Capabilities in Context: A Value Chain Analysis of AP and AR Providers.

Becoming Entrenched in the Process

Historically, many financial services firms have overextended themselves in their efforts to establish a role within AR/AP processes.

“When I first started in this business, you had banks trying to get into the procurement space effectively,” Thomas said. “When Ariba came on in Canada it was a bunch of bank partners who were facilitating its growth. They would take the treasury relationship with people into the procurement space, and they would say: ‘Here’s this marketplace where you can go and do spot buys and so forth.’”

“If history proved anything, it was that was maybe a step too far for banks in terms of expanding out the value chain,” he said. “You don’t necessarily want to have a strategic component of your procurement be a function of who you use for treasury services from a bank. Let’s let everyone do what their mission critical component is of their job.”

There have been notable successes, particularly through partnerships and integrations. For example, Mastercard has a relationship with SAP Taulia that enables embedded finance within enterprise environments. Visa has formed similar relationships, in which business partners handle approvals while both buyer and seller move funds internally, after which Visa or Mastercard finalizes the transaction.

Once card networks become entrenched in these processes, they are able to offer partner businesses additional value-added services, further strengthening those relationships.

“You see that in terms of helping suppliers like SAP to appreciate. This is where someone is going to be more amenable to taking a virtual card,” Thomas said. “Or banks are sharing out use cases in terms of real-time payments that they’re trying to cross-pollinate in terms of use, and then they can build better solutions to address and can grow real-time payments in partnership with the providers along this value chain.”

Procuring the Widget

Given these opportunities, it is critical for financial services companies to understand the AR/AP value chain holistically. From a payables perspective, for instance, a department may notify procurement that it needs a widget. Procurement then identifies the widget, negotiates pricing, and returns the information to the requesting department.

“Bearing in mind that there’s some risk in doing this from the buyer’s perspective, procurement could say, ‘Widget provider, we will give you the funds for this now if you like, if you want to give us a discount for paying you now,’” Thomas said. “Or, ‘We can give you a card and you can authorize so you’ve got the funds effectively earmarked that you’re going to get paid or we can pay you when the goods arrive immediately.’”

By analyzing where data flows and risk reside across the value chain, financial institutions can help customers better manage cash flow and balance operations. In this role, the bank effectively acts as an intermediary bank network between counterparties.

To achieve this, an FI must understand the end-to-end AR/AP process and introduce its solution in a way that allows them to be applied at multiple points in the value chain. This applies to both buyer and seller perspectives: the seller may receive payment earlier, the buyer may extend payment terms, or the bank could intervene to enable both outcomes simultaneously.

“The whole idea of understanding the value chain is for a would-be financier or would-be arbiter of payment timing and payment data and risk mitigation, to understand what data is available, where and what controls are available, where and what commitments have been made available, and where you can then plug in your solutions more effectively,” Thomas said.

Finding Execution Gaps

Another key consideration for banks is safeguarding revenue. Most companies currently filling gaps in the AR/AP process are fintech software-as-a-service providers. While some offer niche capabilities, others have begun to assume aspects of the traditional bank role.

Some fintechs now provide working capital acceleration solutions or virtual card offerings that could conceivably cut into a bank’s market share. A financial institution that understands this landscape can choose to partner selectively, working only with providers that do not present a conflict of interest.

What’s more, a full understanding of the players in the AR/AP value chain unlocks additional opportunities.

“At any given point in the lifecycle of a receivable, there’s an opportunity to do everything from finance it to sell it to somebody for $0.50 on the dollar—with the notion that maybe they can recover credit they’ve extended and that has turned into bad debt,” Thomas said. “The recommendation is to look at those execution gaps, particularly where they suggest a potential for plugging in embedded payment and liquidity tools, and then use real-time data to influence payment method and timing.”

Who’s Who in the Zoo

By influencing timing within the AR/AP process, banks can create dynamic benefits for both themselves and their customers.

“As data becomes more readily available, you’re better able to say, ‘If I moved all these guys out to 45 days, I think we’d still be compliant,’” Thomas said. “’We’re paying them in 30 days just because there’s a pay cycle that we’re working against or that just keeps everything in sync. Move these guys out to 45 days, we can do this because we’ve got a new agentic AI solution plugged in or something like that, so we pay exactly on the day.”

Once financial institutions are partnered with AR/AP providers, it becomes possible to combine data and automation tools to deliver incremental value. For example, in specific scenarios, a bank could stretch the process even further to better meet customer needs.

“That’s the genesis of this, it’s looking at who’s who in the zoo in terms of this space on both the payables and receivables side,” Thomas said. “The best way to do that if you want to understand who’s playing where, is from a value chain analysis.”

“The other pieces are just about segmenting and prioritizing who you want to work with based on how they monetize and use the report to say, ‘Here’s a long list, a catalog of who does what, where they are in the value chain, and how they make money,’” he said. “’Let’s triage that list and figure out who you want to talk to first in terms of where you think your solution might fit.’”

The post Where Financial Institutions Fit in the AR/AP Value Chain appeared first on PaymentsJournal.

Digital banking has trained consumers to expect speed, simplicity, and instant results. Yet, when those same expectations reach the commercial side of the house, many financial institutions fall short—leaving business clients stuck in slow, manual onboarding journeys that drive up costs and frustration.

In a recent PaymentsJournal podcast, Penny Townsend, Co-Founder and Chief Payments Officer at Qualpay, and Hugh Thomas, Lead Commercial and Enterprise Payments Analyst at Javelin Strategy & Research, discussed the common challenges that often hinder commercial banking onboarding and explored how organizations can meet rising customer expectations while still maintaining compliance.

Bridging Gaps in a Broken Onboarding Process

One of the main issues contributing to onboarding deficiencies is the continued use of outdated systems. Paper documents and manual data entry are still a fixture in many processes, often causing delays and errors.

What’s more, the complexity of onboarding commercial clients frequently requires back-and-forth communications, which can create bottlenecks and misunderstandings. Even when institutions manage to navigate these hurdles, they sometimes stumble at the final stage.

“A number of years ago, I applied with a company and their onboarding process was particularly fantastic right at the beginning of it,” Townsend said. “But I couldn’t quite finish it when they were trying to authenticate who I was. Know Your Customer (KYC) was happening, and it went offline to try and figure out who I was as a person, and I couldn’t get through that process. I can’t even explain to you why I couldn’t get through it, but I couldn’t figure out how to take that last step.”

These challenges often arise because organizations are trying to juggle multiple processes simultaneously—collecting data, performing authentication, ensuring compliance, and meeting security protocols.

When institutions rely on outdated systems, more gaps emerge, making it harder to guide clients smoothly through the onboarding journey. This stands in stark contrast to the streamlined interfaces and seamless interactions that have become standard across other sectors.

“I was trying to renew my driver’s license in the UK and the whole government process has been digitized,” Townsend said. “For me to prove who I was, it was a combination of using my phone and my passport. I had to put my phone next to my passport and it scanned my passport details. I had to take a picture of myself as well with my phone and that completed the KYC.”

Commercial clients, accustomed to these modern experiences in their everyday interactions, are likely to resist onboarding processes that rely on paper documentation and lengthy communications.

“Expectations for systems in things like B2B payments are being driven more so today by consumer experiences,” Thomas said. “If you can do this for my driver’s license, why can’t I onboard a new supplier with the same degree? Why is it not just a QR code or something like that? We securely exchange enough information that we know one another well enough to do business and to have a banking exchange between us.”

The Juxtaposition of Departments

Along with outdated systems, many onboarding processes are managed across siloed networks and fragmented workflows.

When financial institutions rely on disparate systems for services such as cash management, lending, and onboarding, clients often have to provide the same information to multiple departments. This duplication can lead to longer approval times and higher costs.

“A perfect example would be the separation that was driven by the changes that happened after 9/11 and with FinCEN, and this different structure where I have an underwriting policy in one department, but I also need to do my anti-money laundering with a different group,” Townsend said. “There was a reason why those two departments were segmented: because compliance has this strong role at a bank, but it’s juxtaposed with wanting to onboard customers, and then you have an underwrite as well.”

“When you have people that have different focuses and they’ve not all been merged together, there’s going to be a lot of friction between what those teams do, and that typically creates a lot of the slowdown that happens,” she said.

These delays may result from departments being physically separated, using incompatible technology, or operating under different rules. Additionally, a department’s main goal may not be to onboard customers efficiently.

These conflicting goals create friction, which can lead to a poor first impression and even missed opportunities.

“I’m always struck by the opportunity that often gets left on the table to better coordinate across departments for the betterment of everyone,” Thomas said. “A great example is if you do payables outsourcing and you look at the flow that’s going out to see what’s potentially going to FX providers.”

“Off that, you say, ‘What could we do conceivably to get a piece of this FX business, knowing the volume that’s going out and understanding we have this overall risk perspective on the customer and we park this much of their capital in different credit products,” he said. “They’d be that much more of an efficient type of customer, but I’m always struck by the fact that through siloed components of institutions, you just don’t get that kind of coordination.”

Driving Through the Lifetime

As regulatory and compliance demands continue to mount, financial institutions are facing an unprecedented challenge: how to stay compliant without stifling businesses growth. Many banks still rely on processes that require businesses to submit the same documents multiple times across different departments—adding friction and slowing onboarding.

Manual compliance checks can also miss critical red flags, leaving institutions vulnerable to fraud, exploitation, and costly penalties. These risks are amplified by an ever-shifting regulatory landscape and the rise of transformative—but not yet fully tested—technologies.

“The latest thing that’s probably going to be the biggest impact on how we think about privacy is artificial intelligence,” Townsend said. “You’re seeing the different states are having a different opinion and we’re seeing the federal government come in potentially with an overall arcing framework for what we should do. That, in itself, will impact how privacy is thought about and how we deal with people’s data and where it can be stored.”

In this complex environment, financial institutions are under immense pressure to understand and navigate their obligations. Yet, embedded within these challenges is a significant competitive opportunity for organizations that can turn compliance into a strategic advantage.

“It comes down to changing attitudes around how you create this onboarding experience,” Townsend said. “Javelin wrote a fantastic article that talks about the onboarding experience being not just this moment in time when you onboard the customer at the beginning, but it’s something you think about it through the lifetime of the customer.”

“That sounds weird, but when banks have so many products that they can offer to a customer—whether it’s a business customer or consumer—that onboarding experience drives through the lifetime,” she said. “How do you meet and bring products at the right time, at the right moment to a customer?”

Starting on the Other Side

Shifting the mentality around the onboarding process can be challenging, especially since many banks have historically outsourced some or all of these functions. However, outsourcing has become an increasingly perilous tack to take, as numerous organizations are now waiting to step in and address the gap if banks are unprepared.

To stay at the forefront of the commercial customer banking experience, financial institutions will need to start at the very beginning.

“It’s just that shift in attitude of how you can think about things differently, where we think about customer satisfaction first and how we can make that experience better,” Townsend said. “Then, think about how do I apply compliance and how do I apply all these different things.”

“Have a different way of framing it rather than starting at the other side of it—this is why we can’t do this, or this is why we can’t do that,” she said. “Shift how you think about it, and that will probably be the greatest opportunity for change that banking might have over where we are right now.”

Building the Bridge

Altering this mindset is essential, as fintech competitors are often more equipped to handle certain onboarding aspects than banks are. For example, recent research from Capgemini found it can cost up to two to three times more–around $496–for a financial institution to onboard a merchant for payment services, while a technology company can spend approximately $214 to accomplish the same task.

This cost gap shows no signs of narrowing, which makes it even more difficult for many institutions to compete. This means the future of financial institutions’ merchant acquiring commercial banking products will belong to the organizations that can shift their mindset from gatekeeping to guidance, and from a compliance-first to a customer-first mentality.

“With compliance as the backstop to what’s going on, modern onboarding cannot remain just that one-time event or that disconnected checklist,” Townsend said. “It has to evolve into a continuous and integrated experience that adapts during the life cycle of a client–and also when you want to add and remove products. All of this will help strengthen the relationship over time.”

For a financial institution to achieve this transformation, it is critical to select the right technology and partners that can provide a holistic view of the process. This means the partner should be equipped to handle all aspects of onboarding, underwriting, and compliance payments, as well as the customer engagement life cycle.

While turning to partners for these crucial functions may cause some trepidation, modernizing an institution’s onboarding systems offers a far greater opportunity.

“It’s a call to action, a moment to have the FI pause and take a look and figure out how to build that bridge with the right partner,” Townsend said. “Or else the FI is going to get left further and further away from their commercial customers, as other fintechs and services jump in to do what the FI is unfortunately unable to do right now–which is to provide that modern onboarding experience.”

The post The Biggest Bottleneck in Commercial Banking? Onboarding appeared first on PaymentsJournal.

The BRICS group of nations is moving forward with plans for a shared currency for internal trade, potentially launching as early as next year. Last week, the Institute for Economic Strategies of the Russian Academy of Sciences announced a working prototype of a trade currency known as the Unit, structured to be backed by 60% of BRICS national currencies and 40% by physical gold.

The national currency portion is equally weighted among the Brazilian real, Chinese yuan, Indian rupee, Russian ruble, and South African rand, representing the bloc’s five founding members. Now expanded to include 11 nations, BRICS collectively accounts for more than a third of global GDP.

The organization has for some time been exploring the possibility of a payments system that operates independently of the U.S. dollar. The Unit is a key part of the BRICS Cross-Border Payments Initiative (BCBPI), designed as an industry-focused alternative to the Swift cross-border network, which currently functions under U.S. oversight. The group also plans to establish a parallel messaging infrastructure to replace the Swift system used for interbank communication.

The Unit is seen as a crucial step toward reshaping trade relationships among emerging and developing nations. The goal is to begin testing transactions next year involving Brazil, China, and Russia, to refine the efficiency and security of the new currency before its full launch.

Kinks to Iron Out

Despite progress toward creating a formal currency, the initiative still has many kinks that need to be ironed out. The BCBPI was first proposed in 2015, but issues like payment mechanisms, cost-sharing arrangements, and security protocols have slowed the development of a functional cross-border payments framework.

“There isn’t really all that much trade between this group of countries,” said Hugh Thomas, Lead Analyst, Commercial & Enterprise at Javelin Strategy & Research. “The main things they have in common are fast developing economies, save maybe Russia, and a general indifference to the U.S.”

Friendly Competitors

There are also concerns that these economies often compete with one another, especially China and India. This will make collaboration on a common currency inherently challenging.

“You’re talking here about harmonizing two countries’ monetary policies that tend to be geared to drive advantage over one another,” Thomas said. “My expectation is that they will continue to build spot solutions where they can find common cause on use cases and a willing audience, but business’s need for transparent systems in countries with independent regulators and a clear rule of law will keep most big flows on Swift.”

The post BRICS Moves Forward on a Common Currency for Cross-Border appeared first on PaymentsJournal.

Not long ago, payments meant paper, ink, and a trip to the mailbox. Today, consumers expect the opposite—transactions that are contactless, mobile-friendly, and processed in real time. With countless digital payment methods now operating smoothly and instantly, it’s no surprise that checks are being phased out in both commercial and consumer settings. Even the federal government—once one of the largest issuers of paper checks—plans to end their use for tax refunds and other payments.  

Still, a reliable and easily tracked payment system continues to have an important role in the modern economy. Today, electronic checks offer a contemporary twist on this trusted, secure method of payment. And for businesses of all sizes, cutting-edge solutions like Authorize.net can make the transition from paper to electronics seamless by offering secure, fast, and cost-effective eCheck processing.

What Is an eCheck?

An electronic check, or eCheck, functions much like a traditional paper check—customers provide their bank account, routing number, and payment authorization to complete a transaction. The difference is that everything happens digitally, typically through an online form that enables secure electronic processing.

“Checks these days are primarily for handling one-off or rare higher value transactions,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research. “EChecks allow you to push a payment to a supplier using the same processes you might with a paper check, but entirely electronically.”

EChecks are transmitted through the National Automated Clearing House (ACH) system for electronic funds transfers. Because the process is entirely electronic, businesses no longer have to wait for a paper check to arrive in the mail or be manually deposited. This not only speeds up payment collection, but also reduces the risk of human error. In addition, eChecks help avoid many of the costs associated with paper checks, including employee time and bank processing fees.

“EChecks initiate an ACH push payment,” said Thomas “But because they come over as an email, you save time and paper, and the time in the mail, while still being able to append all the line-item detail that often rides along at the bottom of checks, like invoice numbers the check is meant to cover.”

A Wide Variety of Use Cases

EChecks offer several benefits that make them suitable for a variety of situations.

First, they provide an alternative to credit or debit cards. Customers without access to credit can still make payments using an eCheck.

They also allow businesses to receive direct, secure bank payments. Unlike paper checks, eChecks can’t be lost or stolen, and they are well-protected against fraud. According to Nacha, fewer than 0.03% of ACH transactions are returned as unauthorized.

For businesses, eCheck transactions are typically inexpensive—much cheaper than processing paper checks, which often cost a dollar or two per check, and far less expensive than credit card payment fees.

“Typically in an ACH transaction there’s only a per unit cost, usually in the range of $0.10 to $0.25 for the merchant,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “A credit card will cost them probably 2% to 2.5%. Even with a debit card, the merchant is paying a certain percentage of the sale.”

The low cost makes eChecks particularly well-suited for recurring payments. Fees for other payment methods can add up quickly for monthly transactions, whereas eChecks allow for a one-time approval to withdraw funds from a customer’s account. This enables businesses to automate recurring payments, eliminating the need to manually collect them and providing a significant convenience factor. A comprehensive processing solution like Authorize.net supports automated recurring eCheck payments, reducing manual work and ensuring predictable cash flow for businesses.

“There are a couple of sectors with recurring payments in which eChecks are extremely popular,” said Apgar. “One is public sector merchants, who collect regular fees and fines. If the debit to your account doesn’t process, they don’t need to pursue a chargeback—they can just turn your service off.”

Another area where eChecks are becoming increasingly popular is in large business-to-business transactions, where secure, cost-effective, and trackable payments are critical.

“Receivables processing solutions these days are well equipped to handle eChecks, as they can read attached PDFs automatically and pull the information required to apply payment automatically,” said Thomas. “You get the ability to push a single payment with the same security you get from a check run, but without the paper. An eCheck makes sense for bigger one-off payments to cover multiple invoices or other detailed remittance information.”

An eCheck Case Study

One potential drawback of accepting eChecks is that the setup process can feel intimidating. It typically requires steps such as establishing an ACH line with a bank.

Authorize.net is built to fit into an organization’s existing payments workflows, with white-label options that keep the process seamless and unobtrusive. Its straightforward integration makes onboarding quick, and the system can be accessed from the office, home, or on-site.

Companies that adopt eChecks often discover unexpected benefits. For instance, VIIRL Marketing, a provider of advertising and marketing services, has relied on eChecks and Authorize.net since its founding, finding them to be a reliable part of their operations.

“Automated billing is huge for us,” said Jed Winkler, VIIRL’s president and COO. “We have hundreds of clients across the country where we bill them every single month. It’s good for us to be able to offer multiple different platforms for our customers to be able to pay, and one big one that we use a lot is eCheck.

“ECheck is great for our end users because they don’t have to mail us a check, we don’t have to process the check, and with eCheck we’re able to just process it immediately when we run the transaction on a month-to-month subscription basis. With Authorize.net the payments just work.”

Marcus Piazzisi, Founder of VIIRL Marketing added: “There are several benefits of accepting eChecks from our customers. First, the fees—it’s a lower cost solution. Second, it’s more secure. Finally, our customers really like using it. It’s easy to do and it integrates with all our payment options. Whatever we save on fees, we can put back into customer results.”

Why Authorize.net Works for Businesses

• Quick onboarding and integration
• Lower transaction fees than cards
• Secure ACH processing with fraud protection
• Supports both recurring and one-off payments

If you’re ready to simplify your payments, Authorize.net makes it easy. To learn more about how to make eCheck processing easy, secure, and cost-effective.
Learn more.

The post Beyond Paper: Why More Businesses Are Turning to eChecks appeared first on PaymentsJournal.

The traditional fleet management model has relied heavily on physical payment cards, which can be lost, stolen, or misused. An emerging alternative is vehicle-initiated payments, a technology in which one of the leading providers, Car IQ, is set to be acquired by Element Fleet Management.

In Car IQ’s model, vehicles can autonomously initiate and complete transactions. This reduces reliance on physical cards and streamlines many of the manual reconciliation processes associated with them.

Element, a large-scale provider of fleet management solutions with existing digital payments capabilities, plans to integrate Car IQ’s technology into its broader ecosystem. With the acquisition, vehicle-initiated payments are expected to become a standard component of the company’s fleet management ecosystem.

“This is a play to expand the payments capabilities for Element as well as the ability to leverage the partnerships that Car IQ has made among fuel and tolling agencies,” said Ben Danner, Senior Credit and Commercial Analyst at Javelin Strategy & Research. “The technology and the back-office simplification that Car IQ has perfected will be a valuable asset to Element.”

“What remains to be seen is what Element does with its current fuel card product on the WEX network. Will they keep it or go fully cardless?” he said.

Frustrated With Fragmentation

There are substantial benefits to moving away from physical cards, as lost or misused cards often create a significant financial drain for companies managing large-scale fleets.

These inefficiencies also affect drivers. Recent data from Visa shows that roughly two-thirds of drivers are frustrated with the complexity of their existing payment solutions, and 84% are unhappy with fragmented systems.

Mitigating Pain Points

The pain points associated with physical cards have led many companies to explore virtual cards, which can be issued and loaded directly into a driver’s digital wallet. Virtual cards are gaining traction across many business-to-business use cases because they enable faster, more efficient transactions and provide stronger guardrails.

For example, a virtual card can be issued as a one-time payment for a single driver on a specific day, while still giving fleet managers the flexibility to issue chargebacks if conditions aren’t met.

While virtual cards are a strong option, embedding payment capabilities directly into vehicles may be even more appealing for some fleet managers. Linking payments to the vehicle itself can help mitigate misuse and streamline fleet management processes that are otherwise manual and inefficient.

The post Element’s Car IQ Acquisition Could Broaden the Scope of Vehicle-Initiated Payments appeared first on PaymentsJournal.

Continuing China’s push to become a leader in cross-border payments, the Chinese government has introduced new programs with Vietnam and Indonesia to enable seamless QR code transfers between the countries.

UnionPay International (UPI), China’s state-owned financial services corporation, detailed the collaborations with the National Payment Corporation of Vietnam (NAPAS) and Indonesia’s national payment institutions. The goal is to allow merchants abroad to accept payments from Chinese consumers while deepening economic, trade, and cultural ties.

Vietnam is expected to have more than 30,000 merchants able to accept QR code payments by the end of this year, according to NAPAS. The organization plans to expand participation in 2026 to all the member institutions, including banks, payment institutions, and major local e-wallets.

The Rise of QR Codes

QR codes have become increasingly important across Southeast Asia as countries expand their digital financial systems. According to the e-Conomy SEA 2025 report from Bain & Company, all 10 ASEAN member states now operate national QR payment systems, and eight have enabled cross-border QR interoperability. 

The pilot in Indonesia, developed with guidance from both nations’ central banks, also relies on QR codes. The initiative connects local switching networks and payment service providers in each country.  

Moving Away from the Dollar

Just as important, both efforts eliminate the need for currency conversion. China has been seeking ways to reduce reliance on the U.S. dollar for cross-border transactions, a goal that helped drive the creation of CIPS, a system that allows foreign businesses to pay Chinese suppliers in yuan.

Earlier this week, CIPS announced that South Africa’s Standard Bank had become the first institution in Africa to join the network. The bank emphasized that the new system will help African businesses that import Chinese materials by reducing their exposure to fluctuations in the dollar exchange rate.

CIPS was established more than a decade ago as a yuan-based settlement and clearing system for transactions. Positioned as an alternative to the dominant Swift payments system, it is overseen by China’s central bank and operated by the private company CIPS Co. Ltd.

The post In Cross-Border Push, China Eases Payments with Vietnam, Indonesia appeared first on PaymentsJournal.

Although consumer payments have become increasingly digitized, many business-to-business transactions still rely on manual processes that add unnecessary friction. This dynamic is beginning to shift.

Freight management software firm Carrier Logistics has introduced FACTSPay, an online payment tool designed to streamline invoice settlement for shippers. Currently, paying freight invoices—whether by credit card or ACH—often requires contacting customer service. Moving these interactions into a digital, self-service environment could bring substantial benefits to the industry, reflecting similar trends seen in other sectors.

“Independent software vendors (ISVs) in the B2C space have been the hottest market for integrated payments and embedded financial services,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Toast is a good example, where restaurants benefit from seamless payment processing and other business financial needs like payroll and working capital.”

“Combine that with the B2B supplier space which still represents the largest greenfield expansion opportunity for card acceptance, and this announcement from Carrier is significant,” he said.

The Primary Blocker

Along with ease of use, this model also presents opportunities for cost reduction. By enabling self-service payments, motor carriers can reduce administrative work associated with collecting from shippers, while shippers face fewer barriers when paying their invoices.

“The primary blocker to card payments in B2B is the 3% average cost that businesses will pay to accept corporate and purchasing card types,” Apgar said. “In this application for the less-than-truckload (LTL) logistics vertical, the cost of accepting payments over the phone and fielding inquiries about invoices and payments is significant.”

“Embedding payment processing into the software that enables users to look up invoice data and make payments on their own represents a huge potential cost savings for the carriers,” he said.

Underpinning the Next Wave

For many software-as-a-service companies, embedded payment capabilities represent just the beginning. For example, Toast evolved from a restaurant point-of-sale solution into a full-scale financial services provider.

As flexibility and cost savings become increasingly important in B2B commerce, platforms that integrate payments directly into operational workflows are set to play a much larger role in the future of the payments landscape.

“This will be one to watch, because if successful it will be the case study that underpins the next wave of growth for electronic payments in B2B applications,” Apgar said.

The post Carrier Logistics Launch Is a Case Study for Next-Gen B2B Payments appeared first on PaymentsJournal.

The travel and expense reimbursement process is a common pain point for many organizations—an issue American Express and Emburse aim to solve with virtual cards.

Within Emburse’s expense management platform, Amex is introducing virtual card issuance capabilities, coupled with real-time transaction data that give organizations visibility into card activity.

For example, a customer could issue an Amex virtual card for a business trip. Once issued, expense entries would automatically be created, and the organization would receive card live updates on card spending as they occur.

Self-Evident Applications

Many industries are only now realizing the benefits of using virtual cards for enterprise payments. Each virtual card is issued with a unique card number, expiration date, and security code—details that not only protect sensitive data, but can be leveraged for reporting.

The advantages of virtual cards in travel and expense management are clear, especially compared with the traditional process where employees pay out of pocket and later submit receipts for reimbursement.

Beyond that, virtual cards also offer distinct benefits over company-issued physical cards. They are far less likely to be lost or stolen, and organizations can set precise spending controls. These may include transaction limits or restrictions that confine a virtual card’s use to specific vendors or sectors.

Furthering the Use Case

While travel expenses are a common use case for commercial virtual cards, their potential extends much further. In fact, virtual cards are often much more efficient for any employee-initiated purchase. This allows employees to make indirect yet essential purchases, including maintenance items or event supplies, without having to go through the purchase order process.

While the benefits of virtual cards are significant, many companies remain unsure about how to deploy them effectively.

“It’s only good to be used to make payment to that one supplier, conceivably on that day,” Hugh Thomas, Lead Commercial and Enterprise Payments Analyst at Javelin Strategy & Research told PaymentsJournal. “It’s got all the benefits of a card wrapped on top of it, the recourse to charge back if you don’t get what you said you were ordering, and so forth.”

“Now you have a solution that has a bunch of benefits to it, but also a bunch of costs to it where you need to be conscious of where the thing is best applied—and that is not something that’s immediately intuitive,” he said.

The post Amex and Emburse Launch Virtual Card Program for Expenses appeared first on PaymentsJournal.

For decades, typically large regional or money center banks served as correspondent banks that enabled smaller banks to offer cross-border payments. It was rare for credit unions, community banks, and other smaller financial institutions to offer cross-border payments. And if they did, it was a money-losing proposition, offered out of necessity to prevent their customers from leaving for larger banks.

It’s notable that the problem for originating institutions has become much worse. Over the past decade, the number of correspondent banks supporting originating institutions for cross-border payments has fallen by more than 25%, even as international bank transfer volumes have surged.

Small or even medium-sized financial institutions struggle to find a correspondent bank. And even if one is found—the commercial terms, product issues from the opaqueness of these payments, customer complaints about slow delivery of funds and high fees, as well as service from correspondent banks—make the experience painful for everyone involved.

But things have changed. 

New software and new paradigms address “legacy bank systems”, “legacy product thinking”, and “legacy risk” in terms of cross-border payments.

And for the first time, smaller financial institutions, credit unions, and community banks can offer their retail customers, SMEs, fintechs, and others cross-border payments that are faster, transparent, and less costly than the “big banks”.  Moreover, they’re very profitable as well as easy to implement and support with new paradigms and new tech—and no correspondent bank required.  

In a PaymentsJournal podcast, Gary Palmer, President, CEO, and Chairman of Payall, and Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how smaller banks can compete and win in the cross-border space.

Fixing the Root Cause Issues at Correspondent Banks

What could reduce both the risk and the cost of cross-border payments? Fixing manual workflows is the first step. Digitizing and enhancing a correspondent bank’s ability to manage counterparty risk, transaction risk, and multi-jurisdictional compliance lowers the cost of processing each transaction and improves outcomes.

Alternatively, some have introduced stablecoins in an attempt to fill the gap of fewer correspondent banks. But without fixing the underlying risk and compliance issues—they’ve added new risks.

“A professor from a renowned European institution tracking various violations or issues with crypto operators in the areas of sanctions and money laundering has noted a marked increase in violations,” said Palmer. “And even though financial institutions may feel somewhat insulated from risk, this hasn’t been fully tested, and the payment system is exposed to manipulation.”

Payall has developed end-to-end infrastructure and enterprise software for banks of all sizes and all roles, which removes what Gary calls “the fear and friction” from cross-border payments—whether these payments are processed through correspondent banks, new alternatives such as Mastercard Move, or stablecoins.

Hugh Thomas observed: “Smaller banks often lack the technical resources to handle the complex demands of cross-border. What’s notable is how purpose-built solutions digitize these processes, lowering costs and opening participation in ways that weren’t possible before.”

This means that smaller and medium-sized banks can now safely, efficiently, and profitably become correspondent banks or originating institutions.

Banks Are Asking Too Much from Their Employees

Millions of times each day around the world, an originating bank employee receives a payment instruction from their core system indicating that a customer wants to transfer funds to the U.S. to make a payment for goods and services. From here, this transaction is manhandled through an overgrown jungle of paper processes across multiple departments at the originating bank and its correspondent bank.

It’s each bank’s responsibility to establish reasonable risk controls to mitigate money laundering, terrorist financing, and sanctions violations. Based on the size of the payment and other attributes, employees must decide what data to collect—contracts, invoices, bills of lading, customs declarations, tax receipts, or something else. They must then determine whether the documents are authentic or have been altered or forged. And apply judgment to decide if what’s been provided reflects an economically legitimate transaction. The bank employee also looks for sanctioned people, companies, ports, vessels, and products in this pile of documents, from an ever-changing list of sanctions. 

Now consider the time, cost, and risk of error involved—even for a few documents/pages. Multiply that by 5, 10, or 50 pages, and the problem becomes overwhelming.

And where do they record, share, and store the results—along with all the related data, documents, photos, and more? Not in core systems or digital bank platforms—because it’s impossible—but instead, in paper files, shared folders, and emails. What a mess. It’s a slow, costly, opaque, cumbersome, and risky process.

The solution? Digitizing counterparty risk, transaction risk, compliance, and a long list of other previously manual processes eliminates the slow, costly, and error-prone reliance on humans to protect each bank and the payment system.

New, Purpose-Built Software is a Game Changer

“It’s easy to understand how AI and digitization could transform cross-border compliance,” said Thomas. “Software that automates data collection, verification, and document analysis has the unique potential to reduce risk and change the economics of participation for smaller banks.”

Payall’s software digitizes all the originating institution’s rules, data collection, verification, and internal, as well as external, sharing needs. Soon, advanced AI will examine PDFs, audio files, videos, and photos, extract unstructured data—such as names of companies, ports, vessels, people, and currencies—and compare them against sanctions lists.

For the first time, an originating institution, even a small bank, can fully digitize its Know Your Transaction (KYT) process for 100% of transactions in real time. Until Payall, these processes could only be executed by a bank’s employees. It’s too much.  

Also, from the perspective of a correspondent bank working with originating institutions, nothing is more powerful than “see-through”—or 100% visibility into each rule at the originating institution, how it was executed, the supporting data and artifacts, including the results of 3^rd party verification services—orchestrated by Payall.

Additionally, correspondent banks configure their individual risk, compliance, or other rules to this incredibly data-rich payment set and take action. Instead of operating on “trust”—validated by occasional audits on as few as 0.0001% of all transactions, months after a payment—imagine the power of complete visibility into the originating institution’s application of their rules, processes, and supporting documentation on 100% of all transactions in real time.

And based on this, the correspondent bank can choose to either accept the payment or independently execute additional transaction due diligence, including a new form of Know Your Customer’s Customer (KYCC). This is only possible with new software that enables instant, on-demand multi-country KYC, KYB, as well as specialty KYT.

What was previously impossible to see is now not only transparent but can be directly and independently interrogated and decisioned by the correspondent bank—this is Know Your Customer’s Customer reimagined. 

This is particularly powerful for correspondent banks that support originating institutions from regions flagged by FATF as having material weaknesses in preventing money laundering, executing KYC, or sanctions screening.

Also, during periods of geopolitical events, bad actors can infiltrate banks. What’s the outcome? In the absence of comprehensive payment data and knowledge, U.S. correspondent banks are compelled to exit from the region or stop just about all payments. But in doing so, legitimate businesses can’t make payments or get paid, and life-saving remittances are stopped. The result? Chaos as commerce is crippled, and everyday citizens struggle to survive. While the bad actors are stopped, a country can be decimated.

“For correspondent banks, Payall enables proactive, data-driven oversight of every transaction, not just retrospective audits or occasional spot-checks. For the first time, correspondent banks can go beyond trust,” said Palmer. “We’ve completely reimagined and redefined Know Your Customer’s Customer so that correspondent banks have 100% see-through into the rules and outcomes of an originating bank partner, and they can directly engage and decision data. This changes everything: it eliminates reliance on inefficient back-office workflows, subjective trust, and guesswork. It creates confidence in the safety of cross-border payments, and gives correspondent banks the control they’ve always needed, but never had.”

Payall’s breakthrough software reduces risk to correspondent banks while ensuring legitimate trade is flowing and the most at-risk can still receive life-saving remittances. “This level of transparency and access fundamentally changes correspondent banking,” noted Thomas. “It’s no longer about faith that a partner executed its controls—it’s about verified execution, visible in real time.”

Correspondent Banks Have New Competition

While new software helps banks overcome legacy systems and legacy risk, Mastercard Move and Visa Direct are new paradigms that address legacy bank product thinking regarding international transfers. Banks and financial institutions of any size can offer cross-border capabilities that no bank has ever offered—such as transfers to mobile money, digital wallets, cash pick-up, and pay to card with Visa Direct and Mastercard Move.

In addition to providing novel software for originating institutions and correspondent banks, having pioneered specialty risk and compliance capabilities as well as end-to-end workflow digitization, Payall is certified by Mastercard Move as a technical integrator and processor. The company also supports Monex and recently announced its FedNow Service certification. Gary emphasized, “We’ll never compete with banks, whether they’re originating institutions or correspondent banks; instead, our software and global payments gateway and orchestration capabilities open more possibilities for all.” 

Mastercard Move and Visa Direct are well-positioned to capitalize on the mass exodus of correspondent banks from cross-border payments in the face of growing retail, SME, and other bank customer demand for cross-border payments. Given the modern, inclusive nature of their products, speed of funds delivery, transparency of payments, and commercial terms for banks—if they can make connecting easy and affordable, major global adoption is likely. Thomas added, “What’s interesting is that new entrants like Mastercard Move and Visa Direct expand payout options, but smaller banks can only plug into them if they have the right software partner. Otherwise, the cost and complexity of connecting make it nearly impossible.”

Palmer agreed, noting, “This is where we shine—banks struggle to find resources to connect and operate with Mastercard Move; we eliminate up to 98% of the capex and can launch a bank on Move in weeks.”

“You Can Do This”

Correspondent banks struggle with effectively and efficiently dealing with the risks associated with how foreign originating institutions, MSBs, fintechs, and other counterparties execute KYC, KYB, AML, and more. But there’s also the financial risk associated with properly maintaining nostro vostro accounts, FBO accounts, or even safeguarded accounts. The ability to perform dynamic sub-ledgering and complex account and currency reconciliation isn’t supported by legacy systems, which rely on manual control mechanisms. This is why banks need new technology to ensure financial integrity, improve outcomes, lower costs, and address the root causes of why cross-border payments have been high-risk, opaque, costly, and slow.

“A good example is a small bank we’re working with. They recognize the gap in correspondent banking and understand that our proprietary software can deliver the safety and efficiency they need to operate and win,” said Palmer. “The opportunities are material but realizing them takes the right technology and bank leadership. Banks can now do this.”

While originating banks have a different set of risk, compliance, and payment problems, new software and new paradigms address their needs, too. And with the likes of Visa Direct and Mastercard Move, there’s no reason for a credit union, community bank, or smaller financial institution to lose a customer just because they don’t offer cross-border payments.    

There’s never been a better time for a bank, even smaller financial institutions, to capture their fair share of cross-border payments—with the right software and know-how.

The post Making Cross-Border Payments Work at Smaller FIs—as Originating Institutions or Correspondent Banks appeared first on PaymentsJournal.

Buy now, pay later has been a success in the consumer arena, but can the same option work for business payments? Alibaba is betting that it will, partnering with Slope on “Pay Later for Business,” an embedded financing solution that lets U.S. business buyers manage payments in much the same way they do at retail checkout.

The offering will allow qualified business buyers to apply for installment terms on purchases. Behind the scenes, Slope provides the lending, underwriting, and collections infrastructure, using artificial intelligence to help assess credit and manage risk for B2B platforms.

The partnership with Alibaba marks a step toward wider adoption of BNPL in the business space, and Slope notes it expects to announce additional collaborations later this year.

Targeting Mom-and-Pop Businesses

Although Alibaba has more than 130 million users worldwide, fewer than 10 million are in the U.S. To drive growth, the company has focused on smaller mom-and-pop businesses in the U.S.

Demand for B2B financing in the small business segment remains strong, particularly for solutions that go beyond traditional card payments. After the 2008 financial crisis, banks largely shifted their small business lending to card-based products. Since then, fintechs have demonstrated that many business financing needs can’t be met solely through card offerings, creating opportunities for more flexible solutions.

The Promise of Embedded Payments

Merchants are eager for embedded payment systems that centralize and manage data from a single hub. Javelin Strategy & Research reported last year that nearly half of all merchants surveyed now obtain their payment accounts from providers other than banks. One reason for that is smaller B2B businesses can expand their market reach by offering more flexible payment options.

“Embedded finance means presenting the product at the right time in the buyer’s journey that will deliver the highest acceptance rates,” said Don Apgar, Director of Javelin’s Merchant Payments Practice. “Consumer-facing BNPL products are a great example of this. Offering a BNPL product on the checkout page offers little value to the merchant because at that point the consumer has already made their purchase decision and is now selecting a payment option. Where BNPL delivers growth for the merchant is on the product page because it shows the consumer how they can afford the product if they decide to buy it.

“This is what Slope is doing in this partnership with Alibaba,” he said. “It’s a great example of how fintechs are building on the promise of embedded finance.”

The post Alibaba Teams with Slope on B2B BNPL Offering appeared first on PaymentsJournal.

By now, virtual cards have established use cases in key industries like healthcare and travel. In these industries, both buyers and sellers see value in the cards’ ability to automate payments, accelerate payment timing, deliver incremental data, offer buyer and seller controls, and mitigate fraud and credit loss concerns.

While these industries continue to deliver healthy spend volumes, identifying new industries with similar payment instrument needs has been a challenge, one now exacerbated by a slowdown in spending growth.

A new paper, The Virtual Economy: Identifying Supplier Industries Receptive to Virtual Cards, takes a macroeconomic perspective on areas where these cards may be poised for a breakthrough. Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research, looks for the first time at the factors that can lead to certain industries being open to this payment method. A companion paper, The Virtual Economy: Measuring Buyer Industry Receptiveness to Using Virtual Cards, looks at similar issues from the buyers’ side.

Setting Forth the Criteria

The research arose from the idea that certain criteria, common to a given industry, make virtual cards a better option for a supplier to get paid. Thomas found that the software business, for example, is ripe for increased use of virtual cards.

Several factors go into that assessment: The software industry has a complex buyer base, waits substantially longer on average than other industries to get paid, incurs higher bad debt losses, and its need to access working capital is higher than average. These are characteristics it shares with existing use cases like online travel providers and the healthcare industry, where virtual cards are already commonplace.

“As an example, a big buyer like Google, might buy software and code from a variety of small providers from all over the place and take longer on average to make payments due to approvals and licensing agreements” Thomas noted. “A high volume of low value, data intensive payments means they tend to take longer both to be paid and to pay, characteristics that look a lot like the healthcare industry. And they can exert terms on their suppliers. If you look at a big player likeSalesforce.com, you can infer  something like 340 days payable outstanding based on last year’s financials. They can pay their bills slowly because they’re a big customer effectively, and they negotiate that into their terms.”

Unprecedented Research

But Thomas’ research didn’t just assess the manners in which buyers and suppliers prefer to make payments within these industries. He used four metrics to establish an industry’s receptiveness to virtual cards: working-capital needs, bad debt, buyer base pull (a measure of buyer base complexity and average desire to pay with cards), and current acceptance rate. To quantify these traits, Thomas drew on three national datasets, as well as prior work measuring buyer receptiveness to using virtual cards.

“There are a few different ways that you can use the data if you’re if you’re a provider in this space trying to bring on more suppliers,” Thomas said. “The model we’ve created will give you a measure of supplier industry propensity to accept, but it will also give you an idea of what’s driving the propensity, so you can customize messages based on payment acceleration, bad debt reduction, or process automation”

Hitting the Nail on the Head

Thomas knew the research hit the nail on the head when the primary established use cases for virtual cards lined up precisely with his criteria.

“Once we started scoring for longest time to get paid or most complex payable processes, OTAs, healthcare and wholesale utility payments bubbled to the top in terms of most receptive industries,” he said. “That’s where they’re already resonating today. Our model is surfacing high propensity in all the industries where you’d expect to see it based on known uses today. If the model is highlighting the existing exemplars, that obviously reflects well on its ability to find new high potential supplier industries.”

The work breaks new ground in terms of the quantitative perspective it brings to identifying new opportunities for the commercial card industry.

“I’ve worked in this business for more than 20 years and I don’t think there has been a study like this done before,” he said. “I’ve never seen the IRS data used this way to identify industry level financial practices, paired with Bureau of Economic Analysis and census data to identify industry counterparties. Integrating these different datasets make for a powerful tool to understand the market.”

The Importance of Credit

A key benefit of virtual cards for suppliers is in how they shift the cost of managing credit to card issuers, away from the suppliers themselves. Virtual cards also offer recourse to things like chargeback mechanisms, a useful tool for buyers, particularly when dealing with new suppliers..

“It’s the classic use case for credit cards in that respect,” Thomas said. “Situations with early days’ relationships between buyers and suppliers, the frequent need to adjudicate credit for new customers, the high cost of onboarding new suppliers, all of these create greater utility for virtual cards, and are things we sought to identify in our modeling”

Cost is the primary reason that suppliers are often resistant to accepting virtual cards. There can be costs associated with setting up a system to receive those payments seamlessly as well as to process them. The models behind the buyer and supplier propensity studies have been designed to highlight industries where acceptance costs are the same or lower than getting paid by other means, either by getting suppliers paid faster, reducing bad debt, or reducing administrative costs.

Moving in the Right Direction

A key challenge for virtual cards, and commercial cards in general, is that they are repurposing a payment systems designed to handle retail transactions for use in B2B payments. The exigencies of these two different types of counterparties are very different.

Even so, the payment industry is getting more accepting of virtual cards every day. Circumstances are ripe for use cases to explode among suppliers.

“Everything seems to be moving in the right direction,” Thomas said. “You’re seeing the networks create more interchange rates designed seemingly to better match the value that’s being realized by using the cards. You’re seeing lower merchant discount rates for merchants that are willing to provide Level 3 data coming through. There is a realization that’s the one-size-fits-all retail model for credit cards is not applicable with B2B transactions like this. We think the sort of insights we’ve built here can only help providers get smarter, and help grow their cards within the B2B payments ecosystem.”

The post Which Supplier Industries Are Ready to Move into Virtual Cards? appeared first on PaymentsJournal.

Many organizations treat their reconciliation and reporting as mere check-the-box activities, investing only the bare minimum to remain compliant. However, companies that deprioritize these critical back-office functions risk being caught unprepared when faced with a more stringent regulatory environment.

In a recent PaymentsJournal podcast, Roger Binks, Chief Commercial Officer at Kani, and James Wester, Co-Head of Payments at Javelin Strategy & Research, explored the current state of the back office, the challenges organizations face, and how businesses can modernize their reconciliation and reporting functions amid regulatory headwinds.

A Traceable and Consistent Baseline

Research from Kani found notable trends among payment leaders. Just over a quarter of respondents said their firms were using fully automated tools, while many still relied on spreadsheet-based solutions for this complex process.

Nearly two-thirds of respondents also reported frequent data errors during reconciliation—errors that are expected to become more expensive and time-consuming as compliance requirements increase.

“The regulatory environment is becoming way more prescriptive than it ever has been,” Binks said. “Reconciliation reporting outputs not only have to be consistent, but they have to be traceable. If you’re having a manual process in there, the workarounds that you have to put in place to make that traceability consistent is really tough.”

“In the UK, the FCA is extending operational resilience requirements into payments,” he said. “What this means is daily reconciliations, real-time controls, and clearly documented processes are going to be mandatory. They’re going to be the sort of baseline of everyone’s business.”

As compliance tasks continue to grow, they add pressure to already strained operations. The report found that roughly 80% of respondents often miss reporting deadlines.

These difficulties will mount for organizations that don’t take steps to modernize.

“Things like reconciliation, reporting, compliance, these are things that we all talk about and we have for a long time,” Wester said. “We have talked about workarounds and band-aids and fixes and manual processes that are employed, while we also know that regulatory compliance and all of the things that that entails, it’s only getting more complex.”

“It’s a known issue, we all talk about it, and yet it continues to be something in 2025 that we are still talking about,” he said. “I’m almost sad about it. It’s almost like, ‘When do we start fixing some of this stuff, especially when we know that regulation and compliance are not going to get any less complex in the future?’”

Saving 700 Hours

One reason manual processes and reporting issues have lingered is that they haven’t been a priority for many organizations.

“Whenever you see regulation or some type of mandate for the way a report must be submitted—or            anything like that—a financial institution, a bank, or a business, they often look at what they must do and they work back from there,” Wester said. “It’s almost as though they try to find the least efficient way to do it. To me, I think we look at it the wrong way.”

Instead of viewing compliance as a chore, organizations should recognize that the reporting process produces a critical output: data. Through this lens, reconciliation and reporting become valuable assets—ones that can deliver dividends by offering deep insights into operations.

Beyond increased visibility, a modernized reporting process also offers tangible efficiency gains.

“We asked some questions around how long it took for people to prepare data—just getting it ready for the reconciliation process,” Binks said. “We found that the average UK payments business spends about three hours preparing data before reconciliations can even happen. With that mandatory daily reconciliation process being a requirement—if you work that out—it’s about 700 hours every year spent just preparing data.”

“Think of what you could do with 700 hours a year in terms of other work,” he said. “There’s some stark numbers in there which we can’t ignore.”

Everything Is a Dev Ticket

As organizations begin updating their back-office processes, many will face the age-old buy-or-build dilemma. However, with the compliance bar rising rapidly and shifting daily, companies that choose to build solutions face significant challenges.

One of the main hurdles to in-housing is ensuring the organization has the right resources in place—starting with personnel. But maintaining a dedicated compliance team presents its own set of issues.

“It depends upon the way the internal organization is structured, which is oftentimes around a particular group or a particular person or a particular unit that’s built a certain way,” Wester said. “Just training is usually very inefficient. If that person ends up leaving—if the person in accounting retires and they were the one that knew how everything was put together—then it becomes a process of unpacking what they did to make that process work.”

Beyond assembling the right team, organizations must also possess the technical expertise and engineering capacity to develop an in-house solution. This is often a struggle: 60% of surveyed firms with internal solutions reported that resource constraints directly impacted their business growth and agility.

Many of these firms also noted that generating reports was too time-consuming, and that operating systems across multiple payments channels remained a challenge. Additionally, maintaining an in-house solution is a continuous process, one that organizations simply aren’t equipped to take on.

As a result of these challenges, few businesses are pursuing the in-house route. In Kani’s survey, less than 10% of respondents said their firm had built its own system.

“If you’ve in-housed it, all of those different changes—even if they’re internal requests—everything becomes a dev ticket,” Binks said. “Everything becomes an item on a list that someone’s got to deal with. If that’s not your main business, suddenly you’re in the business of building and running a reconciliation team, and that’s not really your core.”

The Back-Office Holy Grail

Despite challenges with in-house processes, many organizations continue to lean on them—often because they’re unaware of better alternatives.

“I think that’s one of the problems for people who are in compliance or operations—they don’t know what they don’t know sometimes in terms of what is available,” Wester said. “But also I think that sometimes operations and compliance people are not good advocates for their own needs. Sometimes they’re not tied to revenue, so building a business case for something like a solution in the back office can be a little bit difficult.”

Organizations that begin exploring potential solutions can uncover powerful benefits. Platforms such as Kani manage every aspect of the compliance process, including ongoing maintenance and upgrades.

Another advantage of partnering with a provider is gaining access to the collective knowledge and experience across their entire portfolio. This enables them to stay current with regulatory changes and make proactive improvements to the platform.

“It’s about operational agility,” Binks said. “This isn’t about just speed, it’s about control, traceability and repeatability in a process that you can trust. If you can get that, then you’re in a good place, but it’s a challenge.”

“I would think about getting off Excel and manual systems,” he said. “It’s time to bite the bullet. People just need to work out when, and accept the fact that it’s coming at some point. The back-office efficiency Holy Grail is there—you don’t have to go and build it yourself.”

The post With Rising Compliance Demands, Reconciliation and Reporting Take Center Stage appeared first on PaymentsJournal.

The correspondent banking model that has enabled cross-border payments for the past 50 years is built on trust; trust that each party in a complex chain will act in good faith and fulfill its obligations.

However, the absence of purpose-built technology and the dependence on manual processes at originating institutions and correspondent banks have prevented effective and efficient counterparty engagement and risk management. 

Want proof? The United Nations Office on Drugs and Crime estimates that between 2% and 5% of the global GDP, or up to $2 trillion, is laundered through banks each year. Also, according to Accuity Research, de-risking has driven a 25% reduction in global correspondent banking relationships. Ask any central banker and the message is the same: cross-border payments through financial institutions are high risk, slow, expensive, opaque, and not inclusive. Fear and friction define this business. 

The demand for cross-border payments has surged in recent years, highlighting the urgent need for new solutions that can address counterparty risk within the correspondent banking system.  Otherwise, digital innovators and fintechs will continue to marginalize banks for essential services (deposit taking), but disintermediate them on the originating side, taking their customers and profits. And the “real risk” at banks and payment systems from these players doesn’t go away.

Where It Breaks Down

In the current model, a respondent bank—typically a smaller or regional financial institution—approaches a larger correspondent bank and requests access to its global network to facilitate international payments on behalf of its customers.

“The bigger bank says, ‘Great, let us see your policies and procedures regarding KYC, AML, pick the abbreviation,” said Gary Palmer, President and CEO of Payall. “’OK, we’ve approved you,  here are commercial terms, funding policies and our message format. Every six months up to two years, we’re going to audit your records to see if you’ve followed your own policies.’ And it’s off to the races.”

Typically, the correspondent bank submits its policies and procedures for clearing payments and managing counterparty risk to its regulator, and they periodically audit these to ensure compliance.

Additionally, the central bank or relevant regulator requires a business plan from the originating bank as well and examines their adherence to procedures.

“Here’s where it breaks down,” Palmer said. “Those policies and procedures have been layered on top of each other—layer after layer—for 50 years. I learned this in 2017, when I met with dozens of originating institutions, correspondent banks, central banks, and regulators, and discovered there had never been software built as a part for any of the parties to digitize this business.”

“No core system, no digital bank platform and no risk or compliance engine has ever been built to address the problem set that each one of those institutions faces for cross-border payments,” he said. “They built core bank systems to do deposit accounts, car loans, maybe savings accounts or checking accounts, but never cross-border payments. So, the only way for a bank—whether it’s an originating bank, a correspondent bank, or an intermediate bank—to operate is by manual workflows.”

Nostro and Vostro

This model poses substantial risks and costs for financial institutions as well as frustrations and high costs to users. For example, a bank in Brazil may have customers who collectively make $4 billion in payments to recipients in the United States every year, with an average transaction size of $252,000. This process is facilitated by a U.S. correspondent bank.

In this scenario, the Brazilian bank might advertise on their website that it can make bank transfers to the U.S.

“There’s a concept called nostro and vostro where you’ve got banks that have pots of cash with one another,” said Hugh Thomas, Lead Commercial & Enterprise Payments Analyst at Javelin Strategy & Research. “The nostro is mine that sits with you, and vostro is yours that sits with me. They just sort of net and pool at the end of every day and figure out, ‘OK, you’ve got this much more vostro with me and I’ve got this much more nostro with you as a consequence of us having done these transactions.’ Those are, in many cases, manual processes.”

The nostro account created by the Brazilian bank may hold significant amounts of USD. These dollars sit on the bank’s balance sheet and are subject to market volatility until a customer decides to send their $252,000 payment to a U.S. recipient.

“Guess what happens next?” Palmer said. “A payment instruction goes to the backroom of the Brazilian bank where their customer made the international transfer. A human being looks at it and says, ‘Does my customer have enough money in their account? Do I have enough money in my nostro account? Does my correspondent support this type of payment? Oh, and the customer is in pharmaceutical or they’re in gaming or they’re in furniture construction—will my correspondent bank support the commercial activity or the source of funds?”

Adding to the complexity, Brazil, like many countries, has specific requirements set by its central bank for these payments. For example, if a transaction exceeds a certain threshold, then workers at originating institutions must collect additional data, such as a bill of lading or an invoice, which must then be reported to the regulator.

These country-specific nuances introduce additional manual checks to an already intensive process.

“Based on the size of the payment, what does my regulator say I need in terms of data documents and artefacts to substantiate the payment?” Palmer said. “Did my correspondent bank mandate any particular rules based on the size of the payment? What are my internal risk and compliance rules? This results in millions of manual touchpoints at originating institutions and correspondent banks every day.”

The Essence of Moving Trillions

While the answer to most of these questions may be affirmative, this time-consuming process must be repeated with each transaction. Moreover, these lengthy manual interactions increase the risk of errors or manipulation.

For example, a bank employee must not only review whether all the required documentation has been submitted but also ensure the documents haven’t been altered or forged. They may then verify whether the payment involves a sanctioned vessel, port, company, product, or currency.

As a result, a single payment could require reviewing hundreds of pages.

“Now the bank says, ‘What do we do with all this stuff? There’s no way to tie all this human-collected data, rule execution and decision-making with a payment and store it at the bank’s core.” Palmer said. “So, they file all this stuff away in paper folders, and it sits until either the Brazilian regulator comes in to ask for it, or the American correspondent bank or their regulator, as part of an audit or examination, asks for it.  And how effective is it to manually audit 0.000001% of all transactions?”

“You’re trusting the foreign bank – in the case of the correspondent bank – to execute these things because you can only audit a tiny number of transactions and you’re auditing them two months, six months, two years after the fact,” he said. “This has been the essence of moving $160 trillion last year through the banks around the world.”

Digitizing the Process

Though this model has dominated for decades, several forces are driving a shift to a new paradigm. First, the consumer experience with digital payment solutions has raised expectations across the board. When users can send peer-to-peer domestic payments in seconds, they expect the same speed and transparency in cross-border payments.

Along with these heightened expectations, cross-border payments demand has surged in recent years.

However, with no global standardization of payments regulations likely anytime soon, institutions must implement systems that enable counterparty verification without intensive manual checks. These platforms can digitize the due diligence process and radically improve the efficiency of onboarding counterparties.

“Imagine a series of AI agents surveilling that counterparty over time,” Palmer said. “Have there been changes in the ultimate beneficial owner? Have there been any citations, letters, or interventions from a regulator of the counterparty? Have there been any issues from a financial reporting perspective, or irregularities, or terms of profitability?”

“New software digitizes just about everything: originating bank applications, including document collection and diligence, the boarding process, the examination and evaluation of everything from the Wolfsberg questionnaire all the way to their critical infrastructure,” he said. “It digitizes the relationship—the CRM of the counterparty as well as enables 100% real-time see-through to how an originating institution executed their risk and compliance rules, replacing slow, costly, and human-centric periodic audits of a small percentage of transactions with perpetual visibility and digital decisioning of every transaction. This capability has never existed before and replaces trust with data, removing fear and friction at correspondent banks.”

The post From Trust to Truth—New Purpose-Built Infrastructure to the Rescue appeared first on PaymentsJournal.

When credit unions look for ways to improve service for their members, accounting systems may not be the first thing that comes to mind. But when Texans Credit Union upgraded its accounting platform, the benefits cascaded throughout the organization—saving money, streamlining operations, and even boosting morale.

In a PaymentsJournal Podcast, Tracy Montez, SVP, Controller at Texans Credit Union, and LaChrisha Dourisseau, Vice President of Solution Consulting at Fiserv, shared a behind-the-scenes look at their migration to a new account platform, Prologue Financials. They were joined by James Wester, Co-Head of Payments at Javelin Strategy & Research, who contributed additional insights on the discussion.

A Cumbersome Process

With $2.2 billion in assets and more than 130,000 members, Texans Credit Union was eager to enhance service delivery. In 2020, leadership began exploring ways to scale operations for greater efficiency and speed. With a new community charter allowing them to serve all of Texas, Texans Credit Union also set its sights on growth.  

“One of the things I wanted was an upgraded general ledger system,” said Montez. “While a core general ledger is great for processing loans and deposits, they’re not made with accountants in mind, so things take a lot of clicks and a lot of time. We went on a journey to find a product to help us.”

Under the old system, sharing financial reports with the CFO meant exporting data to Excel. If discrepancies arose, accountants had to manually trace each line—determining which combination of four GL accounts fed into a number, isolating the variance, and then investigating the source within the ledger.

“You would think a financial institution would be the place that would have the latest and greatest,” said Wester. “But oftentimes it’s folks in the back-office that are the ones that are having to make do.”

Enter Prologue Financials

To solve these and other challenges, Texans Credit Union adopted Prologue Financials, an accounting system from Fiserv. The workflow within Prologue saves time and increases efficiency across the entire organization.

Previously, closing the books took the team approximately five days; now they consistently close in four. When a three-day close is required, like Thanksgiving, they deliver.

“It’s a lot easier to get the reports we need to do general ledger balancing in accounts payable,” said Montez. “It helps with our month in review. When I’m going over financials with the CFO, if he has a question about a variance, we pull up prologue on the spot to view what caused the variance.”

It’s not just about efficiency—it’s about morale. After all, nobody loves accounting except accountants.

“I can’t tell you how many managers have come up to me telling me how much they love the AP workflow because it saves them so much time,” said Montez. “People turn their invoices in faster because they don’t have to allocate an hour to approving all their invoices.”

The Conversion Experience

Texans CU ended up converting in January—typically one of the busiest months for accounting—but it still managed to close January’s books within its usual five days.

“We had a good conversion experience,” said Montez. “The data was clean and the people that helped us where experienced. It let us add on a lot of new processes and GLs that we could reconcile without adding any people. We didn’t add another person to our team until late in 2024, whereas I think if we would have been on our old general ledger system, we probably would have had to add that person a year ahead of that schedule.”

Another advantage for Texans Credit Union was realizing just how much time they’d been spending on manual tasks. Once those processes were automated, the work became noticeably easier. And with remote work, it’s no longer practical to walk over to a filing cabinet to hunt through files. Now, everything is right there on the computer.

A Worthwhile Investment

Don’t think of the general ledger system within a financial institution as a cost center. Think of it as an investment in the credit union’s or bank’s ability to expand and build out new products.

Banking is not going to get any less competitive. The financial institutions that modernize their back-office will be the ones better positioned to expand, scale, and compete.

“Don’t be afraid to dream that it can be better than what you have,” said Montez. “Think through how your life could change and what you could be doing instead of the monotonous task you’re doing today. Nobody loves doing a conversion, but I promise it’s worth it.”

Dourisseau  added: “Utilizing Prologue makes accounting fun again. While the accounting function is a cost center, it can add tremendous value to the organization, making it more effective, efficient, faster, leaner, and stronger. It allows that talent within the accounting function to be deployed to other projects that add value to the bottom line. That may not always be hard dollars, but these soft dollars are meaningful and can provide the competitive edge in this highly competitive environment of the financial services industry.”

The post What Texans Credit Union Learned from Upgrading its General Ledger appeared first on PaymentsJournal.

The most important skill for B2B sales professionals is no longer persuasion; it’s mastering financial fluency. Yes, many sales veterans will read that line and laugh. But, as the adage goes, past performance does not guarantee future results.

And now more than ever, those results are reliant on an entirely new approach. More specifically, it’s a fintech mindset. Modern SaaS platforms require embedded finance as a fundamental component. B2B sellers need to understand business-to-business money movements. Sales dialogues now focus on revenue diversification, loyalty, CSAT, together with financial strategy and flexibility. The new standard of sales leadership is shifting toward CFOs and payments leads, together with fintech product architects who recognize embedded finance as a strategic business tool rather than an afterthought.

Vertical SaaS is leading the charge. Vertical SaaS companies are no longer just SaaS—they’re evolving into ecosystem-focused fintech hubs, embedding finance to deepen engagement, unlock new monetization paths, and simplify operations across industries. The restaurant management software provider Toast transformed from basic point-of-sale operations into a financial services platform that delivers payments, lending, and payroll solutions directly within its platform. The business transformation turned the company from a software vendor into a true financial partnership, from a reliable service to an indispensable and vital aspect that its clients could no longer succeed without. The financial services segment at Toast produced more than 80% of its total revenue by 2023, while software subscriptions generated less than 20%. This is just one example of SaaS platforms rethinking an approach, shifting from becoming a provider to an essential stakeholder, charting the course for long-term strategic growth.

The model continues to replicate across multiple industries. Platforms realize that embedding financial workflows strengthens their position at the core of user operations. For example:

• HR & Payroll: Rippling and Deel have expanded from workforce management into global payroll, spend controls, corporate cards, and vendor payments—becoming the financial backbone for distributed teams.
  
• E‑commerce: Shopify now offers integrated payments, merchant cash advances, card rewards, and automated tax tools, transforming from a storefront platform into a full financial ecosystem. In their 2023 annual report, Shopify disclosed that merchant solutions revenue grew 27% to $5.2 billion, driven primarily by Shopify Payments, and generated $1.1 billion in embedded finance revenue in 2023.
  
• Accounting: Xero’s recent acquisition of Melio underscores how accounting platforms are moving deeper into supplier payments, BNPL, and financing tied to earnings, mirroring similar trends at QuickBooks.

These companies understand that controlling financial workflows isn’t just an add-on—it makes their platforms indispensable. The platform gains revenue benefits from embedded finance through its flywheel effect. User engagement rises when customers can complete financial operations, including payments, working capital management, and cash flow management, from the same business application they use daily. Churn decreases. Monetization multiplies.

Last year, Juniper Research released a study that projected embedded finance revenue will increase 148%, from $92 billion last year to $228 billion in 2028. B2B sellers must adapt to this new market trend, which presents both obstacles and opportunities for growth.

Meet The New Buyer Personas

Fintech is no longer a back-office function. It’s at the heart of every strategic buying decision. Sellers who fail to understand how companies manage and move money risk becoming irrelevant, especially as new fintech-savvy buyer personas emerge and value is increasingly tied to monetization, efficiency, and financial control. 

The buying persona has evolved with these changes. It’s not enough to win over IT or Ops anymore. You must win over payments architects, FinTech product leads, and CFOs – or risk being boxed out. Those very teams represent ~60% of SaaS buying committees in vertical SaaS and platforms.

The stakeholders that now determine purchasing choices focus on revenue-enhancing solutions and friction reduction as well as working capital optimization. The questions these decision-makers ask now include:

• How can I turn existing cost centers into revenue opportunities?
• How can I increase stickiness, repeat usage and higher purchase value?
• How can I improve my LTV/CAC?

Winning teams frame their value in terms of money movement, monetization potential, and how your solution can turn an existing cost center into a revenue opportunity. The failure to engage in these terms and identify your internal expert advocate will result in early elimination from the buying process.

B2B Sellers Must Adapt or Perish

Solution sellers now represent the top-performing sales teams in this business environment, having leapfrogged feature sellers. Sales representatives now enter meetings with financial models and business plans instead of relying on technical specifications. They grasp which financial elements matter most to their clients regarding ARR and CAC payback and margin enhancement and demonstrate their product as a solution to achieve these targets. The solution providers recognize how to show their solution’s alignment with corporate finance targets, instead of focusing solely on workflow optimization.

Companies need to establish proficiency in using financial terminology and system models as part of their development process. The finance jargon, which once belonged exclusively to accountants and bankers, has expanded to include interchange rates, along with revenue recognition, net retention, and acquisition cost. A persuasive sales narrative depends heavily on these essential components. The ability to explain how your product helps improve LTV/CAC—lifetime value over acquisition cost, along with decreasing payment processing costs by implementing a native solution, typically leads to a second meeting, significantly increasing your chances of closing.

Leaders in sales must transform their method of team enablement. Training programs need to expand beyond basic product feature education and objection response techniques. The training curriculum needs to feature lessons about embedded finance and partner ecosystem strategies, as well as financial buyer communication skills. Sales enablement resources need to demonstrate product functionality alongside the financial metric improvements the product enables. Vertical platforms require special attention because they handle large transactional data but lack internal financial service capabilities. Sellers who demonstrate their ability to convert usage data into underwriting signals, along with their expertise in using embedded payments for increased conversion rates, deliver a path to business growth rather than a standard product.

A fintech mindset has become essential for B2B sales operations. It’s table stakes. An inability to show customers how your solution impacts their bottom line, competitive advantage, and CSAT means you will lose both the present sale and future prospects.

The sellers who thrive in today’s market don’t just pitch solutions; they shape strategies. They position themselves as partners in growth and innovation, not just as vendors. The real innovators aren’t following trends, they’re helping their customers set them.

The post Why Embedded Finance Is Rewriting the B2B Sales Playbook appeared first on PaymentsJournal.

At best, an inefficient accounts payable process can result in delayed payments or limited visibility into spending. At worst, it could lead to misrouted payments and an increased probability of fraud. Yet many organizations still rely on outdated AP processes—jeopardizing relationships with the suppliers that keep their business moving.

In a recent PaymentsJournal podcast, Marchelle Becher, Business Development Executive at B4B Payments, and Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, discussed the obstacles businesses face in the AP process, the role of prepaid and virtual cards in payouts, and how a unified payments platform can streamline accounts payable.

Holding on to Outdated Systems

One of the main challenges with many AP processes is that they still depend on manual invoices, requiring a high degree of administrative involvement. They also often rely on siloed systems.

“There are so many companies that have multiple banking accounts or solutions,” Becher said. “It’s very fragmented. We see that there’s an increase in reconciliation errors in general, and they’re still using older payout methods like wires and writing checks and ACH. Today we’ve got so many other solutions that streamline the whole process.”

Many companies continue to use outdated procedures because, despite their flaws, they have mostly been sufficient. As a result, businesses have chosen to invest their time and resources in other areas, such as improving the customer experience.

Additionally, there is often a reluctance to innovate in a process that could impact both an organization’s finances and its partnerships. These concerns have been amplified by an increasingly stringent regulatory environment.

However, both businesses and suppliers have become more aware of new payments technologies through their experiences as consumers. The rise of digital payments—easily initiated through an app and settled in near real-time—has many users wondering why this functionality isn’t available in B2B payments.

“Consumer payments experiences are driving what’s expected in commercial payments experiences,” Thomas said. “This is definitely one area where getting outdated is a concern, because you’re falling behind where people’s expectations are for the technology.”

Standing In Sharp Contrast

These technologies can bring dramatic benefits to the AP process. For example, the flexibility of prepaid and virtual cards stands in sharp contrast to traditional payment methods such as wire transfers and paper checks.

“It definitely reduces the lag time in processing payments, transactions settle immediately and finance teams have real-time visibility into cash flow,” Becher said. “Prepaid and virtual cards are going to reduce the time it takes to write checks, and there’s also more controls around them—you can send a virtual card out that can only be used online, or it could be just a one-time use card as well.”

A virtual card can be configured with restrictions—such as use at a specific merchant or for a set amount—enhancing control and reducing risk.

Similarly, a key feature of a prepaid card is its ability to limit the funds disbursed. With a digital prepaid card, the payout is available for immediate use and can even be loaded into a digital wallet.

With both virtual and prepaid cards, organizations retain recourse if a payment is made in error or in the event of fraud. For instance, if a supplier short-shipped an order or a contractor failed to complete the expected work, the company could retract or adjust the payment.

Fraud risk is further reduced, as no bank account information is exchanged when using virtual or prepaid cards.

“The card can come completely hashed, so nobody is disclosing any financial information on either side of the two counterparties, and you’ve got the value added of potentially mitigating cash management goals on buyer and seller side,” Thomas said. “The buyer probably wants to get paid earlier; seller wants to hold onto cash until later. In most cases, you can have an intermediary who can balance those cash management needs when you’re using virtual cards.”

Adding More Guardrails

Although prepaid and virtual cards are powerful additions to payouts, they don’t solve the fragmentation in the AP process on their own. This is why it is important for businesses to consider unified B2B payments platforms.

An all-in-one payment platform eliminates the need for multiple systems and logins. It can also save organizations a significant amount of time currently spent on manual tracking and paper processes.

“One of the benefits of B4B Payments is that our app can capture receipts,” Becher said. “We look at reconciliation, we look at people having to gather receipts, make copies, and send them in. What it amounts to is that there’s a lag to get reimbursed.”

“The great of today’s platforms is that you can prefund an expense card and as a transaction is being done at the point of sale, that individual can take a photocopy of their receipt,” she said. “It can be uploaded and immediately go to accounting, so that on both sides we have accountability.”

This real-time visibility extends across all of an organization’s operations, and a single portal can be used for auditing and reporting.

In many businesses, multiple bank accounts and systems often come with multiple users. Managing access for these users is another pain point—one that can be alleviated by moving to a unified platform.

“Overall, it’s putting more guardrails in there, and those can be as wide or narrow as a business needs,” Becher said. “Also, you can access multiple payout options from one portal. If you wanted to do ACH, prepaid or virtual cards, real-time payments, that is all dependent on your business and what best suits your vendors or customers. That’s key here—everything is accessible from one central point.”

The more of the AP process that is captured in a single system, the less burdensome it becomes for an organization’s accounting staff. The finance office can use this additional time to evaluate operations more effectively and, in turn, make more strategic decisions.

“You’re talking about a bunch of different moving payment instruments,” Thomas said. “If they’re in one platform, you can start getting recommendations, like: you should be thinking about a virtual card here because you could keep 10 extra days payable outstanding on your books, as opposed to just cutting checks on the agreed terms of payment timing or whatever the case might be.’”

The Compliance Straight and Narrow

These added insights into an organization can improve efficiency, but they can also keep a company on the compliance straight and narrow. This is increasingly difficult as businesses wade through Know Your Business and Know Your Customer checks and strive to remain compliant with anti-money laundering regulations.

As organizations search for platforms that can unify their AP process, they must ensure they select a partner that adheres to the most current regulatory standards across different regions. Once they have a platform in place that keeps their transactions compliant and secure, they can begin focusing on what matters most.

“It is extremely important for businesses to be able to have all the data available to them,” Becher said. “They see trends, are able to better manage their cashflow and strengthen their business partnerships.”

The post A Fragmented Accounts Payable Process Is a Liability in More Ways Than One appeared first on PaymentsJournal.

In recent years, the role of commercial checks in business payments has evolved significantly. While their overall use has declined, the value of individual check payments has increased markedly. This trend suggests that checks, though less common, continue to serve a specific function in high-value transactions. Their continued use often reflects long-standing financial practices, legacy systems, or business relationships that have yet to fully transition to digital payment methods.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Commercial Payments Factbook 

The Average Value of Commercial Checks

• In 2015, the average commercial check value was $2,438.
• In 2018, the average commercial check value was $2,938.
• In 2021, the average commercial check value was $3,601
• For 2024, the estimated average commercial check value is $4,533.

Source: Federal Reserve, Javelin Strategy and Research analysis

About Report

This report provides a detailed view of how $175 trillion in commercial payments flow through the U.S. economy. Organized by industry, it highlights which payment methods are most widely used, how economic shifts are influencing behavior, and where emerging options like Same Day ACH and virtual cards are gaining traction. Drawing from sources such as the Federal Reserve, IRS, and Census Bureau, the analysis offers reliable insight into the structure and direction of the commercial payments landscape.

Key benchmarks—including DPO, DSO, inventory days, and funding gaps—offer a clearer picture of liquidity pressures across sectors. The report also examines trends like the rising influence of fintechs and smaller banks, the expansion of commercial card use, and the impact of external factors like tariffs. Whether you’re focused on product development, market sizing, or go-to-market planning, this resource offers valuable guidance for navigating today’s business payments environment.

The post Is the Value of Commercial Checks on the Rise? appeared first on PaymentsJournal.

The payment process is the financial Achilles’ heel of the global supply chain and a risk area too often overlooked by finance and security leaders.

Why should today’s cybercriminals bother with ransomware or selling stolen Personally Identifiable Information (PII) on the dark web when they can use AI-powered social engineering to trick finance teams into wiring money directly into their accounts?

As supply chains grow more complex, attackers are targeting the intersection of human workflows, third-party vendors, and large financial transactions. It’s a blind spot that traditional email security doesn’t flag and it’s costing companies millions.

According to The World Economic Forum’s Global Cybersecurity Outlook (GCO) 2025, nearly half of global organizations now cite the malicious use of generative AI as their top cybersecurity concern—making it a top boardroom issue across industries.

Social Engineering Scams Follow the Money

Large companies, from the CFO to their finance and accounts payable teams, handle thousands of invoices, interact with countless vendors, and operate in flux due to global supply chain shifts. This creates the perfect storm for attackers to insert fake invoices, impersonate executives demanding urgent payments, or compromise vendor communications to redirect funds.

The way that most cybercriminals redirect funds is called social engineering. In fact, social engineering is involved in 98% of cyberattacks. Simply put, social engineering scams exploit human vulnerabilities to manipulate people, or targeted victims, to disclose personal information or take steps that compromise their security, and more often, the security and finances of their employer’s business. 

It’s a direct attack on cash flow. These attacks target the purse strings: employees with vendor-facing roles, including finance teams and executives, that have access to funds and can approve or modify payments. And it works. According to the AFP’s 2025 Payments Fraud and Control Survey, 79% of organizations were targeted by payments fraud attacks in 2024.

Social Engineering Techniques and Payment Process Vulnerabilities

Business email compromise (BEC) remains one of the most effective, and costly, forms of social engineering. These attacks often evade traditional email security filters, exploiting the fact that email is still the primary communication channel in financial workflows—from vendor onboarding to invoice approvals.

But the tactics are shifting. According to the AFP, executive impersonation is declining (down to 49%), while vendor impersonation is rising—now cited by 60% of respondents. That’s a sign that attackers are adapting, opting to blend more subtly into day-to-day supply chain operations.

This trend represents a more targeted threat known as Vendor Email Compromise (VEC) which is when attackers impersonate or compromise real vendors to redirect payments. Unlike classic BEC, these attacks don’t originate from inside your company but instead they exploit trusted partners.

Generative AI makes these impersonations even harder to detect. Attackers now mine breached inboxes, social media, and press releases to craft emails that mimic a specific person’s tone and context, making phishing messages appear shockingly real.

And it’s not just email. AI-generated deepfake voices and video clones are being used to simulate live interactions. In one case, Human Resource Director Magazine reported that a finance executive nearly wired $500,000 after attending a video meeting with a convincing deepfake of their CFO.

Urgency is another powerful lever. Messages claiming a payment is overdue or tied to an urgent deal prey on an employee’s instinct to act fast, especially in high-pressure environments.

Lastly, attackers exploit the scale and repetition of finance operations. With thousands of invoices processed every month, small changes such as a slightly altered bank number can slip by unnoticed. And when those emails reference real vendors and replicate trusted templates, fraud can move through the system undetected.

Protecting the Payment Process

According to the World Economic Forum, one in three CEOs now cite cyber and espionage and intellectual property theft as top concerns yet many still underestimate the operational and financial damage caused to payment fraud itself.

As generative AI accelerates the scale and sophistication of fraud, protecting the payment process is no longer just a finance or security issue – it’s a business survival issue. Attackers are slipping through the cracks not because defenses are weak, but because defenses are misaligned. Most security strategies still treat email as the only line of attack, when in reality, the entire payment process from vendor onboarding to bank account changes is being exploited.

Organizations must act now to reframe how they understand and defend against social engineering threats. That means investing in end-to-end visibility, aligning cross-functional teams, and deploying behavioral AI to catch what traditional tools can’t see.

Fraud is no longer about breaking in but rather it’s about blending in. And unless businesses start securing the systems that move money, not just the inboxes that talk about it, they’ll remain vulnerable to the costliest cyber risk hiding in plain sight.

The post The Payment Process: The Supply Chain’s Most Overlooked Cyber Risk appeared first on PaymentsJournal.

For years, accounts receivable (AR) was a quiet, behind-the-scenes function in corporate finance. Necessary, sure, but not the kind of area that made headlines. But that’s starting to change—fast.

With the rise of artificial intelligence (AI) and machine learning (ML), AR is being transformed from a manual, reactive process into a proactive engine for cash flow and customer insight. The AR automation market is growing at a rate that outpaces the more established accounts payable (AP) automation market. The main drivers behind this boom? AI’s potential and the need for e-invoicing compliance in regions like EMEA and South America.

The Growing Cost of Doing Nothing

It’s no secret that finance leaders today are laser-focused on liquidity, risk management and resilience. However, many still rely on outdated AR processes that can’t scale. Payments are delayed, collections aren’t prioritized and cash forecasting is using antiquated processes. Businesses struggle with bloated DSO (Days Sales Outstanding) and poor visibility into payment trends.

Rising interest rates have brought an opportunity to better maximize cash flow. Economic instability has only added to the pressure, leaving CFOs scrambling to figure out what to do with collections without overhauling their entire financial system. AR is proving to be a strategic area to focus on, offering tangible results without needing a full-blown system redesign.

How AI Is Revolutionizing AR

When people think of AI, they often picture chatbots or self-driving cars. But in finance, AI’s true magic is in its ability to automate, predict and drive smarter decisions. Modern AR platforms powered by AI can minimize revenue leakage by automating exception handling, shorten billing cycles with real-time invoicing and dramatically reduce errors by matching payments automatically. In short, AR is becoming faster and more reliable—leading to faster payment times, lower DSO and unlocked working capital.

While the level of automation varies (some vendors offer 60% automation, others as much as 90% to 95%), the core benefit remains the same: AI is transforming what was once a slow, manual process into a high-speed, intelligent operation. Cash application, collections prioritization, and e-invoicing are all examples of processes where AI is delivering significant value. 

AR Automation: From Back Office to Strategic Asset

AI-powered AR isn’t just about making finance teams more efficient—it’s about unlocking strategic value. The insights gleaned from real-time AR data are helping businesses make smarter decisions faster in areas like liquidity management, customer segmentation and revenue forecasting.

The true value of AR automation lies in its ability to move accounting teams beyond reporting into a realm where data drives action. For example, AI can help CFOs predict when a payment is likely to arrive or if a customer’s payment behavior indicates a shift in their financial health. These insights allow finance teams to act swiftly, making better decisions about cash flow and working capital optimization.

More than just an internal upgrade, AR automation is fast becoming a key differentiator for banks and fintechs. Financial institutions recognize that offering AR automation as a service can help them deepen client relationships and better assess risk while providing clients with a smoother, more efficient experience. However, it’s crucial to have integrations with key ERP systems to make the solution truly effective.

The Future of Finance: Intelligent AR Automation

AR automation is part of a larger shift toward “intelligent finance.” In the not-so-distant future, finance departments will be able to simulate cash positions, optimize working capital and make decisions in real time, powered by AI. AR is the backbone of this transformation.

As the space matures, we’ll see new players emerging to disrupt the status quo. Some are already offering creative financial incentives, such as early payment discounts or lending support for unpaid invoices. And while established vendors are still important, new entrants with a focus on AI-driven AR automation will continue to challenge traditional models.

The Consequences of Falling Behind

The businesses leading the charge on AR automation aren’t just improving operational efficiency—they’re securing competitive advantages that will pay off for years to come. They’ll be more agile during downturns, more scalable during growth phases and better equipped to manage customer relationships.

In contrast, companies clinging to outdated AR systems risk being left behind. Not only will they continue to lose time and money, but they’ll also find themselves playing catch up to more agile competitors and clients who demand smarter, faster service.

AR is no longer just a back-office function—it’s a strategic lever that can help businesses thrive in today’s volatile financial environment. And AI is the key to unlocking its full potential.

The post AI Is Turning Accounts Receivable Into a Strategic Powerhouse appeared first on PaymentsJournal.

The Federal Reserve has transitioned its Fedwire Funds Service to the ISO 20022 messaging standard, making the new protocol mandatory for all U.S. banks.

ISO 20022 provides a single, standardized messaging framework designed to improve interoperability among financial institutions, market infrastructures, and end users. The new standard is expected to enhance payment transaction efficiency, strengthen fraud detection, and support advanced data analytics. However, it may also create ripple effects across other areas of the payments industry.

The Fed’s legacy messaging format, FAIM, has been discontinued. This shift aligns the U.S. with other regions that have already adopted ISO 20022. Notably,  the global cross-border payments system Swift is already using the new format to fuel an enhanced solution for managing payment investigations—significantly reducing the time required to resolve delayed payments.

Benefits Are Many

Financial institutions should also start to see many improvements firsthand. These benefits may not be immediately obvious—especially before an FI has adopted the ISO 20022 standard—but they are significant.

The richer data accompanying these payments will deliver real value to financial institutions. Beyond offering more detailed transaction information, the improved data quality and consistency enable more sophisticated fraud detection algorithms, which can help reduce fraud losses. The ISO 20022 standard also streamlines payment processing by minimizing manual interventions and their associated costs.

“ISO 20022 is important, but it’s not the real story,” said James Wester, Co-Head of Payments at Javelin Strategy & Research. “What banks do with it after compliance is. The industry has mostly treated it like a checkbox exercise. Even having a deadline reflects that mindset. The real value comes from actually using the new data to modernize payments infrastructure: orchestration, fraud, reconciliation, cross-border.”

The Effect on FedNow

Real-time payments should see fewer errors and improved remittance details with the roll out of ISO 20022. One of the biggest beneficiaries could be FedNow, the Fed’s two-year-old instant payment service, which was built on the ISO 20022 standard.

“FedNow adoption will eventually benefit from ISO 20022, but not because of it alone,” said Wester. “Banks still need to rethink key parts of the payment stack like liquidity, risk, and back-office design. Even customer experience and product strategy need to be re-evaluated. ISO 20022 matters, but modernization only happens if someone decides to build on it.”

The post How ISO 20022 Will Impact the Payments Industry appeared first on PaymentsJournal.

For too long, payments have been seen as a necessary evil—plagued by compliance headaches and operational friction, with little opportunity for revenue generation. Embedded finance is flipping that notion on its head, transforming payments into a strategic growth lever.  Where payment solutions were once siloed, modern platforms now reconcile across product lines, powering the next generation of embedded finance use cases.

In a PaymentsJournal webinar, John MacIlwaine, CEO of Highnote, and Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research, explored how embedded payments represent a quantum leap for many businesses—and what to consider when choosing the right partner to support this transformation.

The Origins of Embedded Finance

Embedded finance started with large banks issuing credit cards, which required processing the cards and their transactions. As banks began outsourcing this processing to third-party providers, it laid the foundation for what we now call embedded finance. Some of the first embedded finance platforms focused on building a layer in front of these back-end legacy processors. This allowed other businesses to access processing capabilities from these early providers—marking the genesis of embedded finance.

These early systems were essentially wrappers or facades over core processing infrastructure. However, the limitations of those core systems didn’t foster true innovation; they merely enabled more accessible interaction with outdated technology.

“What we’re talking about now is unlocking a capability that goes above and beyond credit card processing—capabilities that previously were not possible,” said MacIlwaine. “It’s about AP invoice automation, embedded finance, and virtual card issuance. To do that, a lot of different platforms and innovations just on the infrastructure side needed to evolve.”

A Platform for Innovation

Legacy platforms revealed the potential of embedded finance but fell short of delivering on its promise. They simply weren’t designed to keep up with front-end innovation—they were designed to process transactions efficiently.

Modern platforms, like Highnote, take a different approach, offering end-to-end innovation through a unified architecture that natively integrates issuing, acquiring, and credit. This resonates with customers eager to move faster, try new things, and differentiate themselves. The ecosystem is moving at such a fast pace, and this wave of innovation is taking hold across multiple verticals.

“We’ve seen many cases where, as they scale, payments businesses run into problems if they don’t have a solid general ledger at the core,” said MacIlwaine. “Highnote wanted to avoid the common problems in reconciliation, settlement, and reporting. At the same time, we allowed them to address more than one payment method, more than one settlement window, more than one capability. All of this was done while still maintaining that transparency for our customers to know, at any point in time: what is the balance of my multiple accounts, what’s been authorized, what’s been settled, where is the money. You need to know where all these dollars are at any one point.”

Flexible Payments for Modern Fleets

Fleet issuing has become a compelling use case for embedded finance. Fleet businesses that issue fuel cards are disrupting legacy infrastructure and increasingly require the features that modern platforms provide. These businesses need access to in-depth Level 2 and Level 3 data, which enables them to offer targeted discounts and incentives across their networks.

“We all probably thought this was a pretty simple transaction—you pull up to the station and fill your tank—but as these fleet businesses emerge and compete, there are advanced capabilities that require more of a platform and product support,” said MacIlwaine. “Having the proper platform in stream during the authorization allows for questions about such things as whether this the right truck driver or the right amount of fuel.”

Fraud controls are also critical in the fleet space. Fuel cards are often used to fill unauthorized vehicles, so putting controls in place has allowed these businesses to operate more efficiently.

Fleet providers may also offer corporate expense cards for employees or disbursement cards for truck drivers. The power of a strong embedded payment platform is the ability to leverage multiple program types in a way that doesn’t require separate onboarding, integrations, or operational processes for reporting.

Enabling Innovation

Embedded payments provide benefits that were traditionally either non-existent or complicated and expensive to implement through a bank. They highlight that an embedded platform is not vertical-specific but a horizontal platform with enabling capabilities. This allows customers, regardless of their industry or competitive focus, to leverage the platform’s capabilities in ways that make the most sense for them.

“Embedding cards that plug into the payable processes, and to the particular cash management processes of a given organization, is huge,” said Thomas. “The notion that you can look at the solution and be able to say, ‘Does this give me $20,000 more working capital a day?’ That’s huge.”

Under the legacy infrastructure, customer had to go back to the provider to request data exposure or tweaks to an API if it wasn’t functioning as needed. Highnote offers a platform that allows for that innovation, enabling customers to drive change and move fast.

While there are platforms capable of issuing and acquiring, the real challenge is doing so in a way that brings tangible benefits to customers. Achieving this requires a unified platform that significantly reduces acquiring fees and enables real-time settlement.

Highnote doesn’t need to wait three days for acquired funds to pass through different payment rails to reach a final settled state. Instead, they journal the funds from the issuing account to the acquiring account and make them immediately available to customers.

Future-Proofing Innovations

Modern platforms are crucial because they focus on the abstraction of creating systems that can evolve, regardless of what the future holds. This concept is often referred to as future-proofing.

“Maybe five years ago we weren’t even thinking about trying to support a stablecoin or digital currency,” said MacIlwaine. “But we didn’t have to pivot or rewrite in order to do that, because our general ledger was developed in a way that it doesn’t matter if it’s stablecoin or fiat. That’s the reason for the abstraction around the general ledger. We can embrace these new capabilities for the future.”

By not relying on third parties to handle these features, Highnote provides its customers with a canvas to innovate, grow, and leverage both current and future technologies. It doesn’t start with the technology or the goal of leveraging digital currencies; instead the key question is: what is the business benefit? With digital currencies, it’s real-time settlement and access to capital that are driving adoption. 

Opening Up the Possibilities

Not all companies will adopt embedded finance, but any company involved in selling products or engaging in commerce is inherently connected to financial transactions. This connection provides an opportunity to embed further into the customer journey and solidify those relationships.

Financial service providers will be keen to integrate into payment processes like these. They can support experimentation in this space through rebates or upfront help. Business should not hesitate to lean heavily on them, embedding these capabilities into RFPs for financial services products, particularly in payments. 

“It’s important to have a partner that  doesn’t dictate that strategy based on their limited capabilities, but rather partners in a way  that opens up possibilities and helps to enable growth,” said MacIlwaine. “Now the tables have turned where the opportunity to generate revenue to provide much better customer engagement and customer value by extending into embedded finance opportunities.”

The post Embedded Finance: Bringing Payments Under a Single Umbrella appeared first on PaymentsJournal.

A long-discussed cross-border payment system aimed at facilitating transactions among the ten member nations will be among the key topics at the BRICS summit meeting in Brazil this week. Although previous efforts were stalled by technical concerns, the looming threat of tariffs from the Trump administration has brought the issue back to the forefront.

Leaders are expected to recommit to exploring deeper trade integration within the bloc. The BRICS Cross-Border Payments Initiative (BCBPI) was first proposed in 2015, but technical hurdles have hindered significant progress. Key issues still to be ironed out include payment mechanisms, currency usage, infrastructure implementation, cost-sharing arrangements, and security protocols. Some member countries’ central bank systems remain unprepared for cross-border integration, and the presence of several nonconvertible currencies further complicate the process.

“There’s no real governing body between them they could use to build an infrastructure to replace Swift and dollar-denominated transactions,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research. “Add to that you’d basically have China running the show, and the fact that building shared infrastructure with Russia raises a lot of red flags with the U.S., and the case becomes questionable.”

Fighting Back Against Tariffs

The burgeoning global trade war has renewed interest in the topic. The dollar’s plunge in value has created opportunities for emerging markets, and the U.S. tariffs provide an incentive for the BRICS countries—which also include Brazil, India, China, and South Africa—to reduce trade barriers among themselves. However, they have stopped short of introducing a common currency.

“We are not envisioning creating a BRICS currency in the foreseeable future,” Brazil’s Ambassador to India, Kenneth Felix Haczynski da Nobrega, told The Hindu. “What we are envisaging is stimulating businesses of BRICS countries to adopt local currencies as an option for conducting trade.”

Competing with SWIFT and the Dollar

One of their goals is to establish an alternative to the SWIFT cross-border network, which currently operates under U.S. oversight. In addition to creating a multi-currency system that facilitates trade among BRICS participants, the BCBPI has also been touted as a means to challenge the global dominance of the U.S. dollar.

Last year, BRICS expanded to include Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates. The countries in the bloc now account for more than half of the world’s population, giving them significant clout in international trade. However, the expansion will also make cross-border agreements more complex and difficult to achieve.

The post Cross-Border Plan Re-Emerges at BRICS Summit Meeting appeared first on PaymentsJournal.

Xero, a New Zealand-based platform for small businesses, is making a major move into the U.S. market with plans to acquire Melio Limited, a bill pay platform that serves small and medium-sized businesses. The acquisition, valued at $2.5 billion, will be a mix of cash and equity.

Melio currently serves 80,000 customers and processes more than $30 billion in payments annually. While it will continue to operate as a standalone company, Xero plans to integrate Melio’s bill pay capabilities with its cloud-based accounting solutions, creating a unified platform tailored to the needs of U.S. small businesses.

According to Xero’s research, 78% of U.S. small businesses place a high priority on having integrated accounting and payment software. One of the key benefits for Xero in this partnership is that Melio provides access to customers who may not yet be using formal accounting solutions. The two companies will work together on a differentiated payments syndication offering, targeting banks and vertical SaaS partners, with the goal of expanding the initiative over time.

Building a Presence in the U.S.

Xero has long employed a “3×3” strategy, focusing on improving its core accounting, payroll, and payments solutions across three key markets: Australia, the UK, and the U.S. However, its presence in the U.S. has been limited until now, with the company generating most of its earnings from sales in Australia and New Zealand.

“This makes a lot of sense for Xero,” said Hugh Thomas, Lead Analyst of Commerical and Enterprise at Javelin Strategy & Research. “At a stroke they replicate some key differentiating capabilities of probably their biggest competitor, Quickbooks.

“The choice to acquire a U.S. payments provider also makes a lot of sense,” he added. “Xero’s current user base is mostly outside of the U.S., so with this move they get both a more competitive offer, and an installed client base of payers and payees, all new potential Xero users, in a huge market where they’re not yet a big player.”

The Future of Mom-and-Pop Shops

In the past, Melio has partnered with major firms such as Fiserv and Capital One to bring its products to U.S. small businesses. Its white-label service provides vertical SaaS platforms to larger merchants such as Shopify.

But Melio has also long focused on bringing mom-and-pop shops into the modern world of payments technology.

In fact, in 2022, Matan Bar, CEO and Co-founder of Melio, noted: “Now more than ever, mom and pop shops must adopt the lessons learned of the pandemic and embrace digital payment solutions. “With the help of digital payment platforms, small businesses can spend more time serving customers and less time invoicing—allowing their business to thrive even in the face of unprecedented challenges.”

The post Xero to Acquire Melio, Advancing Its U.S. Small Business Strategy appeared first on PaymentsJournal.

Organizations routinely ask employees to take clients out to lunch or attend industry conferences. Yet the expense management process designed to support these essential functions is often manual, time-consuming, and prone to delays, errors, and misuse.

In a recent PaymentsJournal podcast, Susie Shyatt, Business Development Executive at B4B Payments, and Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, discussed the common challenges businesses face in managing expenses—and how embedded payments can help streamline this inefficient process.

Expense Reimbursement Vs. Corporate Cards

One of the most common issues in the expense management process stems from employees being required to use their own funds to cover company expenses. First, this means the employee must have sufficient funds available—something that can be a challenge for costly business trips involving airfare and hotel stays.

Another issue arises once the employee returns, as they must provide documentation for their expenses, which then needs to be manually processed. This can lead to delays or errors in reimbursement. There’s also the risk of abuse in the process—something that, in some cases, has even been inadvertently encouraged by management.

“With some companies that we’ve worked with in the past, their C-level groups are touting the ability to get points and earn rewards using personal cards as a benefit to new hires,” Shyatt said. “Whereas the HR and payroll and finance people see it as a headache, where they’re having to reimburse without knowing exactly what all of the payments are being utilized for.”

These challenges with expense reimbursement have led many companies to adopt corporate cards. However, company credit cards can present hurdles of their own.

“At the end of the month, you have to take this big bundle of receipts and photocopy them and get it back to somebody who then has to look through all that stuff and sign off on it,” Thomas said. “It creates tons of extra work for the payables department. It creates extra work for the payroll department. Frankly, it’s not anywhere as safe or compliant a way to buy on behalf of a company as when you’re having somebody submit their own personal expenses.”

Embedding for Speed and Visibility

Among all these pain points, one of the biggest barriers to streamlining the expense management process is that organizations are often unaware of just how inefficient it really is. Multiple groups within the same company may be involved, resulting in a fragmented, manual solution where items can easily get lost in the mix.

As a result, the expense management process becomes frustrating not only for finance office staff, but also for employees.

“Especially as younger generations have entered the workforce, they’re used to everything being quick in their personal lives,” Shyatt said. “You can go to a restaurant with 15 people and after one person puts it on a credit card, within seconds, everybody has paid that person back. It’s very confusing why a work payment should take so long, when I can make a transaction on a website, and everything is there in seconds.”

Payments technology is the reason these interactions are possible. Much like the innovations that allow roommates to seamlessly split a rent payment, embedded payments can be used to accurately reimburse an employee for a hotel stay. Additionally, embedded solutions can equip employees with the tools they need to manage expense activities upfront, which can help mitigate concerns about payment delays.

Embedding payments into the expense management process also brings substantial benefits to organizations. While this technology likely won’t replace staff members, it can reduce the amount of time finance personnel spend processing expense documentation—freeing them up to focus on more strategic tasks.

It also gives organizations greater control over how funds are being spent. When employees use personal funds to cover expenses, there’s often a lack of transparency into how and where those funds are sourced.

In addition, visibility into the expense management process is often increased because these solutions allow organizations to manage both employee and outbound payments from a single platform.

Many solutions also support faster or instant payment types—and real-time payments benefit not only the recipient but the organization as well.

“When you’re using these embedded solutions or expense management tools, it gives you more ability to maintain your working capital, and it gives you a better idea of where you truly stand from a cash flow perspective,” Shyatt said.

Removing the Inertia Barrier

Even though there are clear benefits to adopting embedded payments in the expense management process, many organizations worry that integration will be too costly or place too much burden on the IT team.

However, with the rise of embedded payments technologies, the biggest obstacle to streamlining the process is often resistance to change.

“Inertia is arguably the biggest barrier,” Thomas said. “If there was no inertia in the world, there still wouldn’t be check payments in the United States, after pundits like me have been talking about check payments disappearing for as long as I’ve been in this business. These things don’t change overnight. They don’t change over years necessarily, and that’s mostly a factor of how people run their businesses.”

Though many companies are focused on day-to-day operations, the benefits of modernizing expense management make it well worth the effort to step outside their comfort zone.

“At a lot of the companies that we work with, payments are not their core business, it is just part of what makes their business run,” Shyatt said. “In their mind, it can be a little daunting to look at these big, embedded solutions and think about adding all of these pieces into what they’re doing today, when it’s not the core business that they know.”

Deep Diving for Solutions

The first step for these organizations is to take a deep dive into their expense management process from end to end. They should talk to their accounts payable and payroll staff, as well as any employee who regularly participates in the expense reimbursement program. Then, the organization can identify the true pain points in their current process.

Next, the company should search for solutions that can meet these needs. This could include evaluating whether a platform can integrate with existing systems or finding a solution that offers more robust compliance reporting functions.

Organizations should also assess whether they need to leverage multiple payment types—such as payment cards, ACH, or real-time payment rails—to optimize their expense management process. Another consideration is whether they require a platform that can support payments in multiple currencies.

Once the organization has identified its needs, it can begin to address the inefficiencies in this critical function.

“A lot of times, especially at a higher C-level, we think we know what the problems are and what the headaches are, but we don’t take the time to get in the weeds and truly figure it out,” Shyatt said. “It goes back to knowing your pain points. Knowing exactly what you need not only helps with efficiencies within your company, but it also helps with your cost savings as well, because those go hand-in-hand.”

The post How Embedded Payments Is Optimizing the Expense Management Process appeared first on PaymentsJournal.

As trade wars escalate globally, an African payment system is accelerating its efforts to enable businesses across the continent to conduct cross-border transactions in local currencies.

The Pan-African Payments and Settlements System (PAPSS) allows companies in different African nations to trade without relying on the dollar. Amid ongoing tariff disputes involving the U.S., China, and other countries, PAPSS says many African nations are ramping up their use of alternative global currencies to reduce trade costs and minimize the exposure to dollar volatility.

Lower Costs, Faster Speeds

PAPSS’ internal estimates show that a $200 million intra-African trade transaction would typically incur 10% to 30% in costs through dollar settlements. By using local currencies such as the Nigerian naira, Ghanaian cedi, or South African rand, these fees could be reduced to just 1% per transaction.

As a result, the potential savings for Africa are substantial. PAPSS estimates that Africa could retain up to $5 billion annually in hard currency by adopting regional currency settlements.

Payments are completed in near real time, typically processing within 120 seconds. To meet these settlement times, PAPSS must ensure that funds are available to complete the originator’s transaction before transferring funds between the buyers and sellers’ accounts. Participants are therefore required to agree to a pre-funding arrangement, maintaining balances with PAPSS.

Towards the World’s Largest Free Trade Zone

PAPSS launched commercially in January 2022. The system was developed by Afreximbank as one of the foundational components toward the full realization of the African Continental Free Trade Area, an agreement reached in 2018 among African Union nations.

Expected to be fully operational by 2030, the continent-wide trade zone would be the world’s largest free trade area by land area, encompassing a potential market of 1.2 billion people and a combined gross domestic product of $2.5 trillion. PAPSS is currently operational in 15 African countries, including Kenya, Malawi, Tunisia, and Zambia, with over 150 commercial banks now participating.

Tariff wars have significantly impacted Africa. According to the Carnegie Endowment for International Peace, 20 African countries are currently facing elevated tariffs from the Trump administration, ranging from 11% on imports from Cameroon and the Congo to 50% on goods from Lesotho. Another 29 African countries are subject to the baseline tariff of 10%, including Egypt, Ethiopia, and Kenya.

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Since The Clearing House increased its real-time payments transaction limit from $1 million to $10 million in February, returns have been positive. Bank of America reports that transactions over $1 million now account for more than half the total value of U.S. real-time payments it processes for corporate clients.

The RTP network’s transaction limit had been $1 million since April 2022, when it was raised from $100,000. Rival FedNow plans to raise its own limit from $500,000 to $1 million later this summer.

BofA is one of the first financial institutions to enable corporate clients to send payments up to the network’s maximum limit. Its growth has been driven by the discovery of new use cases, particularly in business-to-business payments.

Room for Growth in B2B

As of July 2024, businesses accounted for roughly 80% of RTP transactions. However, 95% of these payments were received by consumers, highlighting significant room for growth in higher-dollar payments directed to other businesses.

“Businesses can pay suppliers, contractors, and other vendors instantly as soon as goods and services are received,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “This helps improve inventory management, cash flow, supply chain, and payment efficiency. Payroll and real estate transactions are other use cases that can benefit from the increased RTP transaction limit.”

Good for the Industry as a Whole

BofA’s announcement should further bolster the use of U.S. real-time payments.

“These announcements are enormously productive for the industry as a whole,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin. “There can be a tendency to avoid talking about new uses you’ve found for emerging solutions like real-time payments and virtual cards, the notion being that revealing them risks helping one’s competitors. But by educating the broader ecosystem, you also flush out similar use cases and drive up overall demand for the product.”

The news also reinforces the notion that RTP payments can be a stable and reliable option for businesses that have traditionally preferred wire transfers.

“That scale players like Bank of America are embracing RTP for high value transactions like closing payments suggests they’ve cracked the code for making RTP as secure as wires,” Thomas said. “We saw an immediate and substantial jump for this measure when the limit moved up to $1 million, suggesting there is definite demand there to use RTP as a substitute for wires.”

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For mid-sized companies striving to compete with multinational giants, Vertical SaaS has become a game-changer, helping them bridge the gap in their software needs. One of the key factors driving this shift is outbound payments—empowering even the smallest businesses to process payments in real time, leveling the playing field.

Vertical SaaS seamlessly integrates a range of essential functions, like payments, and tailors them to the unique language and regulations of each industry. By offering a suite of interconnected services designed specifically for one vertical, Vertical SaaS has become the go-to solutions for businesses looking to scale and thrive.

In a PaymentsJournal Podcast, Lori Breitzke, Head of U.S. Strategy at B4B Payments, and Hugh Thomas, Lead Analyst of Commercial Payments at Javelin Strategy & Research, discussed the rapid growth of Vertical SaaS and the many benefits these programs are bringing to medium-sized businesses—particularly in the area of payments.

The Evolution of the Solution

Vertical SaaS has taken off in recent years as companies have realized that vertical selling is more effective than horizontal selling. Vertical SaaS offers finance, workflow management, workforce management, and payment services—streamlining operations for its clients, boosting their profitability, and helping them become stronger, more efficient organizations.

Initially, with early players like SAP and Oracle, these solutions were largely one-size-fits-all. They essentially delivered a “relational database in a box” to large corporations, leaving it up to the tech teams to figure out what needed to be measured, how to measure it, and what reports to generate.

As the market evolved and everything shifted online, it became easier to offer out-of-the-box, specialized solutions. This shift was driven in part by the fact that different industries have vastly different software needs. For example, the metrics an accounting firm tracks are very different from those of oil and gas company or a manufacturer. Modern solutions are better equipped to handle industry-specific complexities—like presorting requirements—that not only vary widely across sectors but are also becoming more intricate by the day.

“Vertical SaaS companies are speaking in the language of that vertical,” said Breitzke. “Oil and gas is going to speak differently from healthcare. By using those terms and using that language, it’s making for a much better user experience.”

Making Payments Faster

Take, for example, companies in the construction industry, which face challenges unique to their field. Managing payments to multiple subcontractors and suppliers often requires waiting on invoice approvals, leading to delays and operational slowdowns. Relying on checks or manual invoicing further slows disbursements. As a result, contractors wait an average of 54 days to get paid, with 83% resorting to liens due to these delays.

“We’re still seeing a lot of checks and a lot of ACH,” said Breitzke. “The numbers from NACHA on same-day ACH are going through the roof because people really need their money now. Automating payments and getting away from those traditional payment methods will help suppliers get paid faster. Certain suppliers will give discounts to businesses if they get paid faster, so that’s going to improve their cash flow as well.”

“If you’re waiting that long to get paid, your credit could get bad,” she said. “You’re missing out on making other payments that you need to make because you don’t have that cash flow. Embedding outbound payments is one of the critical features of a Vertical SaaS platform, reducing the administrative workload.”

Driving Toward More Efficient Payments

One key goal for Vertical SaaS is to squeeze as much non-productive capital out of the flows as possible. A check in the payment flow could result in a one- to three-day delay between invoice, receipt and approval—and when the actual payment finally lands in the hands of the suppliers. Whenever companies can move away from these slower payment processes, suppliers stand to benefit.

Checks are an increasingly antiquated system, with use cases dwindling by the day. The more a system can be built to anticipate the sunsetting of checks, the better off the process will be.

Globally, there’s a shift from a regulatory perspective toward reducing slack in the payments space. In particular, governments are looking to curb balance sheet building by large buyers at the expense of small suppliers. While regulatory mandates around specific payment timeline have not yet been introduced, there have been moves aimed at accelerating the system. This includes a push toward real-time payments, improved reporting, and greater transparency—allowing suppliers to highlight when certain buyers are consistently slower to pay.

The Efficiency of the Economy

Small businesses may be the backbone of the U.S. economy, but they’re often strapped when it comes to working capital. Whenever there’s an opportunity to shift more payment responsibility from large buyers to their small suppliers, it’s a net positive for the economy.

The emergence of the gig economy has also brought solutions like this to the forefront. A business may have a large but atomized base of small suppliers to pay, and they want to settle those payments as quickly as possible. The ability to push a payment through an option like a virtual card solution—as soon as goods or services are rendered—is almost a must in the gig economy.

“You want to be looking for a partner who understands the space in terms of ability to write credit for it and to monitor and manage risk such that they are making sufficient risk-adjusted returns on capital as a bank,” said Thomas. “Expertise in the space is absolutely key from a risk writing perspective, but also from a process perspective too. Having your financial partner understand the unique process needs is absolutely key in succeeding with something like this.”

Compliance is another critical factor, especially in highly regulated industries like oil and gas or healthcare. It’s crucial to receive proper reports confirming that the partner company is compliant and has appropriate anti-money laundering controls in place.

The true strength of Vertical SaaS is its ability to accommodate all of these industry-specific challenges by connecting disparate but related concerns—like compliance and payments—under one solution.

“That’s something that I would recommend companies look at when they’re looking for a partner,” said Breitzke. “They’ve got their own vertical industry compliance needs to worry about, so they don’t want to have to deal with that. Let us worry about those payment compliant things.”

The post From Underdogs to Industry Leaders: How Vertical SaaS Powers Mid-Sized Firms appeared first on PaymentsJournal.

The latest available data from the Federal Reserve found that there were roughly $1.6 quadrillion in payments in the United States alone. However, because this data includes financial economy transactions like company acquisitions and stock sales, as well as consumer payments, quantifying the total addressable market for B2B payments—much less share shift that is happening between different payment instruments—can be difficult.

This is exactly what Hugh Thomas, Lead Commercial & Enterprise Payments Analyst at Javelin Strategy & Research, set out to do in the Commercial Payments Factbook. His report examines the commercial payments market, identifies growth rates on a product-by-product basis, and details how financial institutions can make an impact with business customers.

Defining the Addressable Market

Out of the total volume of payments reported by the Fed (the most recent data was from 2021), there was roughly $1.4 quadrillion in wire transfers. Although wire transfers may be a base competency for financial institutions, they typically aren’t a growth driver for payments.

“Wires tend to be something that you use to execute at the end of events that are not necessarily in any way payments-focused,” Thomas said. “They are more just, ‘Here’s this stock getting traded, and we move the funds using a wire transfer.’ It doesn’t tend to drive treasury businesses.”

“You use it for high-value, very low-volume transactions, and so we don’t look at that as addressable when you talk about total addressable market in the wholesale payments business,” he said.

Leaving out wire transfers, there was more than $200 trillion in payments value. Once customer payments are removed from the equation, roughly $175 trillion was identified as the total addressable market for commercial payments.

The lion’s share of these payments was ACH credit transfers, where the initiator pushes funds to a payee. The next most prevalent payment type was ACH debit, whereby the payer has an arrangement with the payee where they can pull funds from an account, such as in bill pay or loan payments.

“Still hanging in there with a decent-sized share of B2B payments is check,” Thomas said. “Check payments are hanging in there primarily because they’ve become more of an exception solution. Basically, checks almost doubled in terms of average transaction size and almost halved in terms of volume of transactions between 2015 and 2024.

“They’re effectively becoming a solution where either your payee is not set up to receive ACH credit transfers or direct debit, is unwilling to receive, or it’s just not worth it—it’s a one-time payout where doing a wire would be unnecessary or too expensive, It’s no longer as much of a high-volume, low-value payment system as it has been. That’s how checks are hanging in there is they’re becoming an exception management solution.”

Water Finding Its Level

As paper checks fade, there has been speculation that real-time payments through FedNow or the RTP network could be pushed into the limelight. This hasn’t yet been the case because the established financial infrastructure in the United States has been sufficient enough for commercial use cases.

However, there has been some growth in Same Day ACH, especially since the transaction limit was raised a few years ago. Still, the payment mechanism accounts for only roughly a 3% share of total ACH.

Although card-based transactions are ubiquitous among U.S. consumers, this is not the case in B2B, where card payments represent less than 2% of total value. Because B2B spending typically dwarfs consumer payments by a roughly 10-to-1 ratio, commercial payments represent a significant opportunity for card companies. Visa and Mastercard have acknowledged this in recent announcements¹.

Cards are gaining more traction, with substantial growth seen in many types of commercial cards, from fleet to prepaid to small-business credit.

There was also demonstrable growth in small-business debit, as more smaller enterprises have recognized that the payment mechanism is an effective and inexpensive way to pay suppliers.

Beyond these areas, one of the most promising payment types for B2B transactions is virtual cards.

“We think there are a ton of possible use cases for virtual cards, and our forecast is that virtual card spend will overtake purchasing card spend in the next two years, though it may have already done so,” Thomas said. “We think this is the growth engine, something that can help with automation, make payments more secure and reliable, offer the sort of fungibility that’s useful in a number of circumstances, and potentially provide working-capital acceleration.

“Water has far from found its level at this point with that product, so every possibility that growth comes even faster, particularly as you see the networks moving into things like making hashed card number and virtual card number solutions for agentic AI spend,” he said. “There could be some serious force multipliers there, depending on how quickly people come to embrace those sorts of emerging technologies.”

The 5 Sectors

In addition to evaluating the most prevalent products, the study also broke down B2B spending by sector and segment. It showed that there are five segments dominating real-economy spending: wholesaling, manufacturing, retail, healthcare, and social assistance instruction.

Delving deeper, the study examined which sectors were dominated by large-market, mid-market, and small- to medium-sized enterprises, and how much each of these sectors purchase. Although roughly a third of all spending comes from manufacturing, healthcare comprises a substantial amount of business payments because of its multiplier effect.

“You pay your insurance company, and if you go to see your doctor, you pay a copay, your insurer pays an HMO,” Thomas said. “The HMO maybe pays somebody who manages the wages of doctors. That entity pays the doctor’s company, then the doctor’s company pays the doctor. There’s just a giant multiplier effect as a consequence of the structure of that industry.”

A Resource at Your Fingertips

Understanding the total addressable market, the predominant payment types, and the breakdown of each sector is crucial for financial institutions as they build strategies to reach business customers.

For example, identifying slower-paying industries could help organizations improve cash management.

“We looked at the businesses with the highest days payable outstanding who may want things like supply chain finance or other ways to get their suppliers paid faster if they want to hold on to their cash longer,” Thomas said. “Which industries have the higher day sales outstanding? Who waits the longest to get paid? Businesses in these industries may need bridging solutions, so the document helps providers as they decide which industries to focus on and what solutions and messages to emphasize

With so much supply chain disruption and uncertainty in recent months, many organizations are revisiting their supply chain strategies, a great opportunity for providers to have a conversation about solutions that is informed by the exigencies of specific industries.

“It’s a good perspective in terms of where to weigh in with your financial solutions,” Thomas said. “It’s a good primer for anyone who wants to be able to say in 2025, ‘My boss is going to ask me X, Y, or Z question about where the market is, or the size of X, Y, or Z, the sector percentage,’ or whatever the case might be. It’s just a good resource to have at your fingertips.”

¹ Visa 2024 Annual Report, Mastercard 4^th Quarter Earnings Call, January 30, 2025

The post A Definitional Discussion: Exploring the Shape and Trajectory of the U.S. Commercial Payments Ecosystem appeared first on PaymentsJournal.

Business-to-business (B2B) payments dominate the global payments landscape, and Visa is launching a platform designed to connect the major players.

The card company noted that its Commercial Integrated Partners program provides an ecosystem that banks can leverage to offer enterprise clients a range of services, including expense management, a mobile app, and tokenization of virtual cards.

In this model, Visa’s APIs are the rails through which banks can both access products from fintechs and embed them into their business clients’ enterprise resource planning (ERP) software. The objective is to deliver a plug-and-play solution that enables all parties to focus their time and resources on innovation and improving the customer experience.

“This is an interesting announcement,” said Hugh Thomas, Lead Commercial and Enterprise analyst at Javelin Strategy & Research. “The most analogous thing I can think of at Mastercard is their Accelerate program, which takes in things like Start Path and Fintech Express. There are a few big differences here, but the biggest one to my mind is the focus on commercial.”

“Where Mastercard’s Accelerate initiatives run the gamut from emerging solutions like blockchain to consumer-focused offerings like P2P payments to B2B stuff, this Visa program is strictly focused on commercial,” he said. “This seems smart to me, because the ecosystem for commercial payments definitely has a shorter and more manageable set of potential partners, and the forces that drive change are totally different from what you see in the consumer world.”

Speeding the Fleet

As an example, Visa spotlighted its partnership with fleet technology provider Car IQ, best known for software that turns a vehicle into a payment credential. Physical cards still dominate the fleet management industry and are often a pain point due to the risk of loss or misuse.

Through Commercial Integrated Partners, a financial institution could provide Car IQ software to its business customers, enabling virtual card payments through a mobile app at fuel stations.

Visa noted that this type of integration reduces the need for extensive supplier onboarding or development and could potentially save a company “18-24 months of due diligence, integration work and project management.”

What it Says on the Tin

For all the potential benefits of this model, financial institutions will likely have concerns about the security of their data once it is shared with more parties. These concerns have become especially prominent following the collapse of fintech Synapse, which left millions of dollars of its bank client’s funds in jeopardy.

To address these concerns, Visa stated that all fintech partners on the Commercial Integrated Partners platform are pre-evaluated and already integrated with the card company.

“The other thing that struck me was the notion of certification,” Thomas said. “Certifying solutions presumes you have the in-house expertise to not only understand your own products but are able to certify their use in others’ products.”

“It’s a great idea in principle—enabling issuers and other partners to avoid 18 months of certification work before they can launch something that will drive spend volume. But in practice, you’re also then on the hook for whether or not the thing does what it says on the tin,” he said. “It certainly says something about the commitment to growing the card network-driven commercial ecosystem that they’re willing to play this role.”

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When a driver misplaces their fleet card or uses it to fuel a personal vehicle, the consequences can be significant for the organization. Shifting to digital payments can help alleviate these pain points, yet many fleet managers have been hesitant due to concerns about maintaining control.

In a recent PaymentsJournal podcast, Parker Pierce, Senior Product Manager at Highnote, and Ben Danner, Senior Credit and Commercial Payments Analyst at Javelin Strategy & Research, discussed the challenges fleet managers face with current payment systems, the benefits of emerging technologies, and strategies for modernizing fleet payments.

Tokenizing Payment Prompts

One of the main barriers keeping fleet managers from adopting mobile payments is that fuel cards operate differently from many other credit cards. They have purchase restrictions built into their EMV chips, which dictate whether the card can be used for fuel, maintenance, or other products.

These chips can also have built-in security prompts that require the driver to enter their driver ID or mileage before a purchase is approved.

In the past, when a fleet card was tokenized and added to a digital wallet like Apple Pay or Google Pay, these purchase restrictions and prompts were not carried over. This was a dealbreaker for many fleet managers, who didn’t want restricted products, such as a fuel-only card, to act like an open card when added to Apple Pay.

“That’s changing now, as we’re seeing support added from the payment networks and the issuers,” Pierce said. “Now, when you tokenize your card into Apple Pay, if it was a fuel-only card on the physical side, it’s going to act like a fuel-only card in the Apple Pay wallet, which is a huge innovation. All the advantages for digital payments carry over to fleet—without that added risk of losing those restrictions that you wanted.”

Digitizing fleet payments also allows managers to expand their control over transactions. With a physical card, security prompts are built into the EMV chip when the card is issued. If it is initially set to request a driver ID, it will prompt for this information on every transaction for the card’s lifetime.

With an application, the fleet manager can adjust these prompts as needed.

“For one driver, they may want to put in a driver ID,” Pierce said. “For another driver, they may want another type of question for security reasons or just for tracking different types of information. For some drivers, they may ask them one question, while for another driver, they might have three, based on their route or their risk profile. Beyond just the ease of use, there’s also added benefits of security and flexibility for these app-based solutions.”

Embedding Fleet Payments

Once the door to digital payments is opened, fleet managers can leverage a host of other innovations. For example, some companies offer apps that can connect a device to an automated fuel dispenser (AFD), allowing drivers to pull up to the pump and complete the transaction directly from the app, dramatically reducing friction.

Additionally, emerging technologies could accelerate this process even further.

“Looking towards the future, what I think is exciting are embedded devices, which are beyond even the phone and the physical card,” Pierce said. “It’s that same EMV chip that’s in a physical card but put into some other entity. For a driver, they could have a key fob that is enabled for payments.”

“It can get really exciting to start combining these technologies—to have a key fob mixed with an AirTag, all in one on the driver’s key chain,” he said. “Then they can just come up and tap-to-pay with their key fob and their location is being tracked as well. We’ve heard about this with clothing, bands, and watches. There are all sorts of exciting things coming down the line on the payment instrument front when we talk about embedded devices.”

The Persistence of Physical Cards

Though there are real-world use cases for these emerging technologies, one thing is clear: physical cards aren’t going away anytime soon. Just as they continue to resonate with consumers, physical cards remain in demand for fleet operations for several reasons.

Some drivers may not be tech-savvy and lack the know-how to download and use a payment app effectively. Others may simply prefer the familiarity and reliability of physical cards.

On certain rural routes, drivers may not have reliable cell or Wi-Fi signals to complete a transaction. Additionally, some fueling stations may not yet support tap-to-pay.

For these reasons, most fleets won’t be able to fully phase out physical cards.

“As excited as I am for digital, there is still a place for physical cards,” Danner said. “The future will be more of what we’ve been calling a ‘strategic coexistence of different payments products together.’ It isn’t an all or nothing thing. You can have drivers with physical cards that want to bring them into the digital space, or you can continue to have physical cards in the mix.”

“You could have your physical card on you and still have that card embedded in your mobile device, and then it’s up to the driver to make that choice,” he said.

Balancing Digital Payments

Fleet cards keep drivers on the road, so managers want options that make fuel and fleet maintenance purchases as frictionless as possible. However, they must constantly balance ease of use with risk and fraud considerations.

“At the same time, those same fleet managers need accessible tools so they can manage the spend for their drivers,” Pierce said. “They need to be able to analyze that spend after the fact to reduce fraud. Not just looking at a report of what happened, but being able to see things like real-time alerts when a transaction occurs that’s over a certain amount or maybe at a location that isn’t on a driver’s particular route.”

Additionally, fleet managers seek efficiency gains by minimizing manual processes, such as capturing receipts. They also aim to control costs by leveraging the powerful rebate and fuel discount programs offered by commercial cards.

Digital payments enhance these efforts. With smartphones and payment apps now ubiquitous, the learning curve is often shorter—and drivers are less likely to misplace a phone than a physical card.

The risk of device loss drops further when company-issued phones with location sharing are used. This data can also help organizations monitor transaction locations and reduce fraud.

Digital payments offer another key benefit: drivers don’t need to visit the office or wait for a card in the mail. Instead, they can receive a digital card, load it onto their phone, and begin using it right away.

Perhaps most significantly, digital payments accelerate transactions—delivering speed alongside convenience.

“There’s something to be said for digital payments and reducing friction at the point of sale,” Danner said. “All of this is controlled in a unified mobile experience without having to reach in your wallet and fumble and look around for that physical card. Everything is going into this digital world and that goes a long way toward reducing friction.”

The Best of Both Worlds

While physical cards remain reliable, the benefits of digital payments suggest that fleet companies should consider a hybrid approach. However, the added complexity can leave many fleet managers uncertain about the best path forward.

“First and foremost, fleets need to consider what are their biggest pain points right now with payments,” Pierce said. “Is it lost physical cards? Are you having trouble with friendly fraud, like a driver letting someone borrow the card or using their card to fuel up their personal vehicle? Do you have a lot of remote fuel locations?”

“Beyond that, how do you manage your cards—is it per driver or is it per vehicle?” he said. “Do you provide company issued phones or not? Lastly, how tech-savvy are your drivers? Fleet managers need to consider all those things and then decide: do we want to go fully physical cards, fully digital or most likely, are we going to have some mix of both that best fits our situation?”

The post Driving Into Digital: How Modernized Payments Platforms Impact Fleet Management appeared first on PaymentsJournal.

Corpay’s investment in AvidXchange addresses a key functionality gap for the payments firm, meeting the rising demand for accounts payable automation in the underserved middle market. AvidXchange, a provider of SaaS-based AP automation and payment solutions, digitizes and automates AP workflows for smaller enterprises.

Private equity company TPG will hold the majority of AvidXchange’s stock. Corpay will invest approximately $500 million for a 33% equity stake in the company. The $2.2 billion transaction is expected to close in Q4 2025, subject to shareholder and regulatory approval. The deal has already been approved by AvidXchange’s board.

The pandemic put AvidXchange on the map. Many merchants took the opportunity to review their analog processes and systems in favor for a more modern approach, driven by remote work scenarios and the inefficiencies of manual operations. This shift accelerated the adoption of digital financial tools among smaller firms. AvidXchange was well positioned to capitalize on the trend.

Expanding its Market Segments

The deal is the latest in a long line of acquisitions for Corpay as it seeks to broaden its B2B payment and automation capabilities. In 2021, Corpay acquired Roger, a global AP software platform for small businesses, and rebranded it as Corpay One. A year, later, Corpay acquired Accrualify, a cloud-based payment platform for mid-sized companies. With AvidXchange added to the list, Corpay now offers a modular corporate payments product for businesses of all sizes.

“There are great potential synergies here,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research. “Corpay has always skewed more large market, while AvidXchange’s customer base runs more to the middle market. In one stroke, both entities gain better segment representation, and Corpay gets an installed customer base for its mid-market solutions.”

Fueling “Inorganic Growth”

Corpay itself recently sold a minority share of its stock to Mastercard. Through this partnership, Corpay becomes the exclusive provider of currency risk management and integrated large-ticket cross-border payment solutions for Mastercard’s financial institution customers. 

“This development, alongside the recent Mastercard announcement, is evidence of a general desire among large providers for inorganic growth and a broader presence across the procure-to-pay value chain,” Thomas said.

The post Corpay Strengthens Its Push into Accounts Payable for Smaller Businesses appeared first on PaymentsJournal.

The pace of innovation in cross-border payments is relentless, with regular announcements of new technologies and partnerships. Yet even as the ecosystem evolves, adoption of these solutions by commercial users remains slow and uneven. As shifting tariffs force global businesses to reconfigure supply chains, financial institutions have an opportunity to step in with guidance and solutions tailored to meet rapidly changing cross-border payment needs.

In the Tech Meets Tariffs: Cross Border Payments in 2025 report, Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, examines the impact of tariffs across multiple industries, explores how financial institutions can offset a potential decline in cross-border revenue, and highlights the opportunity for a new way forward.

Weathering the Tariff Storm

Many cross-border payments providers likely serve customers who are considering re-shoring their supplier base to domestic partners to avoid tariffs. For example, a U.S. company with an established Canadian partner may now be weighing whether it is worth absorbing a 10% cost increase to continue this relationship or switch to a stateside supplier.

Since tariffs affect each industry differently, these decisions can quickly become complex.

“In the U.S. oil and gas industry, probably 30% of oil and gas inputs come from Canada,” Thomas said. “The supply chain for refining is designed to take Canadian oil sands, and where else can you get that from? Argentina is the only place that produces that sort of crude, and they’re not online right now to send that stuff up, so the chance to change the supply chain for that industry is very low.”

Conversely, the grocery industry sources much of its produce from Mexico. In this case, companies face fewer barriers when switching to a U.S. supplier, offering different fruit products, or pivoting to entirely new ones.

Another aspect that comes into play is which industries maintain higher days of inventory. For example, the top 10% of the construction industry’s inputs come from cross-border sources. However, many builders carry roughly 130 days worth of inventory on their books.

“They can weather the storm on these tariffs if they wind up being something temporary, which Trump tries to negotiate away on an industry-by-industry or even a company-by-company basis,” Thomas said. “Providers should be thinking about the industries that they bank, and how they’re going to support them to weather the storm.”

Making the Donuts

If tariffs linger and cause more U.S. companies to switch to domestic suppliers, financial institutions could potentially lose revenue from cross-border payments. However, there are several ways that these institutions can adapt.

“One way is if the business needs to bring on new suppliers, maybe there’s an escrow play in there where your first six months of payments are contingent on delivery of goods, particularly for big strategic buys,” Thomas said. “There is also the opportunity to move some customers to commercial cards because that’s a quick way to avoid Know Your Supplier (KYS) expenses, and maybe get a little bit of rebate revenue from your card provider. “

Another approach is to make cross-border payments more efficient. For years, these transactions have been plagued by issues such as high transaction fees, slow settlement times, fraud, currency conversions, and regulatory barriers.

Recently, there has been a flood of systems and solutions designed to make cross-border payments easier, cheaper, more automated, and more transparent. These range from programs managed by credit card networks to projects driven by a consortium of central banks.

Some speculate that connecting real-time payments systems globally could offer the most effective cross-border solution.

Digital assets like crypto and stablecoins have also been presented as the ideal solution for cross-border payments, due to their decentralized nature and blockchain-based security.

While each solution offers unique benefits—and some have gained more traction than others—widespread cross-border payments implementation continues to lag.

“Adopting these technologies is moving at about the same pace as getting rid of checks is moving—glacial is the best way to describe it,” Thomas said. “That’s because the people who are in the business of managing business payments, be they domestic or cross-border, have most of their days spent making the donuts, they don’t have a lot of time to tweak the recipe.”

Two Forces Driving a Reckoning

Because operations take precedence for many enterprises, financial services providers must offer products that deliver impact from day one, without requiring significant build-out or customization on the customer’s end. Additionally, the business use case for any cross-border solution must be both vital and practical.

Once financial institutions identify the use case and the right solution, they will be well positioned to support their commercial customers at a time where many could face a seismic shift in their supply chains.

“These crisis moments have the potential to drive things forward if they make everybody have a reckoning, in terms of how they’re doing things today from a process perspective,” Thomas said. “You have this unprecedented situation of a potential supply chain reevaluation—which is a huge force at work right now—and you’ve got a broader move to go more global, which is still persistent despite the fact that people are putting their tariffs up.”

“There are those two forces at work and then there are all these technologies waiting for someone to look at them more seriously,” he said. “Maybe all this disruption can get people to the point of saying, how we did business yesterday is not how we will do business tomorrow.”

The post As Businesses Reevaluate Cross-Border Relationships, Financial Institutions Can Help appeared first on PaymentsJournal.

Mastercard has acquired a 3% minority stake in payments platform and network Corpay, which processes large-ticket payments in over 160 currencies worldwide.  

The partnership positions Corpay as the exclusive provider of currency risk management and integrated large-ticket cross-border payment solutions for Mastercard’s financial institution customers. The collaboration aims to streamline customer access to a broader range of payment options, including both carded and non-carded methods. 

The agreement will also expand their existing virtual card collaboration, with Corpay offering Mastercard virtual card programs exclusively to its client base.  

A Gateway to New Offerings

It’s rare for a network to publicly announce a direct investment in an issuer. While this type of move could introduce new challenges, it may also give Mastercard the opportunity to experiment with new offerings. 

“There are some clear advantages in a direct investment and partnership like this, as Mastercard builds out its cross-border products and other payables solutions,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research. “This sort of investment presumes a level of transparent partnership where Mastercard may benefit from direct interaction with Corpay’s customers, learning firsthand about what’s working and not working.

“That said, while networks invest in issuer partner initiatives all the time, I don’t know that I’ve ever seen a direct investment by a network in an issuer. Without knowing the specifics of the deal, I wouldn’t want to speculate too much, but there’s potentially a risk of other issuers worrying that Mastercard has a vested interest in the success of one of its competitors.”

As part of the partnership, Mastercard will also expand Mastercard Move—its suite of cross-border services—to a wider group of small and mid-sized businesses, including existing Corpay customers. The fact that one of the major card networks is willing to promote this collaboration suggests it views it as a position of strength.

Corpay’s Buying Spree 

Corpay has been actively acquiring other companies to help boost its corporate payments capabilities. It acquired GPS Capital Markets in December, following its purchase of invoice and accounts payable automation platform Paymerang the previous year. 

Most recently, in February, Corpay announced plans to acquire Brazil-based vehicle registration and compliance payment company Gringo. That move came on the heels of its 2024 acquisition of another Brazil firm, Zapay, a digital mobility solution for paying vehicle taxes, registration, and tickets.

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The Clearing House’s Real-Time Payments (RTP) network has doubled its transaction volume over the past 18 months, reaching one billion transactions earlier this year. One key contributor to this growth has been an increase in its transaction limit. Since February, RTP now supports payments of up to $10 million each.

In response, The Federal Reserve’s instant payment service, FedNow, is raising its own limits as it strives to stay competitive with RTP. Starting July, FedNow will introduce a new $1 million cap for higher-value credit transfers, covering transactions such as business-to-business supplier payments, real estate deals, and payroll account funding. The default transaction limit will remain at $100,000.

Banks Like Higher Limits

These higher transaction limits have played a critical role in accelerating adoption of instant payments. According to research from Red Compass Labs, more than 80% of senior payments professionals at U.S banks say that increasing the RTP transaction limit to $10 million has enhanced its appeal. Smaller banks—those with 500 to 2,000 employees—are even more enthusiastic, with 88% saying the new limits helped. Another 84% believe that raising FedNow’s cap will make it even more appealing.

The Clearing House has highlighted several use cases that could benefit from the increased limit. These include commercial and high-value residential real estate payments, merchant settlements, supply chain payments, and cash consolidation. RTP’s first $10 million payment was made on behalf of Computershare, a global transfer agent, to another of its company accounts.

Consumers Demand More

The demand for instant payments is growing. Red Compass found that nearly half of the surveyed banks are experiencing overwhelming demand from corporate clients—three times the percentage reported in last year’s survey. Mid-sized banks, particularly those with 2,000 to 10,000 employees, are feeling the most pressure.

Perhaps ore surprisingly, retail consumers are also driving increased demand for instant payments. While just 11% of respondents in last year’s survey reported overwhelming demand from retail customers, that figure has jumped to 43% this year. In this segment, it’s the largest banks—those with more than 50,000 employees—that are facing the most pressure.

Many banks are also increasingly concerned about competition from fintechs, neobanks, and services like Zelle. Nearly two-thirds of the largest banks say their instant payment decisions are heavily influenced by the competitive pressures.

The post Rising Transaction Limits Are Paying Off for Instant Payments appeared first on PaymentsJournal.

Global cross-border payments system Swift is introducing an enhanced solution for managing payment investigations, aiming to significantly reduce the time needed to resolve delayed payments. Relying heavily on ISO 20022, the solution could serve as a key use case for broader adoption of the new messaging protocol.

Delayed payments cost financial institutions more than $1.6 billion annually due to labor-intensive investigations. Swift claims the new solution could cut these costs by more than $600 million per year and reduce case resolution times by up to 80%.

The speed of cross-border payments has improved in recent years, with 90% of transactions over Swift reaching the destination bank within an hour. However, when a payment instruction is missing key information, it can take five to ten working days for financial institutions to resolve these issues. The average end-to-end time to complete a single investigation has remained unchanged over the past five years, at 200 hours.

Using the New Standards

Swift’s new solution standardizes the investigation process by leveraging ISO 20022 data to enhance transparency and interoperability across networks. ISO 20022 compliant messages deliver richer structured data and are universally understood by all parties to the transaction.

In addition to payments made on the Swift network, the protocol can also be applied to any payments that use UETR, or a unique end-to-end transaction reference. The UETR standard provides visibility into a payment’s status and location at every stage of the transaction.

A Use Case for ISO 20022

Starting November, Swift will require institutions to use the ISO 20022 protocol for payments on its network. ISO 20022 offers a single standardized messaging framework designed to improve communication interoperability among financial institutions, their market infrastructures, and end users.

While ISO 20022 is expected to lead to more error-free transactions, one challenge slowing the global adoption of ISO 20022 is that many financial institutions have yet to fully recognize these benefits.

“There will probably be plenty of financial institutions that look at ISO 20022 and say, ‘Oh, it’s not something that applies to us,’” said James Wester, Co-Head of Payments at Javelin Strategy & Research. “But that just means that further down the line, they or one of their partners is going to have to bear higher costs.”

The post Swift’s New Initiative to Hasten Payment Investigations Leans on ISO 20022 appeared first on PaymentsJournal.

While faster payments have gained some popularity in the United States, many other countries have surged ahead in adoption. China, Brazil, and the UK have all benefited from proactive measures to promote instant payments. In contrast, the U.S. market, led by RTP and FedNow, holds a smaller share, making steady but slow progress.

What needs to happen for the U.S to catch up? Catching Up with Faster Payments, a report from Javelin Strategy & research, explores this and offers insights from countries that have successfully implemented instant payment programs.

The Factors Driving Instant Payments

In countries where instant payments have become a key part of the financial landscape, they have generally addressed an unmet need. The Chinese government built a real-time payments network that took off like a rocket. This enabled Alipay, a full suite of banking products including instant payments, to achieve ubiquitous adoption by offering merchants a convenient way to get paid.

“Alipay effectively replicated several processes that had existed for a long time in the United States,” said Hugh Thomas, Lead Analyst for Commercial Payments at Javelin, and author of the report. “That’s not a lever that the instant payment folks in the States necessarily have to pull.”

Another reason faster payments have succeeded in other parts of the world, including Brazil and India, is the prevalence of sole proprietors. In fact, 58% of consumers in India effectively work for themselves, blurring the lines between peer-to-peer, B2B, and B2C payments. These processes have also helped many unbanked individuals in these countries access financial services. In India and Brazil, having a bank account is not necessary to participate in the real-time payments ecosystem.

On top of that, faster payments help mitigate the effects of persistent double-digit inflation, such as that seen in Brazil. If an employee or vendor does not receive payment on the day they earn their money, those funds will have diminished value in just weeks.

 Growing Use Cases in the U.S.

While many of these factors are not present in the U.S. to the same extent, there are emerging use cases, such as down payments on vehicles. When someone buys a new car, instead of carrying a cashier’s check to the dealer, the consumer can transfer the funds as a real-time payment directly into the car dealer’s account. This not only makes the transaction faster in the long run but also more secure.

One factor that could help accelerate the adoption of faster payments is the reduced cost per transaction, especially when compared to wire transfers. While buyers typically don’t bear these costs, as they are passed on to the merchant, they are certainly aware of them.

“B2B buyers are conscious of the expense to the point of very much understanding the P&L of the bank that is taking on their business,” Thomas said. “Every treasurer worth their salt knows exactly what the risk-adjusted return on capital is not just on their own business but for the bank as well. There’s a tremendous degree of understanding among treasurers and the banks that they work with.”

Buyers also appreciate the benefits of the time value of money. With an ACH transaction, they can lose two or three days while the money is lost in the ether. Instant payments obviate those concerns.

Wire transfers can be very expensive, typically costing $40 or $50 per transaction. Large brokerage firms that need to move substantial amounts of money around still rely on them because wire transfers often require a human intervention to complete. Faster payments have the potential to replace wires, as they could provide the same immediacy of payment without the manual intervention that wires often require.

Solutions in the UK

Launched in 2008, the UK’s Faster Payments Service (FPS) is often cited as the gold standard for real-time payments in a developed market. The solution offers users the ability to execute one-time payments and also provides several business-friendly options, such as forward-dated payments and recurrent/standing-order payments.

Innovation in the UK was facilitated by the relatively small number of players in the country’s financial services market, compared to those in the United States. This allowed third-party providers to step in and create their own solutions.

“It helped that UK banks did not have to bet on VHS versus Betamax in terms of building solutions to one network or another,” said Thomas. “Whereas in the States, they were asked to choose between The Clearing House and FedNow.”

Concerns Around Fraud

Real-time payments introduce a whole new approach to managing fraud and liquidity. Once processed, these payments are virtually impossible to reverse. While fraud management systems are available, the question remains: who will bear the cost.

“The instant payment situation that banks try to watch for is where the customer pulls money from one account to another account,” said Thomas. “They immediately shunt the money off to a third account that is likely in a jurisdiction without extradition or something like that. And the money is gone. Because ACH was slower, banks had greater control over the processes.”

Inertia Trumps Innovation

Even without a compelling use case, real-time payments may become table stakes for full-service U.S. banks. Banks do not want customers to feel the need to go somewhere else to complete an instant payment.

However, adoption may be slower, as the United States already has a strong and reliable payment system in place.

“If you say, OK, here’s this extra thing that’s a change in the way of doing things, adoption is going to be slow,” said Thomas. “You’re going to have to make a strong business case for that or come out with a plug-and-play solution for making that happen. That’s not going to happen overnight. Inertia generally tends to trump innovation.”

The post Why the U.S. Trails the World in Faster Payments appeared first on PaymentsJournal.

Mastercard Move has partnered with MoneyGram International to use its cross-border platform for sending payments to 38 markets worldwide. It’s merely the latest in a series of alliances between payment networks and remittance providers working to strengthen their burgeoning cross-border payment networks.

The MoneyGram network already spans 450,000 retail locations globally, but Mastercard Move aims to further expand its capabilities, including person-to-person and business payments, as well as cross-border transactions. With access to more than 95% of the world’s banked population, Mastercard Move supports more than 150 currencies.

In a similar move, Western Union and Visa formed a partnership last year. Their seven-year agreement enables Western Union customers to send funds directly to recipients’ eligible Visa cards and bank accounts in 40 countries across five regions.  

Competition with Visa and Swift

Mastercard Move, unveiled last October, has been touted as facilitating near real-time, predictable, and transparent commercial cross-border payments. It is playing catch-up to Visa’s B2B Connect, which has been offering similar services for some time.

Both efforts are strategies for the two credit card giants to compete for cross-border business with networks like Swift and SEPA. To maintain growth, they also rely on entities like MoneyGram and Western Union.

“It’s a land rush for the networks, signing up any and all remittance providers,” said Hugh Thomas, Lead Analyst of Commercial Payments at Javelin Strategy & Research. “My suspicion is that the remittance providers are happy to get marketing funds from networks to talk about how they can now move funds card to card instantly.”

A Rush of Remittance Providers

That land rush has been ongoing for a couple of years. Providers are teaming up with either Mastercard Move or Visa Direct, the international payment network that uses Visa’s rails.

Earlier this year, ACE Money Transfer partnered with Mastercard Move to simplify and accelerate cross-border payments while offering multiple payout options to customers. In October 2023, Remitly integrated Mastercard’s Send and Cross-Border Services into its platform. Send is Mastercard’s push payment solution, while the broader Move platform encompasses fraud management, interfaces, and back-end fund movement.

Visa Direct had earlier signed up Europe-based TransferGo and Azimo, which has since been acquired by Papaya Global, as well as the Africa-focused Zepz (formerly WorldRemit). It also established an earlier partnership with MoneyGram itself, allowing the service’s customers to transfer funds directly to recipients’ Visa debit cards in various countries.

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Financial institutions have been hesitant to embrace the array of payment types now available, from instant payments to stablecoins. However, these technologies offer more than just a faster means to an end—the operational efficiencies they deliver can have a significant impact across an organization.

In a PaymentsJournal webinar, Nick Botha, Global Payments Sales Manager at AutoRek, Michel Vaja, Head of GTM Europe Cards & Payments Practice at Capgemini, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the state of the payments industry, the benefits of emerging payments, and the approaches financial institutions can take to transform their organization.

The Overall Objective

The payments industry has flourished over the last two decades, and 2024 was no exception. According to Capgemini’s World Payments report, 1.6 trillion digital payments were exchanged globally. Digital transactions saw double-digit growth across all regions, with Asia leading the way.

“It’s quite a dynamic and interesting market, both in transaction volumes but also in value,” Vaja said. “What is stimulating the market is instant payments—we’ve seen more than eighty countries across the world adopting instant payment schemes. Of course, that introduces a number of new use cases for corporate consumers. There has also been the rise of open banking, where there has been strong growth over the last 12 to 18 months.”

The overarching goal is to build a global real-time payments economy, and last year saw significant progress toward that objective. Emerging technologies, like cloud platforms, are becoming integral to the infrastructure that supports the vast transaction volumes processed by organizations.

Another key trend is the integration of artificial intelligence and machine learning into the payments space. AI is making an impact in areas ranging from fraud prevention to data management. This new technology is also closely tied to various regulatory initiatives, which has shifted the broader conversation about the industry.

“Payments regulation over the last 10 years or so has been about encouraging competition, encouraging growth, and bringing new entrants to the market,” Botha said. “In today’s world, the regulators are trying to understand what needs to be in place to put control frameworks around certain types of payments, and especially the technologies that are being introduced to payments.”

A Technology Deficit

The technologies driving the acceleration of payments have created more opportunities than ever for financial institutions, but they have also introduced complexity and uncertainty in many cases.

“It’s exciting on one end to know that the world is getting smaller and smaller from a payment standpoint,” Wester said. “But on the other side, what does that mean in terms of where our products are going to go? What can our companies do? What can financial institutions do? That’s a bit more daunting simply because we are opening so many possibilities.”

The rapid pace of technological innovations means that, despite investing in tech solutions for decades, many organizations still find themselves operating at a technological deficit. In Capgemini’s report, European banking payment leaders were interviewed about their readiness to support SEPA Instant, an EU instant payment rail. The study found that only 7% of these leaders felt their organizations were prepared to comply with the regulations.

“They looked at readiness just from a compliance standpoint, while many in the industry are massively investing in those initiatives to generate more value,” Vaja said. “If (the institutions) are not ready to comply, it tells a lot in terms of how much they are ready to leverage some of those initiatives to enhance their payments customer propositions. A lot of work still needs to happen there.”

A Tough Sell

Shifting to a new payments paradigm can be a tough task because traditional banking systems are reliable and well-established in many countries.

“It’s an expensive, time-consuming exercise to keep up with the times,” Botha said. “For many, it’s this thought process of, if it’s worked until now so it should continue to work. When we speak to businesses that have been around for a long time, they’re very heavy on the head counts that are required to run these processes. It’s hugely expensive, and the reason is they’re running off these legacy tech stacks.”

While the current model may be effective, it will become increasingly difficult for institutions to shift to new payments protocols, such as ISO 20022. The standard offers significant benefits, like richer transaction data, but adoption is not as simple as flipping a switch. Many of the current systems aren’t equipped to handle the extensive data that the format provides.

When it comes to instant payments adoption, the reliability of the U.S. traditional financial system has been a significant barrier. The financial services space has traditionally been risk-averse, which means that tried-and-true payment systems are often valued over innovative systems that could invite risk.

“Financial institutions want to run a cost-benefit analysis and some of the stuff that we talk about in terms of benefit versus cost is a little iffy,” Wester said. “Sometimes we have to estimate and say, ‘We know this is going to be good for you.’ The idea of these financial institutions implementing some of the technological advancements, even though we know they are going to come with benefits from efficiency, it becomes a very tough sell.”

Walking the Transformation Path

The efficiency benefits from payments modernization can unlock significant revenue. However, even as organizations begin to recognize these benefits, they may still be unsure how to proceed. Transformation is often viewed as an expensive, multi-year program fraught with risk.

“The risk aversity of organizations can be a barrier to walking the transformation path,” Vaja said. “Where we’ve seen organizations be successful is when they accept that they need to be in an ongoing incremental transformation state. A key consideration for your bank is to define your organization’s transformation trajectory and your quick wins. Having a clear road map is a key aspect with which we’ve seen many organizations be successful.”

As many companies undertake modernization projects, they tend to focus heavily on the front office, particularly in improving customer acquisition or user interfaces. While these aspects are important, the most dramatic impacts are often achieved by transforming middle- and back-office systems and processes.

“Organizations operate on thin margins, and it becomes a diseconomy of scale if you’re not utilizing automation and the newest technologies to help your business increase margins and generate more revenue,” Botha said. “It’s fundamental to understand what your teams are doing to make sure that your payments are settling, you’re driving up liquidity, and you’re reducing settlement times to generate more revenue.”

Technology Interplay

The payments industry is soaring, driven by a growing number of enablers, including open banking initiatives, instant payments rails, digital currencies, and new payment formats. However, for organizations, navigating this complexity can be challenging, as they must balance innovation with the need to combat fraud and maintain compliance.  

“I would strongly encourage bank executives to look at those initiatives and regulations as opportunities,” Vaja said. “More importantly, I would encourage executives to look at how to combine some of those capabilities together to generate value, because combining richer data, real-time money movement, and the payment services offered by non-banks presents a major opportunity.”

As financial institutions undergo payments transformations, they should focus on understanding the interplay of technologies within the organization, rather than searching for a magic bullet.

“You can have the greatest system doing reconciliations, the greatest system processing payments, the best ledger technologies, and the best front-facing applications, but if they are not effectively communicating with each other in real time to allow for the effectiveness of the payment product that you’re offering, it becomes null and void,” Botha said.

To achieve this interoperability, many organizations will have to lean on partners—especially those providers who can lighten the lift on some of the middle- and back-office processes that often seem like a chore.

“Someone told me at a conference that reconciliations were not a very sexy part of the process and I disagreed with him,” Botha said. “What we do is play a part in that process of unlocking the potential for increasing your margins and generating further revenue. AutoRek is helping some of the biggest organizations around the globe with their data difficulties, and showing them how to reconcile effectively.”

The post Payments Modernization: Always Evolving with Tech appeared first on PaymentsJournal.

Time is money. So, it isn’t lost on you that there’s a lot of expense involved with having your finance team log in to various bank portals, transfer balances onto spreadsheets, and perform tedious calculations just to get a handle on your cash position. But it turns out that managing cash manually and monitoring it with spreadsheets comes with several other hidden costs as well.

1. If the organization is facing a crisis, like a significant revenue drop or unexpected expenses, you might have limited contributions to a strategy pivot since you can’t tap into real-time insights. Once you’ve turned things around and your CFO wants to know if it’s an appropriate time to acquire a competitor, you might fall short again and not be able to provide the certainty they need since your numbers are stale or missing. When you can pull up your cash and liquidity positions with the click of a button, however, you can be a far more agile and active collaborator in the business.
   
   
2. It’s also tough to keep up with every finance-related law, regulation, and standard when there’s no centralized treasury system in place, so your compliance risk can be higher, too. Take Foreign Bank Account Reporting (FBAR), which requires any US-based corporation that has ownership or control of foreign accounts with an aggregate value of $10,000+ in the calendar year to file certain data with the IRS. Compiling everything you need manually can take hours, especially if there are several bank accounts requiring paperwork. But with many of today’s cloud-based treasury solutions, you can produce the needed report (and many others) in minutes, getting the required information to the necessary parties easily and in a fully compliant fashion. Plus, you can also proactively find and tackle potential compliance issues with 100% visibility into your whole treasury operation in one place.
   
   
3. Managing cash with spreadsheets and antiquated systems is also a drain on your talent. Today’s employees want to contribute in meaningful and impactful ways – not spend their time tallying up account balances or extracting data from various teams and systems. If this is the only work that’s available in the treasury department, and your systems and processes leave a lot to be desired, you risk losing employees. Then, you need to spend significant time and resources on backfilling. This isn’t an ideal situation given that almost 60% of treasury and finance functions reported a talent shortage in 2023.
   
   
4. Managing your organization’s cash manually also impacts scalability. As you grow, you’ll need more and more employees to keep up with the work and get the job done. We just discussed the difficulties related to that. If you centralize treasury operations into a comprehensive and user-friendly tool, on the other hand, your existing headcount can handle more banks, bank accounts, currencies, and subsidiaries as you expand geographically, for example. Increasing operational complexity is a lot easier to handle with the right tech solutions solidly in place.

Costs of Transforming Cash Management

Slow, inefficient cash management workflows aren’t going to cut it for these reasons, and others. But there’s a cost to upgrade, too. A bit of a balancing act needs to happen as a result.

Traditionally, many companies have jumped right to Treasury Management Systems (TMS). But these tools are very costly and take months (or years) to stand up, which delays any return on investment. A TMS can also require the help of outside consultants to deploy, adding significantly to the overall cost.

There are other strong contenders available these days in the form of SaaS treasury management tools. They offer the same robust functionality around cash visibility, cash forecasting, reconciliation, and cash optimization but come with much more appealing price tags. They provide the functionality you need, so they’re easier to launch and enable treasury teams to extract value quickly.

There aren’t added or unforeseen costs as there can be with other types of treasury management tools, the modern solutions are typically a SaaS subscription and a minimal implementation fee.

Today’s Cash Management Tools Do More Than Improve Visibility

Effectively managing your organization’s cash is critically important and getting there is even more achievable these days with the treasury management tools on the market. Getting these solutions in place can have the added benefits of improving your decision-making abilities, boosting compliance, aiding employee retention, and empowering growth.

The post Inefficient Cash Management Practices: 4 Hidden Costs Missing from Your Radar appeared first on PaymentsJournal.

One of the toughest challenges for businesses is ensuring customers pay their bills on time. In fact, a third of all businesses surveyed by Creditsafe report regularly dealing with overdue payments—totaling up to $70,000 per month.

The Cost of Late Payments report revealed that nearly a third of respondents lose between 5% and 30% of their annual revenue to bad debt. However, just 2% reported losses exceeding 30%.

The Factors Slowing Down Payments

The reported losses are partly due to finance teams not consistently performing due diligence. A majority of respondents admitted they don’t always analyze a potential customer’s historical trade payments and late payment trends before signing a contract. Indeed, 17% said they rarely or never do so.

However, B2B payments can be delayed by factors beyond a customer’s ability to pay.

“Slow payment problems are often related to slowness on the buyer’s part to approve invoices, particularly for big buyers with byzantine approvals processes,” said Hugh Thomas, Lead Analyst of Commercial Payments at Javelin Strategy & Research. “Some suppliers may want to consider offering solutions that enable a pre-approve/post-audit process. Commercial cards work well for that, as their final payment amounts are so easily fungible as opposed to checks or ACH.”

Chasing Down Customers

Finance teams often spend a lot of time chasing customers for overdue invoices. The vast majority of the Late Payments survey respondents reported needing to contact a customer between one and four times just to secure a single overdue invoice. Nearly a third said they were willing to wait between 31 and 60 days for customers to pay up to $50,000 in overdue invoices.

Thomas suggested that a carrot-and-stick approach can help address late B2B payments. The carrot often comes in the form of 2/10 Net 30—offering a 2% discount if the full amount is paid within 10 days; otherwise, the full amount is due within 30 days.

The stick typically involves enforcing delinquency terms on invoices if buyers fail to meet payment deadlines. For regularly delinquent buyers, businesses may consider requiring prepayment to mitigate risk.

The post Businesses Seek Ways to Contend with Late Payments appeared first on PaymentsJournal.

FedNow will raise the limit on many of its real-time transactions to $1 million later this summer. It will also implement new risk mitigation features to help financial institutions feel more confident in sending payments at the higher limits, a key factor in the network’s growth.

The service’s new account activity threshold functionality will allow participants to set value and velocity thresholds by customer segment, aligning with their unique business needs and risk tolerance. The new $1 million limit will apply to higher-value credit transfers, including business-to-business supplier payments, real estate transactions, and payroll account funding. The default transaction limit will remain at $100,000.

According to FedNow, the account activity threshold enables participants to establish multiple risk management strategies based on different scenarios. For example, a financial institution might set a higher cumulative threshold for business customers and a lower one for new account holders.

Recently, FedNow’s competitor in instant payments, The Clearing House, raised its RTP network payment limit from $1 million to $10 million. This followed a similar increase in the Same Day ACH transaction limit, which also rose to $1 million.

Keeping Up in the Instant Payments Arena

More than 336,000 transactions were settled on FedNow in Q4 2024, with consumers and businesses sending an average of $190 million through the service per day. However, those figures pale in comparison to RTP, which processed 343 million transactions throughout 2024.

Beyond intensifying its competition with RTP, FedNow is also working to encourage more institutions to enable send capabilities. This feature is critical for driving instant payments adoption, yet the vast majority of the 1,100 banks on the platform remain receive-only.

Overall, FedNow has seen significant recent expansions. In February, FIS announced it would become one of the first fintech providers certified to enable send capabilities for credit transfers on FedNow.

The post FedNow to Raise Transaction Limit, Offer New Risk Features appeared first on PaymentsJournal.

The way businesses pay and get paid is still evolving. Complex, manual systems continue to be replaced by smarter, more automated and integrated tools that save time, generate cash back, cut costs, and improve security.

As we turn the page on another year, I want to delve deeper and explore several key trends reshaping business payments and how they can impact organizations. I’ve pulled these themes from thousands of hours talking with businesses, fintechs, card brands, vendors, and others in the B2B payments space this past year.

Embedded Payments:  Built into Your Workflow 

Imagine making a payment without having to leave the platform you’re already using. No switching systems, no extra steps. That’s the magic of embedded payments.

By weaving payment functionality directly into tools like ERPs or procurement systems, businesses can speed up processes, reduce errors, and gain better control over cash flow.  Partners of our business payments network Paymode, for example, get to offer a familiar, branded experience to customers.

How does this work in practice? Bottomline simplifies the payment experience for our partners’ end-users in four steps:

1. Their customers send payment instructions to their regular systems as usual. 
2. Partners then send all data via API to our Paymode network to facilitate payments. 
3. Paymode processes the payments to suppliers and handles any exceptions. 
4. Payment data and rebates flow back through the partner’s systems, which display payment details back to the end user.

For accounts payable teams, this means fewer headaches and more time for strategic work. Suppliers, meanwhile, get paid faster and can focus on maintaining and strengthening their customer relationships. Those benefits are why embedded payments are set to become the norm, making every step of the payment process feel seamless in a way that wasn’t possible previously.

Vendors already using Paymode are familiar with Premium ACH and virtual card, two of the signature payment offerings for Bottomline. New suppliers opt-in to receive these payments because they offer rich remittance details and process efficiency for their Accounts Receivable (AR) function. Vendors get AR data when and how they ​want it via formats they prefer, scheduled reports, live payment trackers, and more.

AI: Your Secret Weapon for Smarter Payments 

Artificial intelligence has moved from a buzzword to a familiar ally for businesses, especially as it relates to payments and payment protection. It’s helping companies detect fraud before it happens, reconcile accounts in record time, and even forecast cash flow with precision. 

AI shines by spotting patterns in mountains of data that humans can’t process quickly, and supplements the fraud prevention powers and automation offered by solutions and experts today. It flags issues like duplicate invoices or unusual transactions, reducing risk and saving money. For Bottomline, for example, machine learning capabilities allow for steadily improving accuracy when ingesting and reading invoices.

AI’s full range of applications are still being developed and understood, but businesses should expect its role in AP and cash management to grow.

Software as a Service Payment Platforms: Flexible Tools for a Changing World 

Gone are the days of archaic and cumbersome on-premise payment systems. SaaS platforms have taken over, offering the flexibility businesses need to adapt quickly to change. These cloud-based solutions can handle growing payment volumes and keep operations running smoothly, even as markets shift, and business needs evolve. They can be rolled out as white labeled solutions, connected to embedded solutions, or accessed directly through a software provider.

Another win for SaaS? Automatic updates. Businesses don’t have to worry about falling behind on compliance or missing out on new features. Add in advanced reporting tools that give real-time insights, and it’s clear why we’re nearing all-encompassing adoption of SaaS.

Vendor Onboarding: Building Relationships with Trust 

The first step to a successful B2B partnership is a smooth, secure onboarding process for vendors.  With more complex supply chains and growing fraud risks globally, businesses can’t afford to cut corners here. 

Modern onboarding tools use automation supplemented by expert reviews to check vendor details, verify compliance, and unearth potential red flags—all in a fraction of the time it would take if everything was done manually. These capabilities and expertise build vendor trust from day one and set the stage for strong, lasting partnerships. As fraud threats grow, secure onboarding is no longer a nice-to-have; it’s essential. 

At Bottomline, for example, enrollments are matched against over 300 data points to ensure a vendor is who they say they are, and no vendor can receive a payment until they are automatically reviewed and their details are looked over by an experienced team of in-house fraud prevention experts. Bottomline keeps the Paymode network secure by blending advanced technology with 15 years of experience fighting fraud.

Personalized Payment Terms: Flexibility Wins 

What if you could customize payment terms for every supplier relationship? That’s becoming the expectation as businesses prioritize flexibility to strengthen partnerships. Early payment discounts, extended terms, or tailored schedules offer personalized options that create win-wins for both buyers and vendors.  At Bottomline, we have clients who offer payment via Paymode within 10 days of invoice receipt or within 45 days if the vendor insists on a check payment, driving adoption of more convenient, secure electronic payment types.

Businesses benefit with more control over their cash flow, better predictability, and stronger supplier loyalty. Advanced analytics tools are helping companies break down vendor data and craft payment terms that make financial sense for both parties.

Security and Compliance: No Room for Mistakes 

Cyberattacks are on the rise, and regulators are paying close attention. This makes enhancing security and compliance for payments more critical than it has ever been. Businesses are adopting tools with built-in safeguards like encryption, tokenization, and fraud monitoring to protect sensitive data. 

Compliance is equally important. Navigating global regulations can be daunting, but robust tools make it easier, ensuring businesses stay on the right side of the law in any locale where they do business without wasting resources. In a world where trust is everything, prioritizing security and compliance is non-negotiable, given its potential to protect not just data and money, but also a company’s reputation.

Looking Ahead 

The future of B2B payments is exciting—and full of opportunity. Embedded payments, AI, SaaS platforms, secure onboarding, personalized terms, and rock-solid security are shaping a smarter, more efficient landscape.  The trick is figuring out where to spend your time and resources in 2025 and beyond to drive the business forward and realize your target gains in efficiency, security, and cost savings.

At Bottomline, we’re here to help businesses embrace these changes with solutions that simplify complexity and drive growth as they embrace these solutions for better payments and bigger results.

The post 6 Business Payments Trends to Watch in 2025 appeared first on PaymentsJournal.

The headlines surrounding the American Express settlement trumpet that the credit card giant is paying $138 million to rectify concerns over niche products intended for small and mid-sized businesses. What the headlines don’t mention is that the company took steps to resolve this issue long before federal authorities became involved. Amex not only discontinued the problematic services in 2021, but also fired members of the team responsible for them.

Here’s what happened: In 2018, American Express launched Payroll Rewards, which allowed business customers to fulfill their payroll via a direct payment from an Amex account. Amex charged a percentage-based fee based on the size of the wire, even though its competitors offered similar wiring services for nominal fees or even for free.

Small- and mid-sized businesses were told that if they used Payroll Rewards, the fees from the payments were tax-deductible as a business expense. Without the Amex services, customers were told they would have had to pay taxes on the fees.

Premium Wire was a follow-up product that allowed customers to make wire payments beyond just payroll use cases. According to a statement from the IRS, the marketing for both products relied on incorrect tax advice—namely, that the wiring fee was deductible as a business expense.

But as the IRS acknowledged, American Express recognized the problems with the two products very quickly. In early 2021, the company launched an internal investigation and ultimately fired around 200 employees connected to the products. By the summer of 2021, Amex had stopped enrolling new customers in the wire services, and by November of that year, the products were discontinued entirely.

“They Wanted to Do the Right Thing”

As part of the agreement, American Express will not face any prosecution. The non-prosecution agreement notes that the company voluntarily took substantial measures to mitigate and correct the deceptive sales and marketing practices around the two products.

In a statement, Amex said it “took decisive voluntary action to address these issues, including discontinuing certain products several years ago, conducting a comprehensive internal review, taking appropriate disciplinary measures, making organizational changes, and enhancing policies, compliance, and training programs.”

In addition to law enforcement, industry observers also appreciated the way American Express addressed the incident.

“American Express looks like they handled this properly right from the beginning,” said Brian Riley, Co-Head of Payments at Javelin Strategy & Research. “It was an isolated incident, and from what we’ve seen, they’ve been forthright in cooperating with the investigation. It’s clear they wanted to do the right thing.”

The post How American Express Got Out in Front of the IRS Probe appeared first on PaymentsJournal.

Walmart’s majority-owned fintech, One, is set to receive a fresh infusion of capital next year, fueling speculation about the future direction of the retail giant’s financial arm. The first step will be the relaunch of the Walmart credit card after the severing of an alliance with Capital One last year. 

According to Bloomberg, One is seeking to raise $300 million through Ribbit Capital, the same firm that helped Walmart launch One in January 2021. The capital will likely support efforts to secure a replacement for Capital One, which handled Walmart’s credit card business from 2018 to May 2024.

Walmart’s huge customer base consists of approximately 255 million customers and members, many of whom have moderate incomes and are underbanked. This creates an opportunity for simple deposit accounts and other core banking services. Additionally, One also offers early wage access to Walmart’s more than 1.6 million employees in the US.

These individuals trust the Walmart brand, making them more likely to embrace an app that integrates not just bank accounts and credit cards but investment options as well. The trove of consumer data Walmart possesses further enhances the potential for innovative offerings.

One got its start in the consumer finance space in 2022 by rolling out checking accounts for Walmart employees and select online customers. Its savings accounts offered a 5% interest rate—well above the national average—as a strategy to attract more users and grow its business.

New Services

This year, One has helped Walmart add buy now, pay later (BNPL) to it roster of services, with pay-by-bank features scheduled for next year. The addition of BNPL presents a myriad of opportunities for cross-selling other products. The pay-by-bank offering will allow Walmart customers to make instant transfers directly from their bank accounts for online purchases, sidestepping card networks and their processing fees. 

Some industry experts believe that pay-by-bank may not be attractive to Walmart customers, but the retailer says that earlier iterations—routing payments through the Automated Clearing House within three days—found support with its customer base.

“It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type,” Jamie Henry, Walmart’s Vice President of Emerging Payments, told Bloomberg News.

Integrating pay-by-bank functionality into One’s own digital wallet could enable seamless incorporation of loyalty rewards, coupons, and partnerships with other companies. It could also bolster anti-fraud measures by having user authentication integrated directly within the app.

The post Walmart’s Fintech One Is Poised to Take Off in 2025 appeared first on PaymentsJournal.

Data is the foundation of business-to-business expense management and corporate credit. Effective data management gives CFOs and finance offices insight into high-margin revenue opportunities and highlights the path to overall business efficiency.

In a recent PaymentsJournal webinar, Aaron Bright, Head of B2B at Galileo, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how harnessing the power of data can drive the CFO’s office forward. 

The Importance of Automation

Integrating data flows is the first step toward automating the expense management process, a task that is often resource-intensive for finance teams.

“Automating data integration into ERP or expense platforms reduces manual work like the bulk uploads and reconciliations that occur in traditional expense management,” Bright said. “Utilizing a platform that is directly connected to network transactional data can significantly boost an expense management system and make it more accurate.”

Many businesses struggle with data silos caused by fragmented systems, which can lead to inconsistencies and poor data quality. Consolidating these systems into a single platform helps resolve these issues challenges through data aggregation.

The automated aggregation of transactional data is crucial because it provides financial professionals with a broader perspective on their business. This information can help reduce costs, uncover efficiencies, and offer insights into how the finance office can access new funds and improve cash flows.

Additionally, it can also help the CFO’s office identify and eliminate risks related to fraudulent or inaccurate transactions. For example, identifying duplicate expenses across multiple vendors can help a company maximize its bottom line.

However, there are still a significant number of businesses who aren’t there yet.

“I’ve given talks about the importance of automation in treasury departments, and I often ask the financial professionals in the audience how much of their business is automated,” Bodine said. “It’s almost inconceivable to me how many businesses only have certain functions that are automated, and how many have no automation at all.”

The Innovation Curve

Companies at the forefront of innovation are increasingly looking for ways to embed financial products directly into their platforms.

“Large brands like Shopify or Starbucks are using open banking tools to incorporate things like loans or savings for their customers,” Bright said. “From a data perspective, embedded finance offers another way to get important information about consumer payment behaviors, which can be used to build better financial solutions.”

A substantial data repository can be analyzed to enhance decisioning-making, from selecting the most suitable payment methods to managing working capital loans. However, to tackle a finance office’s most complex challenges, more advanced tools will be necessary.

“Across the board, CFOs from small businesses to Fortune 500 companies say the most difficult challenge they face is cash flow forecasting,” Bodine said. “Without proper analytics and automation, forecasting cash flow and liquidity is next to impossible. The technology might not be there quite yet, but with AI and sophisticated data models, we’re reaching the point where we can more accurately forecast those aspects.”

The User Experience

Reliable data is also the basis for personalizing user experiences, which is critical for the adoption and implementation of financial management tools across an organization. For both consumers and businesses, the modern-day user experience must be mobile-first.

“The consumerization of business banking has been a hot topic,” Bright said. “Business owners are familiar with the features that are available in consumer online banking, and they want the same functionality. They want early access to funds, relevant notifications, and the ability to upload receipts or deposit checks by mobile check capture. Of course, they want to send and receive payments like they can on consumer digital-first banking platforms.”

Business banking is more complex than its consumer counterpart, and that complexity grows as companies scale. When it comes to data collection and analysis, many larger brands don’t want to reinvent the wheel—they want to partner with companies that can provide the data they need in an automated fashion.

“The larger brands prefer to work with partners and technology platforms that have likely onboarded many of the same clients before,” Bright said. “Those partners are likely to have baseline information on their client businesses, like the type of business, the owner, and even the tax ID number. Obtaining access to that data makes the onboarding process much smoother for business customers and enhances the user experience.”

Common Points of Compromise

As onboarding becomes more automated, there must still be a thorough review to ensure the business is legitimate and compliant. A solid foundation is essential for effective KYC and KYB checks.

Given the massive volume of data companies handle, they need a platform that can aggregate data and analyze it for signs of fraud.

“Companies like Galileo offer platforms that can remove personal identifiers from data and analyze larger-scale data trends,” Bright said. “Once our platform identifies the common points of compromise in a company’s systems, the organization can then reduce those types of transactions to mitigate fraud and disputes.”

Capturing payments and receivables data in real-time is critical to combat fraud, especially with the rise of instant payments. In addition, a sophisticated fraud detection system is necessary as criminals employ more advanced tactics.

“To catch today’s criminals, a company must have a partner or someone in the organization who can think like a criminal,” Bodine said. “In Las Vegas, the best way to catch a card counter is to hire a card counter. Coupling fraud expertise with tech like AI is going to be best solution companies can implement to identify and mitigate fraud.”

An Ecosystem of Partnerships

Artificial intelligence excels at fraud detection, but its impact extends to nearly every aspect of the finance office.

“The advent of AI will bring much more effective cost control measures to expense management,” Bright said. “It will be exciting to see how it can take historical transactional data, provide insights, and help businesses automate responses. AI can potentially reduce costs, improve efficiencies, and offer cash flow management solutions.”

As technology becomes more complex, it becomes harder for companies to go at it alone. Businesses often face the choice of buying or building financial solutions. Most will rely on a network of partnerships to handle aspects like fraud controls, customer disputes, and front-end user interface design.

The right data management partners do more than just build a data repository—they also interpret the data and deliver insights that are customized to a business’s needs.

“It all starts with good data,” Bodine said. “Organizations that don’t have the ability or the resources to mine and nurture good data will have to lean on technology and partners, because they can’t do it all themselves. They will have to think long and hard about their partnering strategy.”

The post How Data Powers B2B Expense Management appeared first on PaymentsJournal.

The correspondent banking system that has been the framework for cross-border payments for decades has become inadequate to meet the demand for global remittances. However, with so many technology solutions available, many financial institutions might be unsure how they can participate in the growing cross-border payments segment.

In a recent PaymentsJournal webinar, Gary Palmer, CEO and Founder at Payall Payment Systems, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the obstacles facing global payments systems, the potential solutions, and the emerging paradigm for cross-border payments.

Purpose Built

One of the main reasons why there have been issues when sending cross-border payments is that there was never the purpose-built infrastructure to support it, whether that be through a core bank system, a digital banking platform, or a back-end system.

Sending a payment across borders requires processes that can account for aspects like risk, compliance, process automation, data sharing, and payment orchestration. So far, there has not been a widescale solution that allows the entire ecosystem to enjoy transparent, efficient, and safe cross-border payments.

One reason this infrastructure hasn’t existed is because financial institutions simply haven’t had the time or the budget to build it.

“I had lunch recently with the CTO of a major U.S. financial institution, and we were chatting about his massive technology budget for innovation,” Palmer said. “We found out that it wasn’t so massive, because 90% of his budget is spent doing three things. One, protecting the institution’s data and their systems from hackers. Two, trying to keep thousands of disparate applications and systems current, and three, trying to keep products up to snuff with regulatory changes.”

By the time a financial institution fulfills these essential obligations, there is little left over for innovation. As a result, originating institutions who want to offer customers cross-border payments, or correspondent banks that are under pressure to improve how they support payments from foreign financial institutions to the U.S., might be unsure how to proceed.

The Human Angle

Though it is challenging to facilitate cross-border payments, the demand is stronger than ever. That creates an opportunity for financial institutions to provide a solution that can touch almost every person on the planet.

“When you think about how global our world is, it means you can own a retail shop in Dubuque, Iowa, and you’re importing goods from India or China,” Palmer said. “You might have a software designer in Eastern Europe and a leather supplier in Argentina. Small retailers are now engaged in global trade and selling products worldwide on Etsy and Amazon. They need to be paid.”

In less-developed areas of the world, a marketplace seller on eBay or Etsy is not just concerned with the speed of getting paid and the costs associated with the transaction. These payments are extremely significant to these individuals because they could be the difference in obtaining medical care for their family or putting food on the table.

“There’s a human angle here,” Palmer said. “There are businesses that have struggled or failed because they were waiting to get paid from a cross-border transaction. A better cross-border system helps financial institutions to not only help their local community, but there is also a trickle effect to other parts of the world. It starts with giving customers the ability to pay suppliers and vendors efficiently.”

Speed and Safety

Though cross-border solutions can make an enormous impact, they can also be difficult to safeguard. As payments systems have gotten faster, and in many cases real-time, there has been some concern that this speed could be exploited by criminals.

“Some have said that real-time payments systems undermine an institution’s ability to protect the safety and soundness of its payment systems, to prevent money laundering, and to make sure that nefarious activities aren’t happening,” Palmer said. “I’m passionate about this and I can prove it, that speed and safety are not mutually exclusive with the right software solution.”

If cross-border payments become slower and more regulations are tacked on, they won’t be a functional solution. Consumers could turn to alternative channels that would be unregulated and unsafe. Instead, cross-border payments should be front-and-center in financial institutions that use software to facilitate them.

A Modern Alternative

Most of the new cross-border payment technology solutions are geared toward disintermediating financial institutions. However, there are solutions that are designed to work with banks.

Both Visa and Mastercard have created frameworks for cross-border payments that financial institutions can utilize. For example, Mastercard Move is a product that is a modern alternative to the classic correspondent bank structure.

Mastercard Move gives banks the ability to make transfers in more than 100 countries, and in most of those countries the transfers are in near real-time. In addition to faster settlement, when a bank is connected to the framework through a platform like Payall, they will receive confirmation of delivery for both sender and recipient. There also aren’t the typical fees associated with foreign transfers.

That functionality can have a dramatic effect on smaller businesses.

“I like to speak in terms of cash flow and liquidity, but I don’t say that in terms of only Fortune 500 organizations,” Bodine said. “Cash flow and liquidity are very important to the unbanked and the underbanked, and to small business owners. With the proper tools, the inefficiency that has plagued cross-border payments can be mitigated, and cash flow and liquidity for those individuals can be improved.”

The Next Few Years

Because financial institutions are still in the earliest stages of adopting cross-border payments technology, one of two things will happen. Either classic correspondent banking systems will adopt software that allows them to be competitive, or alternative paradigms will begin to gain traction.

“My prediction is that we’ll see more financial institutions all around the world offering these types of products to their customers,” Palmer said. “In five years, we’ll see more pay by bank payments using infrastructure like ours. But I want to be clear, we’re literally just getting started. There’s a long way to go before that happens.”

There may also be new constructs like domestic networks that connect to other domestic networks. In a few years, banks will have more options than ever for how they can enable funds to move around the world. Regardless of the framework, there is a clear need for change.

“I can’t overemphasize the importance of efficiency, speed, cost, and transparency,” Bodine said. “I had the great displeasure of paying for a wedding overseas, and I spent large amounts of money in the correspondent banking system just to get the funds there, and then I had to wait long periods for confirmation. The whole time I’m wondering whether my money was actually safe.”

The post How Financial Institutions Can Change the Paradigm for Cross-Border Payments appeared first on PaymentsJournal.

Organizations seeking more flexibility and sophistication in devising transaction fee and commission structures are increasingly turning to rules-based fees engines.  Billing systems are designed to handle invoicing and collect payments, but they are limited in their ability to help companies create new fees and commissions.

Rules-based fees engines allow payment processors to stay competitive and profitable, enabling them to offer new value-added services, develop creative incentive programs, create new revenue streams, and respond quickly to market shifts. In a recent PaymentsJournal podcast, BHMI’s Chief Technology Officer Mike Meeks and Senior Program Director Cheryl Fitzgarrald spoke with James Wester, Co-Head of Payments at Javelin Strategy & Research, about the advantages of rules-based fees engines and who benefits from them.

Developing the Solution

Rules-based engines allow fees and commissions to be configured from any combination of attributes, such as the payment method used, the amount, the merchant category, and the time of day the transaction occurs. Unlike traditional billing systems, a rules-based fees engine provides the ability to measure and test the financial viability of new fees and commissions before they are implemented.

“Back in 2004, we were approached by one of the country’s largest debit networks, which was not able to introduce new products or new pricing strategies without long software development cycles,” said Meeks. “All of their rules for how they price things were embedded in code, which made it very slow and costly to roll out new structures and to respond to what their sales teams were asking them to do in a timely manner.”

“They needed a solution that was flexible and could meet unforeseen future requirements,” he said. “That’s what drove us to the concept of a rules-based engine and the kind of open-ended capabilities it would provide. For more than 20 years now, we’ve been implementing these solutions for companies all over the world.”

This solution gives companies the ability to be creative and innovative, supporting any business opportunity, client relationship, or product offering that marketing and sales bring to the table. It also speeds up time to market, as new fee and commission structures can be quickly configured and implemented.

“Research is showing that there is a requirement now in payments for companies to be able to pivot quickly, to be able to bring products to market quickly and to not necessarily be held hostage by those development cycles,” Wester said.

A modern rules-based fees engine should have the flexibility to create any type of fee or commission on any type of payment transaction. This includes card-based transactions as well as account-to-account and real-time payments. It should also have no limitations on the types of fees or commissions that can be configured and should allow for additions and modifications without requiring software changes or downtime. 

Another important factor is that the system must be able to access payments data in real time, applying the appropriate fees or commissions while the transaction is still in flight. Finally, rules-based fees engines should provide companies with a real-time view of fee revenues, enabling them to analyze the financial impact of those revenues and easily determine if adjustments are needed.

Under the Hood

A rules-based fees engine integrates data from multiple sources. The most common way to access data from these sources is real-time APIs, but in some cases, automated file-based mechanisms are required, depending on what is supported by the originating data source.

“The typical sources that we see are credit and debit card transactions that an authorization system is writing to a transaction log file, a clearing system that creates a clearing file for POS dual message systems, and a card network that creates a settlement reconciliation file,” said Meeks. “A modern rules-based fees engine can use data from any and all of those sources to assess fees and commissions as a transaction is being processed.”

Once that data is collected, companies have discovered a wide variety of use cases for the technology. “The possibilities are unlimited,” said Fitzgarrald. “Some common use cases would include things like calculation of gateway fees, processing and service fees, and recurring fees. They are also used to calculate many different types of commissions. If you think about it, a commission is just like a fee, but the money goes the opposite way.”

Opening Up Creativity

Rules-based fees engines have allowed companies to be more creative with their services and pricing structures. Fees can vary based on time sensitivity, such as higher fees during peak business hours and lower ones during off-hours. Companies can also introduce fee models tied to loyalty programs or specific merchant partnerships, incentivizing behaviors that increase transaction volumes or customer loyalty.

Once a company implements a rules-based fees engine, the infrastructure allows them to better analyze and address important questions like which fees bring in the most revenue, which commissions provide the most incentive, and whether a particular service can be expanded or rolled out to other customers.

“One of the amazing parts of this is the approach to testing,” said Wester. “Testing is very difficult and time consuming. The idea that you can test a product or a fee, and pull it back if it doesn’t work, gives you a tremendous amount of flexibility.”

Any company that processes transactions and has a need to calculate fees and commissions can benefit from this technology.  “Probably the single most important reason that I’ve heard for people adopting rules-based fee engines is that they are money makers,” said Fitzgarrald. “They allow the company to rapidly configure creative fee and commission models and let them pivot quickly in response to changing market conditions. All of this Is done without the cost and delay of code changes.”

Learn more about maximizing your pricing and fee structures.

The post How Rules-Based Fees Engines Drive Innovation appeared first on PaymentsJournal.

In a move that could jump-start instant payments in the U.S., the Clearing House is raising the payment limit on its RTP network from $1 million to $10 million. The new limit will take effect on February 9, 2025.

“The higher transaction limit would enable more real-time payments use cases, especially higher-value transactions such as business-to-business transactions and real estate,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “This is a positive development and could help accelerate instant payment adoption in the U.S.”

While businesses account for 80% of RTP transactions, 95% of these payments are received by consumers. This indicates there’s some room for growth in higher-dollar B2B payments.

The Clearing House is highlighting several use cases that will be enhanced by the increased limit, including:

• Real Estate/Title Insurance: With commercial and higher-value residential real estate payments now being sent instantly around the clock, more closings can be settled after business hours or on weekends.
• Merchant Settlement: Larger merchants and retailers can receive instant payments the same day they’re made, instead of waiting for a payout the following day.
• Supply Chain: Manufacturers can pay suppliers instantly, enabling quicker receipt of products and supplies.
• Cash Concentration: Businesses can more easily transfer funds to a single account, optimizing liquidity and streamlining fund consolidation.

“The $10 million transaction limit allows financial institutions and their customers to make larger payments in real time, continually enabling the RTP network to evolve to meet industry needs,” said Margaret Weichert, Chief Product Officer at The Clearing House, in a prepared statement. “Customers already benefit from the system’s around-the-clock availability, with 42% of transactions taking place overnight, on weekends, or holidays.”

Staying Ahead of the Competition

Although the U.S. government launched its instant payments service, FedNow, last year, the RTP network remains the largest system of its kind in the country, averaging more than one million payments daily. On November 1, the network set a new single-day record, processing 1.45 million transactions valued at $1.24 billion. More than 285,000 businesses send instant payments over the RTP network each month.

The RTP transaction limit has been $1 million since April 2022, when it was increased from $100,000. This change followed a similar increase to the Same Day ACH transaction limit, also raised to $1 million, one month earlier. FedNow has a transaction limit of $500,000.

The post RTP’s Instant Payment Limit to Jump to $10 Million, Expanding Business Use Cases appeared first on PaymentsJournal.

Cross-border payments are a vital part of the globalized economy, transferring trillions of dollars between countries each year. These transactions span traditional methods such as bank transfers and credit card payments, as well as emerging alternatives like digital wallets and mobile payment solutions. By 2030, Javelin Strategy & Research estimates that the market will grow to nearly $3 trillion.

By definition, cross-border payments exist outside the purview of a single currency or national regulatory framework. Each transaction involves multiple currencies, different financial systems, and varying regulatory schemes. Additionally, they are subject to currency fluctuations, international trade laws, and compliance standards, which collectively make the process more cumbersome and time-consuming.

Businesses that have evolved to meet the need for cross-border money movement are equally complex. These international payment systems include federal governments, consortiums established by major banks, international nonprofits, and traditional card networks like Mastercard and Visa.

Today, there are 0.7 annual cross-border transactions per capita on average globally, up from 0.5 in 2014. Although cross-border flows represent only one-sixth of total transaction values, international payment revenues total up to $200 billion globally, split roughly evenly between transaction fees and foreign exchange (FX) revenues.

These payments not only fuel global commerce but also provide benefits to all types of economies.

Let’s explore the latest insights into the contemporary world of global cross-border payment solutions, including key trends, challenges, and the emerging technologies transforming international transactions—and how individuals, businesses, and financial institutions can benefit from them.

Cross-Border’s Major Players

The most important facilitators of cross-border payment have traditionally been organizations established by major banks and national governments, working together to facilitate a smoother global economy. The primary ones include:

• SWIFT (Society for Worldwide Interbank Financial Telecommunication), a trailblazer in this area, is the most widely used network for international payments, providing a standardized messaging system for financial transactions between banks worldwide.
• The Single Euro Payments Area (SEPA) is a European Union initiative that simplifies bank transfers denominated in euros, promoting faster and more cost-effective transactions within Europe.
• The Clearing House Interbank Payments System (CHIPS) is a U.S.-based clearinghouse that handles large-value cross-border dollar payments.

However, a challenge to the hegemony of these players is coming from a more established segment of the financial landscape. Traditional card networks, including Visa, Mastercard, American Express, Capital One, and Discover, have been elbowing their way into cross-border transactions. Through their existing global networks—historically used for consumer transactions—they are capturing an ever-growing share of the vast cross-border market.

Mastercard and Visa, specifically, are hedging their interests in retail payments across many EU markets, while American Express has long been a leader in corporate relationships—a natural landing space for cross-border transactions. Although transaction amounts on the card rails are relatively low compared to those conducted over SWIFT, they will continue to grow and gradually chip away at large capital purchases that are currently almost entirely completed via wire transfer.

It’s important to note that the card rails won’t simply watch their revenue stream erode due to the rise of instant payments. 

Visa and Mastercard have been able to navigate the regulatory landscape that allows them to process payments overseas and settle them without relying on correspondent banking. The rails themselves have become  more sophisticated in their ability to handle cross-ocean or cross-continent payments.

While it’s still early, time will tell how the card networks become involved in cross-border and instant payments. Eventually, India’s UPI, Brazil’s PIX in Brazil, as well as FedNow and RTP in the U.S., could become the primary route for these payments.

Key Growth Factors in Cross-Border Payments

The old system for making international payments was the correspondent banking model, composed of the largest banks in the world. This network of large legacy banks relies on one another to transact across borders.

For example, if someone in the United States wanted to buy an airplane from a seller in the Emirates, they might contact JPMorgan Chase. JPMorgan can then process the payment, through the SWIFT payment rail, to the bank in the Emirates that the seller uses.

But this model has been under pressure as the market grows. Over the past decade, the volume and value of cross-border payments have increased by 61% and 37%, respectively, according to the Bank for International Settlements Committee on Payments and Market Infrastructures. The Faster Payments Council has outlined five key developments that were responsible for much of that growth in cross-border payments:

1. In 2017, Swift introduced its Global Payments Initiative (GPI), allowing financial institutions to send and receive funds quickly and securely anywhere in the world. GPI also allowed for full transparency in the status of a payment at any given moment. By working together to strengthen the SWIFT network, banks can help ensure that clients receive a consistent and value-added global payments service. They can also pave the way for fast, traceable cross-border payments.
2. The global standard ISO 20022 became a reality for SWIFT member banks in March 2023. It established a common language to both send and exchange payment data, enhancing the current interface within companies, payment schemes, and financial institutions worldwide. ISO 20022 offers enriched payment data, enabling more robust fraud controls, behavioral predictions, and more resilience.
3. Distributed ledger technologies, which blockchains are made from, facilitate payments by providing a secure and transparent platform for the transfer of funds. Blockchain is particularly well-suited to cross-border payments, where numerous intermediaries are involved in processing transactions, and continues to drive technological innovation.
4. Application programming interfaces (APIs) allow applications to communicate with each other, offering more accessible, transparent, affordable, and faster cross-border payments. APIs facilitate faster and more efficient cross-border payments by reducing manual intervention and supporting more timely data exchanges across the payment chain.  
5. Central bank digital currencies (CBDCs), digital versions of a country’s fiat currency, allow for faster, cheaper, and more secure payments compared to traditional methods. Digital currencies and tokenized assets have immense potential to alter the global cross-border payments landscape by making it faster, cheaper, and more secure.

Challenges and Solutions for Cross-Border Payments

Many challenges remain for organizations trying to build a fluid system for cross-border payments. Perhaps the most significant of these is the currency fluctuation inherent in these transactions.

Exchange rate fluctuations can create uncertainty for businesses and individuals. Instant payments, which have the potential to clear and settle within 20 seconds, can help reduce this uncertainty.

A 24-hour window to complete a transaction gives both national currencies the chance to fluctuate in value, making the settlement cost a moving target. With instant payments, traders can almost pinpoint exactly what the exchange rate will be.

Companies today use several tools to help mitigate that risk. For example, natural hedging involves an organization holding funds in a local currency in case they need to make a payment in a foreign currency. Other types of currency hedging can lock in rates for a fee. Bringing instant payments to cross-border transactions, as several blockchain experiments have shown, would eliminate the need for these techniques.

Other challenges facing cross-border payments include:

Regulatory barriers: Differing regulatory frameworks, anti-money laundering laws, and Know Your Customer requirements can complicate sending and receiving international payments. While essential for preventing fraud and ensuring security, these regulations can be burdensome, especially for underbanked regions where individuals may lack the documentation or financial literacy to comply with stringent requirements.

High transaction costs and fees: These costs include currency conversion fees, intermediary bank charges, and compliance-related expenses, which collectively reduce the net amount received by the beneficiaries.

Slow processing times: With multiple intermediaries, different time zones, and varying banking systems, cross-border payments can be unpredictably slow. This can affect an organization’s cash flow for businesses and cause headaches for those expecting the payment.

Fraud: With international payments,the physical distance between criminals and their victims significantly lowers the chances of perpetrators being caught, and victims have limited options for recourse after being defrauded. While only representing 11% of total card payment transactions, cross-border payments account for 63% of card fraud.

Lack of transparency: It can be difficult to get reliable information on transaction fees, exchange rates, and processing times, lack of visibility into these factors can make it hard for business to choose the right option.

Emerging Technologies and Innovations in Cross-Border Payments

One reason cross-border payments are evolving away from the correspondent banking model at such a rapid pace is technological innovation. Some of the most important recent developments that are affecting this landscape include:

Blockchain/Tokenization

Blockchain’s potential to reduce fraud, lower transaction costs, and increase transparency is particularly beneficial for cross-border payments. Cryptocurrencies operating on blockchain technology offer an alternative to traditional fiat currencies, enabling peer-to-peer transactions without intermediaries. While this can significantly speed up transactions and reduce fees, the volatility of cryptocurrencies and regulatory uncertainties pose challenges for their widespread adoption in commercial payments.

The blockchain has the potential to bypass the traditional correspondent banking model.  Theoretically, individuals do not need to be banked to use the blockchain, which democratizes cross-border capabilities.

Tokenization—the process of creating digital tokens, such as cryptocurrencies, on a blockchain to represent assets, including financial instruments—offers several benefits. These include greater simplicity within the financial system, faster settlement, and a potential reduction in fraud. It represents a more efficient and transparent approach to value movement than the methods banks currently employ.

Several organizations are exploring tokenization as a way to enhance the speed and integrity of cross-border payments. Among private banks, UBS, JPMorgan Chase and Citi have all made forays into this arena.

A number of governmental entities are also dipping their toes in this space. For instance, the Federal Reserve Bank of New York, along with six other central banks, has teamed up with the Bank for International Settlements (BIS) to test the benefits and utility of tokenization. Operating under the name Project Agora, the collaboration intends to ease international payments while addressing differing legal, regulatory, and technical requirements.

Central Bank Digital Currencies (CBDCs)

The increasing popularity of cryptocurrencies has prompted central banks and financial institutions to explore the potential of CBDCs as a way of increasing the efficiency of cross-border payments. These digital currencies, backed by the central banks, offer the benefits of cryptocurrencies, such as faster transactions and increased transparency, while retaining the stability and regulatory oversight associated with traditional fiat currencies.

A report from The International Monetary Fund explores how new platforms for CBDCs can improve cross-border payments. IMF’s blueprint foresees the ongoing digitalization of the financial sector, providing a framework for countries to leverage the advantages of digital currencies in a regulated environment.

While IMF’s vision aligns with the digitization trend, it also represents a departure from the decentralized nature of cryptocurrencies. The envisioned global CBDC platform, while efficient and cost-effective, does not fulfill the aspirations of crypto enthusiasts seeking a decentralized financial system. It may, however, provide benefit, without much of the risk that has plagued cryptocurrency exchanges.

Card Companies

Existing credit card companies’ payment rails can also be seen as a growing technology. Visa, Mastercard and American Express have a presence in 200 different countries, allowing U.S. consumers to buy products from India or China without realizing a cross-border payment is involved.

For larger entities, Visa’s B2B Connect has been offering cross-border commercial services for some time and was recently joined by Mastercard Move Commerical Payments. Their inroads into the commercial payment business have grown substantially over the past two to three years.

Nonprofit Consortiums

Because cross-border payments fall under the regulatory structure of multiple governments, it’s common for international consortiums to spring up, often consisting of major banks that band together to facilitate such payments. This label applies to the entities formed by the banks mentioned above, as well as initiatives like Project Agora.

Another example is the Interledger Foundation, an organization advocating for an open and interoperable payment network. It has worked with fintech Chimoney to facilitate cross-border payments in 130 countries, and extended these capabilities to rural Mexico through a partnership with the People’s Clearinghouse, a tech platform serving community banks and credit unions in Mexico. For remote corners of the world teeming with underbanked or unbanked people, nonprofits will play a key role in unlocking secure and reliable cross-border transactions.

Future Outlook in Cross-Border Payments

Efficient, reliable cross-border payments are a necessity in a truly globalized economy. U.S. consumers can now make digital purchases from distant locations without ever considering how the transaction is processed. The traditional correspondent banking model is ill-suited for handling the sheer volume of fast-paced, relatively small-scale transactions. As is often the case, commercial interests will drive technological advancements, while government regulations will aim to foster innovation rather than impose undue restrictions.

Cross-border payments have never been more important, even for small retail outlets. Take the example of a mom-and-pop necklace shop in Bali that doesn’t have a bank account but likely has a phone. That smart device could receive payments from anywhere in the world through blockchain technology. This innovation could enable small businesses to operate like Fortune 500 companies, extending their supply chains globally.

Advances in global cross-border solutions are likely to accelerate over the coming decade, driven in part by three factors:

New competition: The credit card issuers’ payment rails are just one means of bringing new players into the cross-border arena. Central banks around the world have also been working to foster global money movement, as well as quasi-governmental organizations like FedNow. The increasing number of cross-border payments is likely to bring even more entrants to the field.

Technological innovation: Blockchain technology has the potential to revolutionize global payments 15 years after it was first introduced. The next 15 years promise developments that are barely being dreamed of today.  

Nonprofit initiatives: There is both a moral and an economic incentive to bring payments to the far corners of the globe. As more business entities recognize the value to reach the underbanked, the more payment options will proliferate in these areas.

Cross-border payments will continue to accelerate, both in the number of transactions and the volume of purchases. It’s inevitable that more options and opportunities will emerge to meet these growing needs.

The post Cross-Border Payments: Trends, Challenges, and Solutions appeared first on PaymentsJournal.

More enterprises are adopting commercial credit card programs to streamline their financial operations, leveraging tools and simplify transactions while improving control and oversight.

To gain deeper insights into how various players in the space compare, Javelin Strategy & Research released its 2024 Commercial ePayables Scorecard. The scorecard guides commercial enterprises in assessing potential ePayables partners, comparing current vendors, and understanding the technology, key benefits, and sample use cases.

Who’s Using ePayables?

Within a commercial credit card program, ePayables operate alongside corporate cards and purchasing cards. These cards, linked to the buyer’s credit line, are used to pay suppliers in an automated and seamless manner, typically integrated with the company’s accounts payable system. They serve as virtual credit cards, providing an  electronic payment alternative to checks.

“In the case of ePayables, you don’t present a card,” said Albert Bodine, Director of Commercial Enterprise Payments at Javelin Strategy & Research and author of the scorecard report. “It’s transacted from computer to computer, very similar to what used to be called electronic funds transfer. It doesn’t appear to either the buyer or the seller as anything like a traditional card transaction. The only common piece is that it is based on a card credit line.”

Commercial ePayables are particularly suited for large organizations that process high volumes of invoices and payments. They are widely adopted across industries managing complex supply chains and large-scale procurement processes, like retail, manufacturing, logistics, and professional services. While ePayables can be used for purchases of any size, enterprises typically reserve them for recurring expenses, such as service maintenance.

Third-party platforms are often white-labeled by financial institutions offering other essential treasury services, such as ACH, wire transfers, and check processing. Although some platform providers work directly with corporates, even those with bank identification numbers for issuing virtual cards still require a sponsor bank to provide payment accounts. As a result, most ePayables programs are sourced through chartered financial institutions.

The Industry Leader

The most comprehensive offering, scoring highly across all four categories evaluated by Javelin, was provided by Bottomline. Bottomline also leads in the supplier enablement category, with a standout offering for vendor onboarding and ongoing supplier engagement.

“In our analysis, Bottomline has the most comprehensive offering for a company looking for a soup-to-nuts solution,” said Bodine. “But they also excel in an area that is most important in ePayables, which is supplier enablement. You simply don’t have a good ePayables Program if you don’t have very strong supplier enablement.”

Supplier enablement encompasses efficient supplier onboarding and streamlined payment processes that foster positive relationships between businesses and suppliers. To optimize supplier enablement, companies should adopt tools and technologies that facilitate seamless communication, reduce onboarding time, and provide flexibile payment options.

“In order for a vendor to accept ePayables as a form of payment, it takes quite a bit of effort, mostly because of the cost of the transaction,” Bodine said. “In order to have a strong group of vendors, you really have to be able to paint a very good value proposition with them. Supplier enablement is not a one-time thing. It’s an ongoing relationship.”

The Best of the Rest

Other recognized firms included Boost Payment Solutions for cross-border, Highnote Technologies for ledger and back-office integration, Galileo Financial Technologies for infrastructure and architecture, and Paymentus as one to watch.

While working on this report, it became clear to Bodine that many entities—both customers and suppliers—were better served by focusing on just one aspect of ePayables.

“There are organizations that don’t need soup to-nuts solutions here,” said Bodine. “Some only need the cross-border component. There are organizations that have very strong development staff, so they don’t need any user interface, just the APIs and the nuts and bolts for infrastructure and ledger to be able to integrate into their systems. That was one thing I didn’t really expect going into this project.”

The post Exploring the Top Players in ePayables appeared first on PaymentsJournal.

Truly effective spend management goes beyond just controlling costs—it’s about enhancing efficiency and unlocking value. The advent of artificial intelligence is introducing new ways for payment processors to increase that value.

John MacIlwaine and Alexander Hagerup are on complementary sides of this discussion. MacIlwaine, Co-founder and CEO of Highnote, helps companies move beyond legacy payment providers, while Hagerup, CEO and Founder of Vic.ai, leverages machine learning to power more efficient, automated payments flow. In a recent PaymentsJournal webinar with Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, they discussed how advanced spend management tools, integrated with modern embedded finance features, are transforming back-office processes.

The AI Enhancements

AI offers the opportunity to take a comprehensive look at corporate spending across both vendors and customers. Real potential becomes visible through AI, which serves as roadmap for moving customers away from checks or other outdated processes.

According to Hagerup, there are two primary ways AI is enhancing the payments process. The first is through insights and analytics. Since AI is processes data in real time, it enables instant reporting across accounts payable and expenses, while its predictive capabilities help organizations forecast future spending in both areas.

The second enhancement is in processing efficiencies. AI improves error reduction and fraud prevention while also delivering cost savings by reducing the need for manual transaction processing.

This increased data visibility offers deeper insights into various fraud patterns, not only for individual programs but across the entire platform. It can help detect transactions that deviate slightly from normal spending patterns, allowing them to be flagged as suspicious.

“I like to view AI as a coworker,” said Bodine. “I’m a farmer, and when the tractor was developed, it didn’t replace the farmer. It made the farmer more productive. Where the farmer used to be able to plow and harvest 5 to 10 acres, they now could plow and harvest maybe 100 to 200 acres. I view AI the same way.”

The combination of a strong payments platform and a forward-looking AI operation propels payments into a much brighter future.

“These types of symbiotic relationships really are pushing the overall experience and the outcomes for our customers to be developed much, much faster,” said Hagerup.

The Benefits of Payments Orchestration

The benefits arise not only from what the data reveals but also from the events occurring throughout the entire payments lifecycle. One of the capabilities of a high-quality payments platform is event notification.

“Traditional platforms and solutions historically in our view have been a bit of an encumbrance,” MacIlwaine said. “It’s our job to enable AI and to do what they need to be competitive with regard to both the data, but also orchestration. As checks are cleared, all those events are able to be sent to Vic.ai in terms of how they want to consume them to make business decisions.”

In many payment processes, the different windows and timings can’t adhere to specific rules, making it hard to develop solutions. However, combining event notifications with data allows for innovative solutions to emerge and facilitates the management of these different workflows.

Payments orchestration refers to the strategic coexistence of payment types, allowing an organization to handle different payment methods from various customers or vendors while maximizing the value of downstream data and analytics.

Much of the challenge lies in customizing solutions to meet the varying needs of different vendors or customers. The goal is to allow each company, with its unique processes, to innovate within the payments platform.

“Vendors have different preferences, and they can even have different preferences depending on what they’re getting paid for,” said Hagerup. “Catering to the vendor’s preferences is really important. They need to get paid in the most important payment rail so the money gets to their vendor in time and at a low cost.”

Breaking New Ground

Maybe the biggest advantages for payments processors come from addressing edge cases—businesses that are breaking new ground and leading the way toward new developments.

“The innovators building on top of this platform are what we’re most excited about,” said MacIlwaine. “That’s what is allowing our platform to evolve into the best platform to support accounts payable automation and build on the processes that Vic.ai is highlighting.”

Many organizations remain in a state of transition, relying on legacy systems to manage their payments while eagerly anticipating the benefits that new technology can offer. It’s essential to have a platform that can support older payment modalities while continuing to demonstrate and provide the value of newer models.

“The whole modernization of the back-office is happening at a very rapid pace,” said Hagerup. “The technology is there. Now we just need the world to adopt and build into it.”

The post Unlocking the Benefits of AI in Spend Management appeared first on PaymentsJournal.

Instant payments have been a global phenomenon, but the momentum for real-time payments  is building in the U.S. There is a growing expectation among both businesses and consumers that when they send funds, the recipient should be able to access them instantly.

In a recent PaymentsJournal podcast, Justin Jackson, SVP, Head of Enterprise Payments, Fiserv, and Robert Clayton, Vice President of Product Management, as well as Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the increasing number of use cases for instant payments and the progress that has made toward adoption.

Instant Use Cases

One of the early use cases for instant payments has been in the gig economy, predominantly in the rideshare market. Drivers are constantly refueling, performing maintenance, and buying food and beverages. To keep them out on the road, it would be a great boon for rideshare drivers to refresh their funds throughout the day, any day of the week, through a real-time payments connection.

“There are similar needs in the marketplace space,” Clayton said. “There is a demand for real-time, around-the-clock payments so marketplace sellers can manage their inventory. Marketplaces traditionally have set payment boundaries around sellers, where they must wait a prescribed amount of time or reach a sales threshold before they can request a payout. Real-time payments have tremendous benefits for those sellers.”

The insurance industry is also seeing traction. Often, clients lose their car or house and it could be a massive competitive differentiator for an insurance company if they are able to settle a client’s claim in real-time during an urgent situation.

Instant payments could serve government agencies in a similar capacity. The Southeastern U.S. was recently hit by hurricanes that did significant damage, which created the urgency needed for many to receive disaster funds.

“Federal and state agencies are extremely focused on getting aid to the people who survived these events,” Clayton said. “They need to make those funds available as quickly as possible, but it can’t be location based. Even if the government could deliver checks same-day to disaster victims, many have evacuated or their homes have sustained extensive damage.  The ability to pay a person digitally in real-time, wherever they might be, could be an incredibly important force for government agencies.”

Shifting the Conversation

Although the amount of use cases for instant payments has increased, some of the financial institutions that were early adopters of RTP or FedNow aren’t using the rails to their fullest potential. Many of these organizations can only receive instant payments; they don’t have the functionality to send.

“Either they didn’t see the use case or the applicability, or those institutions are concerned about the risks,” Jackson said. “However, that mindset has shifted to where it’s not receive-only, it’s receive-first. They may not be ready to send instant payments now, but they want that capability in the coming months or years. They know they will have customers that want to make instant transfers or pay bills in real-time.”

The risks of sending instant payments, and the potential for fraud, has daunted some U.S. financial institutions because real-time payments are guaranteed credit transactions that are instantly available on the recipient’s end.

“It is a significant hurdle to clear to unwind an instant payment transaction if necessary,” Jackson said. “There is a need to have strong risk and fraud controls, many of which are already in place, but some institutions are still reticent on instant payments because they are not sure how they will handle fraud.”

Instant payment volumes will also hit an inflection point where exponential growth occurs overnight. In that scenario, many organizations are concerned they won’t have the infrastructure to support it.

There are additional concerns in corporations or government entities that are still reliant on paper checks. Many of those organizations have built their financial operations to account for the float between the time a check is issued and the time it is processed. A switch to instant payments would mean those organizations would have to drastically adjust their model.

Though it might cause short-term issues, there are benefits to moving from paper checks to a real-time payments model. Chief among those benefits is an increase in customer or constituent satisfaction if they receive their funds instantly.

“In the case of a natural disaster, if a government agency is able to send funds immediately, it shifts the conversation,” Clayton said. “Instead of a citizen who is focused on the hardship they endured, they can say they experienced a terrible act of nature, but their government was there to get them back on their feet. It shifts the conversation to a happy ending.”

Intriguing Frontiers

While there are a variety of domestic use cases, one of the most intriguing frontiers for instant payments is cross-border transactions.

“Cross-border instant payments are compelling because there are already so many instant payments services that have been established in other countries,” Bodine said. “There is Pix and UPI, and there is FedNow and RTP in the U.S., but we can’t do a cross-ocean instant payment right now. It’s intriguing to see who will connect those disparate rails.”

The global card networks operated by Visa and Mastercard could be a solution to that problem. International messaging network SWIFT has also made headway toward creating a cross-border framework.

“There is a bit of reality in that there are so many disparate payment schemes locally across various countries and regions,” Clayton said. “However, RTP has discussed the potential of a SWIFT integration that would enable cross-border transactions from the U.S. into Europe. Europe is advantageous because there are consistent regulations in the region.”

Instant Expectations

Instant payments are quickly gaining ground in the U.S. but are far from being implemented in every use case. Adoption is indeed growing. There will be an increasing expectation from commercial enterprises, consumers, and small businesses that they can send and receive funds instantly.

“Instant payments are very real and they are very here,” Jackson said. “Fiserv has approximately 700 financial institutions signed up or live for RTP and FedNow. We as an industry, including payments processors, financial institutions, merchant service providers, we all have to do our part to support instant payments adoption. Instant is fast becoming the expectation of the day, so we should continue to push that ball forward.”

The post Very Real and Very Here: The Proliferating Use Cases for Instant Payments appeared first on PaymentsJournal.

Cross-border transactions have become a cornerstone of the global economy, enabling businesses and individuals to seamlessly exchange goods, services, and payments across international boundaries. As technology advances and digital payment systems evolve, the process of moving money across borders is becoming faster, more secure, and increasingly accessible. However, this growth also brings challenges such as regulatory compliance, currency fluctuations, and the need for transparency in payment processing. Understanding the dynamics of cross-border transactions is essential for businesses looking to expand internationally and for financial institutions aiming to support global commerce effectively.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Commercial Cross Border: This is Getting Good.

Cross-Border Transaction Market Size, in Trillions of U.S. Dollars

• 2022 – $1.27 trillion
• 2023 – $1.41 trillion
• 2024-est – $1.56 trillion
• 2025-est – $1.72 trillion
• 2026-est – $1.91 trillion

About Report

Commercial cross-border transactions are a driving force in the global economy, poised to grow at nearly 11% CAGR through 2030. Yet, these transactions remain complex, often hampered by the inefficiencies of the traditional correspondent banking model, which is costly, slow, and lacking transparency. Emerging technologies such as instant payments and blockchain are disrupting this legacy framework, offering faster and more cost-effective solutions for business payments.

This report by Javelin Strategy & Research explores the evolution of cross-border payments, comparing traditional methods with innovative tools reshaping the landscape. It also examines the critical risks associated with international business, including foreign exchange volatility, regulatory challenges, fraud, and geopolitical uncertainties, while providing strategies to address these hurdles effectively.

The post Will Cross-Border Transactions Continue to Be Lucrative? appeared first on PaymentsJournal.

When we talk to organizations that have thus far not gotten involved in embedded finance, we frequently hear key decision-makers refer to it as an efficiency play. And because they see it as a streamlining tool, they often push it to one side, seeing it as nice-to-have rather than must-have.

Such thinking overlooks the enormous growth potential of embedded finance and is one of the reasons its adoption is lagging in the B2B space when compared with the B2C sphere.

Time and again studies have shown that the buy now, pay later (BNPL) services that are commonplace in the consumer space lead to shoppers spending more and therefore businesses making more.

No One-Size-Fits-All in B2B

The obvious question then is if services such as Klarna and Clearpay can have such a huge impact on B2C companies’ growth, can this concept be translated into the B2B world to accelerate growth?

The answer is both yes and no. While embedded finance has the power to boost corporates’ revenues, it may not happen via tools that are industry agnostic.

For the B2B world to succeed in embedded finance, companies need to tailor their offerings to their specific industries. It’s undoubtedly trickier than integrating a ready-made product into their content management system, but it’s also far more powerful because it becomes a differentiator.

Using the unique insights they have into their supplier and distributor networks, organizations have the ability to design vertical propositions tailored to specific industries.

We work with a beverage company that primarily sells beer. Like many other companies in the sector, its growth had been slowing as it competed with many other breweries selling a highly commoditised product. Traditionally, the big lever in such industries has been volume-based discounts, but everyone offers these. What this company has done to set itself apart is build a unique lending product that frontloads the discount. Instead of offering a discount at the end of a period based on the volume purchased, it loans the money interest-free upfront instead, with the caveat the funds don’t need to be repaid if the target is reached.

This recognizes the often cash-poor nature of its distributors and how much more value it has as a partner this way.

If we take it a step further, by offering a fully integrated financial offering to your partners, the potential becomes endless. Imagine you’ve got full data on one of your bars because you’re providing all its POS and payment processing systems. The data acquired by having visibility over all transactions taking place is hugely valuable—it can inform future investment decisions and also provide a useful credit profile of the business.

This data may show a partner bar as being in good health, but then an industrial freezer worth £40,000 unexpectedly breaks down. Good health and having £40,000 lying around aren’t necessarily the same thing and the only way for it to stay afloat will be a loan.

Banks are likely to shy away from such a loan due to the lack of assets available as collateral, or at least be far too slow to grant one quickly enough to allow the bar to remain in business.

But if an organization has an asset financing deal with an equipment supplier, it could underwrite the loan itself—helping to keep the supplier’s business afloat while also securing future business and earning interest through a fee-sharing arrangement.

Bespoke Is Best

There’s also a pharmaceutical company that utilizes bespoke financing arrangements to grow its share of its distributors’ businesses.

Given they aren’t seasonal or even particularly discretionary like hospitality businesses, pharmacies don’t have the same cash flow challenges and levels of uncertainty as bars, so the approach that worked for the beverage company couldn’t simply be copied over.

However, the pharmaceutical cooperative had done some research and realized that modernized pharmacies were selling 15% to 20% more like-for-like than unmodernized pharmacies. They decided to offer interest-free loans to partners to modernize their retail outlets, in return for an agreement that those outlets would increase the percentage of their products stocked. The increase in revenues was far greater than the interest it could have made on the funds loaned out, therefore boosting its own growth as well as that of its pharmacy partners.

In some industries, the main appeal of embedded finance isn’t financing but payments. Consider a drop-shipping provider where production is based in China, while storefronts are spread globally. Given the reliance on an international supply chain, payments can effectively make or break operations.

To ensure consistent revenue flow for its clients, this provider implemented an orchestration platform capable of switching between payment providers based on factors like cost, returns, and other nuances, to keep the system flowing at all times. In logistics, financing will undoubtedly play a role in embedded finance, though likely on a shorter-term basis compared to industries like hospitality or pharmaceuticals.

A perhaps more obvious point of commonality in the embedded finance proposition is the opportunity to earn interest. Acquiring fees are high and funds that sit within this ecosystem are likely to be earning interest while they are held by corporate partners.

In addition, while the means of achieving it may be different, a key goal of any organization designing an embedded finance proposition for its clients is to ensure retention.

It’s clear there are themes that run across industries when it comes to making embedded finance as successful in the B2B world as it has been in the B2C space. But the key to success for corporates is tailoring their embedded finance offering to the specific requirements of their clients’ industries. This will position them far better than rolling out across-the-board solutions such as those used in the B2C world.

The post Embedded Finance Is More Than an Efficiency Play—It’s a Growth Tool appeared first on PaymentsJournal.

With ACH payments processing over 31.5 billion transactions valued at $80.1 trillion in 2023, the importance of bank account validation cannot be overstated.  

For many organizations, the focus on validation may stem from a need to comply with Nacha regulations. While compliance is essential, businesses that view account validation solely as a regulatory obligation are missing out on the broader benefits that come with a more strategic approach. Fraudsters are becoming more sophisticated and basic validation methods may not be enough to protect against these evolving threats.  

By leveraging advanced account validation technologies, organizations can not only meet compliance requirements but also drive significant business value through enhanced fraud prevention, improved decision-making, and operational efficiencies. 

Why Compliance-Driven Account Validation Matters 

As a baseline, bank account validation is a process designed to verify that a bank account is legitimate and can be used for transactions. Typically, this is done by checking the format of account numbers, confirming that the account is open and active, and ensuring that the routing number is valid. These checks are vital to complying with Nacha’s Account Validation Rule, which requires organizations to use a “commercially reasonable fraudulent transaction detection system” to screen WEB debits for fraud.  

While basic validation methods are sufficient for meeting regulatory requirements, they do little to address the broader risks that come with processing ACH payments. 65% of organizations were victims of fraud attacks in 2022. Today, forward-thinking businesses are going beyond this baseline by analyzing other key elements in combination with the routing and account number such as consumer identity information and payment performance. 

Robust fraud detection is Key 

In 2023, $3.1 Trillion in illicit funds infiltrated the Global Financial System. Fraudsters are becoming more sophisticated, often using tactics such as synthetic identity fraud or account takeover to bypass basic validation checks. These advanced validation solutions that create a more accurate risk profile enable businesses to catch potential fraud that might slip through with more basic validation methods.  

Some advanced systems can detect if an applicant is using a non-residential phone number, has multiple SSNs associated with a bank, or if there’s a mismatch between the provided name and bank account. For instance, in an analysis of bank account payment performance data, bank accounts linked to three or more SSNs are found to be ten times more likely to experience a fatal return, such as an R03 (invalid account number) or R04 (unable to locate account), compared to those associated with fewer than two SSNs. Other providers of bank account validation services analyze bank accounts over time to better pinpoint high-risk bank accounts. 

By combining multiple data points and analyzing connections like consumer information, bank account transaction patterns, stability, and payment performance, along with bank account routing and account numbers, businesses can prevent fraudulent transactions before they occur, significantly reducing potential losses.  

Beyond fraud prevention, advanced validation technologies can also provide valuable insights that enhance decision-making across the organization. For example, during customer onboarding, these technologies can reduce the need for manual verifications by assessing bank account data in real-time. This enables organizations to dynamically route customers through onboarding, streamlining those with positive performance, while applying additional screening for higher-risk accounts.  

By introducing calculated friction when necessary, such as deploying real-time microdeposits to verify authorized access to a bank account, ensures only legitimate customers and accounts are approved. Automated decisions to dynamically route customers based on risk can allow for faster onboarding and payment processing and reduce friction for legitimate customers. This allows businesses to enhance operational efficiency but also improve the overall customer experience by minimizing unnecessary delays and ensuring the right amount of verification is applied to each customer. 

Managing Financial Risks Means Bottom-Line Improvement 

The impact of verification is particularly critical when it comes to managing financial risks and ACH returns. By reducing the frequency of ACH returns and associated fees, businesses can see substantial improvements to their bottom line. For example, R03 (unable to locate) and R04 (invalid) are “returns with no recourse,” meaning the transactions are final and can’t be disputed or reversed, leaving organizations without the ability to recover the funds. This finality poses a significant financial risk, as businesses are left to absorb the loss. By implementing robust verification processes, organizations can minimize the likelihood of encountering these return codes. Accurate and timely validation of bank account information ensures that transactions are initiated with valid, active accounts. This not only protects the organization from financial loss but also more secure and successful ACH transactions. 

Perhaps most importantly, advanced validation provides businesses with data-driven insights that enable more informed decision-making. The value of advanced validation is evident across industries. In the automotive sector, companies use these solutions not just for Nacha compliance, but to validate bank accounts before extracting car payments, to reduce ACH returns. In the real estate industry, property management firms leverage advanced validation to prevent rejecting potentially good renters during application while more accurately identifying high-risk-lenders at risk for payment issues. 

As the financial landscape continues to evolve, businesses that embrace advanced account validation will be better positioned to mitigate risks, improve operational efficiency, and drive growth. By going beyond basic compliance, these organizations can unlock valuable insights that provide a competitive edge in an increasingly complex digital economy. 

John Gordon is the CEO of ValidiFI, the leading provider of predictive bank account and payment intelligence. 

The post Advanced Account Validation: The Key to Payment Optimization  appeared first on PaymentsJournal.

In the increasingly complex and competitive world of commercial payments, the benefits of automating the accounts receivable (AR) and accounts payables (AP) functions continue to grow. Automation allows companies to maintain tighter control of their spending, take better advantage of price breaks, and use their financial and human resources more efficiently.

Organizations can benefit from automation in ways they may not even anticipate. A new report from Javelin Strategy & Research, Global AR/AP Automation: Improving Cash Visibility and Reducing Risk, looks at the ways that contemporary automation processes have resulted in fewer errors, reduced risk of fraud, and even a decrease in compliance issues.

The Cash-Flow Challenge

Perhaps the most important advantage of AR/AP automation is that it significantly improves liquidity and cash-flow analysis by providing real-time visibility into financial transactions. Automated dashboards and reports can offer immediate insights into cash inflows and outflows, allowing businesses to monitor their cash positions in real time and make informed decisions about their liquidity needs. This continuous monitoring can help businesses optimize their working capital and ensure that they have sufficient funds to meet short-term obligations.

Artificial intelligence is playing a big role in the development of these automated tools. Through the use of machine learning and AI, predictive analytics can forecast cash-flow trends based on historical data. These forecasts are invaluable for a business’ planning in the short and long terms. They help companies anticipate future liquidity needs, identify cash shortages or surpluses, and plan accordingly.

“The most difficult thing to do in business is to forecast liquidity and cash flow,” said Albert Bodine, Director of Commercial & Enterprise Payments at Javelin and the study’s lead author. “You used to have a room full of MBAs spending days, if not weeks, doing the cash-flow liquidity. Now you can get cash-flow and liquidity recommendations in seconds for some platforms. Predictive analytics have the ability to analyze mountains of data and then identify trends and mitigate risk much faster than humans would be able to.”

Artificial intelligence is passing out of its fad phase and is now seen as a legitimate tool, Bodine said. Machine learning also has a dramatic impact on the financial and banking worlds.

“I think of AI as something that can ingest an enormous amount of information and data in milliseconds, extract trends from that, and then make recommendations,” Bodine said. “Think of the number of humans it would take to do that.”

Comprehensive Compliance

Any business operating in today’s complex financial environment has discovered how important it is to comply with regulatory standards. The easiest way for an organization to get in trouble is by making mistakes when it comes to regulation or compliance issues. In areas such as anti-money-laundering efforts and know-your-customer rules, infractions can result in multimillion-dollar fines.

Automating payment processes can go a long way toward preventing these issues. It’s easy to make sure an automated system is regularly updated to keep itself aligned with the latest regulatory changes, and this frees humans from having to adjust for every new rule. These systems also facilitate real-time audits and reporting, allowing businesses to maintain their compliance responsibilities with minimal manual effort.

“The global regulatory and compliance environment has gotten so complex and so overweighted with laws and regulations that it’s difficult for any organization to keep up these days,” Bodine said. “Compliance-as-a-service companies have started to pop up to completely automate this process, and to integrate AI to assist with keeping abreast of everything. At a minimum, this type of machine learning is a strong addition to compliance efforts at companies. But I would go as far as to say if you know you don’t have a significant level of automation and in your compliance or regulatory efforts, you probably are not compliant.”

Reducing the Human Element

Of course, automation greatly reduces the number of human errors in your operation, enhancing accuracy in everything the organization does. When manual systems are eliminated, invoice receipt, processing, payment, audit trail, and downstream analytics reach new levels of efficiency. Fewer hands involved means maximized streamlining and efficiency.

But Bodine stressed that it’s important for organizations to fully commit to an automation strategy.

“Being 25% automated is almost worse than not being automated at all,” he said. “I’ve never come across an organization that’s 100% automated, even among the biggest, most sophisticated organizations. But a halfway effort into the world of automation can almost be more problematic than just staying entirely manual.

“It really takes a commitment, and there can be significant costs associated with it. But the ROI is certainly there over a reasonable amount of time, in many different areas.”

The post The Benefits of Committing to an Automated Payments Process appeared first on PaymentsJournal.

In its push to further internationalize the yuan, the Chinese government has enlisted HSBC’s Hong Kong unit to join its worldwide interbank payment system as a direct offshore participant. It’s the next step in China’s promotion of its Cross-Border Interbank Payment System (CIPS), which it has touted as an alternative to the globally dominant Swift payments system. Nevertheless, CIPS is a partner of Swift and uses its messaging service to facilitate international payments.

CIPS was set up in October 2015 as a settlement and payment clearing system for transactions that use the yuan. The system is overseen by China’s central bank but is run by the private company CIPS Co. Ltd., based in Shanghai. 

The yuan currently ranks fourth in global payments. The Chinese government would love for it to challenge the U.S. dollar, still by far the world’s most widely used currency.

Hong Kong’s Role

Hong Kong has been a key part of China’s developmental strategy for some time. Having HSBC on board will make payments faster and cheaper for overseas companies that want to trade and invest using China’s currency.

Cross-border payments are not the only role Hong Kong has played in China’s economic outreach. Earlier this year, the Hong Kong Monetary Authority and the People’s Bank of China announced that residents in Hong Kong will be able to use the digital yuan, also known as e-CNY, for cross-border transactions. This marked the first application of the central bank digital currency outside mainland China.

China’s National Financial Regulatory Administration has also begun to encourage banks and insurance firms to issue yuan-denominated bonds and list shares in the Hong Kong Special Administrative Region. On top of that, Chinese mainland companies have been encouraged to set up their global or regional headquarters in Hong Kong.

But the growth of the yuan in cross-border transactions has also been driven in large part by Russia. International sanctions prevent major Russian banks from using the Swift international payment system, a result of the ongoing invasion of Ukraine. This has left Russia increasingly turning toward the Chinese yuan for cross-border payments. According to the Russian Central Bank, Russia has invested 139.6 billion rubles ($2.28 billion in yuan) this year alone.

The post Reaching for More Cross-Border Payments, China Looks to Hong Kong appeared first on PaymentsJournal.

For any business, payment reconciliation may not be the most glamorous task, but it’s certainly one of the most critical. The process of ensuring that all transactions align accurately between the accounting books and bank statements is a cornerstone of financial integrity. Yet, it’s often overlooked or neglected, especially as businesses grow and operations become more complex. This neglect, however, can quickly snowball into a significant risk, impacting both business stability and long-term growth.

The Importance of Payment Reconciliation

Payment reconciliation is more than a bookkeeping routine; it’s a vital financial safeguard. The process involves comparing sales and transactions recorded in your financial systems against entries in your bank accounts and other financial documents. This may sound straightforward, but the real world is far more complicated. Discrepancies can occur due to entry errors, chargebacks, or even unauthorized transactions. These mismatches, if left unresolved, can lead to inaccurate financial reporting, unseen fraudulent activity, and poor decision-making.

For businesses, especially those dealing with high transaction volumes or complex payment ecosystems, ignoring payment reconciliation is akin to navigating a ship without a map. Without clear and accurate financial data, a business could be making critical decisions based on faulty assumptions. Worse, in industries where compliance and regulatory scrutiny are high, unresolved discrepancies can attract fines or other legal consequences, further eroding trust and financial stability.

Why Businesses Fail at Reconciliation

Despite its importance, many businesses either struggle with or entirely neglect the reconciliation process. The reasons are often tied to the growing complexity of managing diverse payment methods, operating in multiple currencies, or scaling operations across different markets. Manual reconciliation, in particular, becomes a near-impossible task in such environments, leading many businesses to simply hope that everything adds up at the end of the month. This is a dangerous gamble.

The absence of a robust reconciliation process creates opportunities for undetected fraud, financial mismanagement, and ultimately, business instability. As payment ecosystems evolve, businesses that fail to invest in proper reconciliation tools are setting themselves up for costly errors. Inaccurate financial data doesn’t just impact day-to-day operations; it skews financial forecasting, disrupts cash flow management, and complicates financial planning—all crucial elements for sustainable growth.

The Digital Era and Reconciliation

Thankfully, technology has transformed the landscape. The digital era offers automated reconciliation tools that streamline the process and vastly improve accuracy. Automated systems can match transactions across various platforms in real-time, flagging discrepancies and reducing the risk of human error. These systems are particularly valuable for businesses operating in complex environments where sales flow through multiple channels and payment methods.

But technology alone isn’t a panacea. Effective reconciliation requires a strategic approach that goes beyond simply adopting new software. Businesses need to ensure that their reconciliation processes are integrated seamlessly into their broader financial management systems. This means selecting solutions that not only automate reconciliation but also enhance cash flow management and financial forecasting. When done right, automation frees up resources and allows businesses to focus on more strategic activities.

The Cost of Neglecting Payment Reconciliation

The consequences of poor or non-existent reconciliation processes can be severe. Businesses that neglect this crucial aspect of financial management may face spiraling costs due to undetected errors, fraud, or compliance issues. In the long term, these financial blind spots can erode profit margins, damage business relationships, and limit growth opportunities. Simply put, reconciliation is a critical investment in business stability.

Moreover, neglecting reconciliation can lead to liquidity issues. Unreconciled accounts may overstate a company’s financial health, leading to inaccurate cash flow projections. This, in turn, can create challenges in meeting financial obligations, whether that’s paying suppliers, employees, or even tax authorities. In environments where credit is tight or competition is fierce, these missteps can be the difference between thriving and merely surviving.

Sustaining Success for Businesses

For businesses looking to maintain stability and achieve long-term growth, payment reconciliation should be seen as a strategic priority, not an afterthought. Investing in advanced reconciliation tools and developing a structured process is essential. These efforts will not only enhance operational efficiency but also strengthen the financial foundation upon which your business grows. The cost of neglecting this vital process is simply too high in today’s competitive and fast-paced market.

Payment reconciliation may be a behind-the-scenes activity, but it plays a front-and-center role in determining business success. Companies that prioritize this process will find themselves better equipped to navigate financial challenges, make informed decisions, and seize new opportunities for growth.

The post Neglecting Payment Reconciliation: The Hidden Threat to Business Stability and Growth appeared first on PaymentsJournal.

Mastercard introduced its new near-real-time cross-border product, Mastercard Move Commercial Payments, this week. Although Mastercard didn’t mention its longstanding credit card rival in its announcement, the product clearly has the goal of taking on Visa’s B2B Connect.

Mastercard Move, unveiled at the annual Sibos conference in Beijing, is touted as a way for banks to facilitate near-real-time, predictable, and transparent commercial cross-border payments. The offering aims to simplify operations, optimize liquidity, reduce counterparty risk, and provide end-to-end visibility for banks and their customers. The program is the newest part of the Mastercard Move portfolio of money transfer capabilities. 

“We’re primarily looking at trade and treasury payments, not wholesale or the smaller B2B FX payments we do in Mastercard Move already,” Alan Marquard, Executive Vice President, Global Head of Transfer Solutions at Mastercard, told Forbes. “This is really aimed at trade flows, principally in the major currencies in which those happen.”

Visa’s B2B Connect has been offering similar cross-border commercial services for some time now.  The efforts are ways for the two credit card giants to compete for cross-border business with networks like Swift and SEPA.

“The card companies aren’t going to sit around and watch the instant payments networks chip away at their revenue,” said Albert Bodine, Director of Commercial & Enterprise Payments at Javelin Strategy & Research. “They are well positioned to disrupt the legacy correspondent banking network for cross-border payments.”

Seeking Advantages

Mastercard Move Commercial Payments processes payments in near real-time, unlike the instant payments promised by other networks. But the payments on these rails are revocable for the sender, which is also unlike the instant payment networks. That could be an advantage for Mastercard.

More important, this is a market that seems poised for continued growth. Cross-border payments have been growing at double-digit rates, according to data from McKinsey.

More than half of global consumers have made instant cross-border payments for goods and services, and approximately 63% of consumers have used instant payment systems to send funds across borders to friends and family. Instant payments are also a prime candidate for cross-border payments, which often face issues with slow settlement times, regulatory hurdles, and fraud.

The post Mastercard Move Commercial Payments Stakes Its Place as a Rival to Visa B2B Connect appeared first on PaymentsJournal.

Artificial intelligence has had a dramatic effect across industries in a short time. Accounting is no exception, but there has been speculation of whether AI would replace those working in the profession.

In a recent PaymentsJournal podcast, Ted Callahan, Accountant Leader at Intuit, and Albert Bodine, Director of Commercial Payments at Javelin Strategy & Research, explored key findings from the 2024 Intuit QuickBooks Accountant Technology Survey and their implications for the accounting sector – including how accountants are interacting with AI. The survey gathered insights from 700 accounting leaders to assess the impact of AI and technology on their firms.

Contrasting the Narrative

Unsurprisingly, respondents identified the top challenges for accounting firms as maintaining compliance with regulations and tax laws and driving profitability for both their firms and clients in the face of high interest rates and inflation.

“What was surprising was that in contrast to a common narrative, accountants don’t view AI as competition,” Callahan said. “Only 9% of the respondents said they were concerned about AI replacing their job. Instead, they felt that embracing technology would help them boost their efficiency and improve their client service.”

“In addition, 71% of the surveyed firms said accounting technology solutions were the driving factor in the increased profitability of their clients,” he said.

Another key insight from the report revealed that 30% of respondents identified the biggest competitive advantage of technology as its ability to enable customized services and advice through data analysis.

“There can be a bit of fearmongering with AI and, in some cases, it can be justified,” Bodine said. “However, I look at areas like cash flow analysis, which can be one of the most difficult things to forecast. As AI tools become more prevalent and integrated into accounting platforms, they can deliver substantial benefits, especially if an organization doesn’t have the staff to perform that kind of analysis.”

The Top Priority

Partly due to staffing challenges, the accounting industry has embraced AI on a large scale—98% of respondents reporting that they actively use the technology to enhance client service. Additionally, nearly as many (95%) said that adopting new technology is just as important as traditional accounting skills to succeed as an accountant today.

AI is also the top priority for new technology investments, according to accounting firm leaders. However, there are three main concerns hindering full-scale AI adoption: security, accuracy, and cost.

“Firms are primarily concerned that effective data and security safeguards are in place,” Callahan said. “However, when implementing new technology, accountants must always do stringent checks to make sure the inputs of the process are valid, and the outputs are accurate. Of course, there will always be concerns about how the service will be priced and rolled out in the cost, especially as more experiences become automated.”

A Vertical Leap

To address these challenges, the broader accounting community can collaborate with clients to drive change through AI. Since the pandemic, there has been a vertical leap in the demand for accounting services among small and mid-market businesses.

“Back in the dark days of COVID, the government offered assistance to ensure businesses didn’t go under due to staffing shortages,” Callahan said. “There was the Employee Retention Credit and other initiatives that were implemented. The sophistication level of the questions went way up because firms had to report to government entities, and client needs dramatically increased. Now, with inflation and rising interest rates, the questions are getting more sophisticated again.”

Accountants have adopted AI to address the growing needs of their clients, from data entry and processing to fraud prevention. AI excels in identifying irregularities in data and providing real-time financial insights.

On the firm side, accounting leaders are increasingly deploying AI in their operations—roughly 65% of firms in the study reported using AI to manage client portfolios and client communications.

The Talent Gap

One reason accounting firms have deployed technology is to enhance efficiency and accuracy amid staffing shortages. Over the past few years, there has been a significant talent gap in the accounting industry due to a decrease in qualified graduates. While AI can help address some of these challenges, an optimized technology platform can also assist firms in attracting and retaining talent.

“Education and skills development can help a firm win the battle for talent, especially as more digital natives enter the workforce,” Callahan said. “A firm’s culture can be a strategic differentiator for attracting candidates, particularly non-traditional prospects, because there are fewer CPA-credentialed graduates. A robust training program that incorporates AI, coupled with positive culture, helps a firm retain its talent as well.”

Instrumental to Success

Concerns that AI might someday replace accounting firms seems to be unfounded. While accountants will increasingly integrate AI into their operations with growing sophistication, AI will always serve to augment rather than replace human expertise.

However, the growing complexity of accounting platforms might cause apprehension among CEOs and business owners seeking the right partner for their organization. Fortunately, there are platforms that provide non-financial professionals with valuable insights into their company’s financial operations, which can be instrumental to a company’s success.

“Our mission is to see businesses be successful,” Callahan said. “We’re doing everything we can to make the QuickBooks platform a single place where business owners can manage their finances. It’s built to be an integrated, AI-driven end-to-end experience. Our platform is designed to provide both the data insights accountants can leverage to help their clients, and tools their clients can use to help themselves.”

The post Accountants View AI as an Ally, not a Competitor appeared first on PaymentsJournal.

Mastercard continues to expand its cross-border payment offerings through a new collaboration with Citi. The two financial giants are teaming up to offer cross-border payments to Mastercard debit cards in 14 receiving markets worldwide, including the U.S.

Although Mastercard has previously teamed up with several regional financial institutions, Citi is the first global bank to enable cross-border payments to Mastercard debit cards. This service is available to Citi clients across 65 origination countries spanning the corporate, financial institutions, e-commerce, and commercial sectors.

Citi and Mastercard are promoting the solution for a range of use cases, including insurance payouts, airline refunds, compensation payments, on-demand payments to freelancers and gig economy workers, e-commerce payments to merchants, and refunds to customers. The new offering leverages Mastercard Move, a suite of global solutions that cover both domestic and cross-border transactions. Mastercard Move’s cross-border services now reach more than 95% of the world’s banked population across 280 countries.

This is just one of the ways Mastercard has aggressively expanded its cross-border portfolio recently. Last year, the company introduced Cross-Border Services Express, allowing financial institutions to set up international payments for their customers. “Cross-Border Services Express levels the playing field and provides small and mid-tier banks, including credit unions and community banks, with the same international payments features regardless of their size and scale,” Alan Marquard, Executive Vice President of Transfer Solutions at Mastercard, noted in a prepared statement.

Partnerships Around the World

Recent partnerships with many of the world’s leading financial institutions highlight the growing demand for faster payments. An alliance with China’s Alipay, announced in March, reflects the growing consumer demand for faster online payments in and out of China.

Last November, Mastercard announced a strategic partnership with Dubai Islamic Bank to launch cross-border services for both peer-to-peer and business-to-business transfers. This collaboration further demonstrates the United Arab Emirates’ determination to transform its payments ecosystems, both domestically and internationally.

“Cross-border payment solutions that ride on card rails are a game changer,” Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, noted upon the introduction of Cross-Border Services Express in 2023. “The relative ease of payment versus other methods will move card-based toward the instrument of choice.”

The post Mastercard Builds on Cross-Border Strategy With Citi Partnership appeared first on PaymentsJournal.

In a world where businesses fiercely compete for customer attention and trust, cultivating loyalty has become more challenging than ever. While many companies focus on marketing strategies, product innovation, and superior customer service to win loyalty, one often overlooked factor can make a significant difference: transparent payment reconciliation. Ensuring that your payment processes are seamless, error-free, and fully transparent not only strengthens customer trust but can also lead to long-term loyalty and repeat business.

The Intersection of Payment Reconciliation and Customer Experience

At first glance, payment reconciliation might seem like an internal financial process with little impact on customer relationships. However, its influence extends far beyond the accounting department. Payment reconciliation involves aligning transactions recorded in your company’s financial systems with those on bank statements and other financial records. When done accurately, this process ensures that payments are correctly applied, discrepancies are swiftly identified, and financial data remains consistent.

For customers, this accuracy is crucial. In today’s fast-paced digital environment, customers expect transactions to be quick, reliable, and error-free. A single misstep—such as overcharging, misapplied payments, or delays in processing refunds—can damage trust and leave a lasting negative impression. Transparent payment reconciliation ensures that these pitfalls are avoided, fostering a sense of confidence and security in your brand. When customers trust that their payments are handled with precision and transparency, they are more likely to remain loyal, even in a competitive marketplace.

Building Trust Through Transparency

Trust is the cornerstone of any lasting customer relationship, and transparency is essential to building that trust. Customers appreciate businesses that are open about their processes, especially when it comes to payments. Implementing clear, easy-to-understand payment policies, accompanied by proactive communication, sends a message that your business values honesty and integrity.

Transparent payment reconciliation goes beyond simply correcting errors—it involves providing customers with visibility into their transactions. This can include automated payment confirmations, detailed receipts, and timely updates on the status of refunds or disputed charges. By ensuring that financial processes are not only accurate but also fully transparent, it empowers customers with the information they need to feel secure in their transactions.

This transparency becomes even more critical in complex business environments where customers engage through multiple channels, payment methods, and currencies. By integrating automated reconciliation systems that reduce errors and enhance transaction visibility, businesses can present a consistent and trustworthy payment experience across all touchpoints.

Avoiding the Pitfalls of Poor Reconciliation

Neglecting payment reconciliation doesn’t just lead to internal inefficiencies—it directly impacts your customer base. Mistakes such as double billing, missed payments, or delayed refunds can erode trust and push customers toward competitors. In fact, one bad experience with payment processing is often enough to make a customer think twice before returning to a brand.

A robust reconciliation process minimizes these risks. Automating the reconciliation of transactions helps detect and correct discrepancies in real-time, reducing the likelihood of customer-facing errors. Moreover, automation frees up your team to focus on delivering value rather than spending time resolving payment issues. For customers, this seamless experience translates into greater satisfaction and a higher likelihood of repeat business.

The loyalty dividend: How reconciliation impacts retention

Loyalty is the result of consistent positive experiences, and payment reconciliation is an often-underappreciated part of that equation. When customers trust that the business is reliable in handling their financial transactions, they are more likely to stay engaged, make repeat purchases, and even provide referrals. The impact of loyalty on the bottom line is substantial; it’s well-known that retaining existing customers is more cost-effective than acquiring new ones.

For subscription-based businesses, where recurring payments are a central feature, the importance of reliable reconciliation is even more pronounced. Errors in billing or subscription renewals can quickly lead to churn. By ensuring that all payments are accurately reconciled and customers are billed correctly every time, businesses can significantly reduce churn rates and foster long-term loyalty.

Using technology to enhance transparency

The digital age offers businesses powerful tools to enhance both reconciliation and transparency. Automated systems equipped with advanced analytics can provide real-time insights into transaction statuses, identify discrepancies instantly, and generate accurate reports that can be shared with customers when needed. These tools not only make the reconciliation process more efficient but also provide the transparency that today’s customers demand.

Moreover, leveraging these technologies allows businesses to scale their operations without compromising on the accuracy and reliability of their payment processes. As businesses expand across different geographies and payment platforms, maintaining a unified and transparent reconciliation system becomes essential to sustaining customer trust.

Putting customers first through financial integrity

Customer loyalty isn’t just about flashy promotions or exceptional service—it’s about reliability and trust. Transparent payment reconciliation is a key ingredient in building that trust. By prioritizing accuracy and clarity in your payment processes, it shows customers that your business values their experience and is committed to getting it right every time.

In today’s competitive landscape, where customers have endless choices, those that prioritize transparency and integrity will stand out. Payment reconciliation may be behind the scenes, but its impact on customer loyalty is front and center. Businesses that get this right will not only enjoy more satisfied customers but will also unlock the lasting benefits of loyalty, retention, and sustained growth.

The post Fostering Customer Loyalty Through Transparent Payment Reconciliation appeared first on PaymentsJournal.

Tapping into the global economy requires successfully navigating the challenges associated with cross-border payments. Even relatively simple tasks, like processing payments in foreign currencies, can become major headaches if you fail to account for the volatility of exchange rates.

Proactively addressing common challenges like fraud, regulatory compliance, and processing times can help protect a company’s profitability. These measures support efforts to expand into new markets and ensure the necessary tools are in place to process payments in a wide range of currencies, from dinars to Australian dollars.

Understanding Key Challenges

Cross-border payments in the era of e-commerce can quickly become complicated. Without a proactive approach to addressing these hurdles, organizations risk running afoul of international laws, tax agreements, or fraud. If they’re processing international payments, organizations should work with software that accounts for:

• Regulations designed to combat money laundering and improve income visibility
• Fraud and cyber security threats ranging from Phishing to identity theft
• Slow transaction times that may take days to clear
• Currency rates that fluctuate between payments

Navigating these challenges is key for succeeding in the global economy. Even small changes, like adopting a reliable payment portal, can help protect organizations from legal fees and excessive taxes.

Combating Fraud in E-Commerce

Fraud is a serious issue for the global economic economy, with an estimated 2% to 5% of global GDP laundered each year—amounting to between EUR 715 billion and 1.87 trillion. Fraud can significantly impact businesses as well, and falling victim to criminal activity is often easier than expected.

AI plays many roles in e-commerce today, enhancing inventory management, personalizing product recommendations, and offering predictive analytics. AI is also combating fraud by:

• Tracking consumer interactions
• Identifying suspicious behavior
• Keeping up to date with trends in criminal activity
• Providing data to help reclaim stolen revenue/products

Taking a data-driven approach to fraud can also serve as a powerful deterrent. Utilizing well-established payment processing software helps deter increasingly emboldened criminals and reduces the risk of falling victim to fraud in cross-border transactions.

When evaluating payment providers, consider Swift and Wise, which have recently partnered to offer API services, payment pre-validation, and cloud connectivity. These innovations can support bank’s efforts to streamline global remittances and modernize legacy software that is not equipped to handle cross-border payments.

Analyzing Transaction Data

Leveraging consumer data not only protects against fraud but also empowers organizations to make smarter financial decisions when expanding into the global economy. Successful use of big data can help:

• Identify market opportunities in the global economy
• Manage risk during expansion and mitigate investor losses
• Improve your forecasting efforts for greater stock management
• Enhance customer services regarding payment transactions when selling to consumers from overseas

Utilizing an AI-driven big-data analytics program can help organizations overcome challenges associated with data adoption. Most analytics programs have built-in functions that clean data sets and transform complex information into actionable customer and market insights. These tools can also assist in raising capital from investors, ensuring that organizations can navigate challenges related to cross-border payments without falling into financial difficulties.

Leveraging AI to track transaction data can help organizations better understand the fees they are likely to incur when conducting business internationally. International bank payments are often frustratingly opaque, with fees commonly hidden within currency conversion rates. This lack of transparency can erode a company’s profitability and hinder its ability to manage international payments effectively.

As the global economy expands, more banks are investing in fintech solutions, like blockchain, to minimize these fees and offer more competitive payment options to companies. AI can be used to monitor transactions via blockchain, reducing the risk of hidden costs like investigation charges.

Conclusion

Navigating the complex web of cross-border payments can be daunting for organizations new to the global economy. Without a proactive approach to cybersecurity, companies may unknowingly expose themselves to fraud. Additionally, failing to work with a well-established payment portal can lead to compliance issues with international tax laws. By adopting a proactive strategy for processing cross-border payments, companies can hedge against currency risks, enhance security measures, and improve payment processing times.

The post Navigating the Challenges of Cross-Border Payments in a Global Economy appeared first on PaymentsJournal.

Businesses looking to stay competitive, drive growth, and build resiliency are increasingly focused on cash flow. What was once considered a back-office function is now viewed as an opportunity to enhance efficiency and generate revenue.

In a recent PaymentsJournal webinar, Bottomline’s Leo Gil, VP Product Management, and Paul McMeekin, Vice President, Marketing, in addition to Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed key strategies for optimizing cash flow and highlighted how these efforts can elevate businesses.

One: Put Idle Cash to Work

It’s common for companies to have cash on hand, whether from available credit facilities or recent customer payments still sitting in a bank account. Optimizing this starts with cash visibility—having a real-time view of all accounts and balances across multiple banks.

For a company with 20 banking relationships, this means logging into 20 different banking portals, exporting data, inputting it into a spreadsheet, and using macros just to get a single cash position. This process can take hours, meaning the data is outdated by the time it’s ready.

Some boards are still advising CFOs to diversify and work with more banks, resulting in even more portals to manage. This makes forecasting difficult, even for a simple question like how much cash will be available at the end of the week or month.

“One of our clients is a hotel company, which needs to deploy cash sometimes quickly to particular properties to handle extra business or fix issues that might have occurred,” said Gil. “With this finance team, we got elevated to a strategic role in the company where they’re helping the company make decisions. How do we deploy cash? Do we transfer money between accounts? Do we pull from a line of credit we have? How do we do that in a way that maximizes returns and reduces interest expense?”

These functions are only possible if a company has full control over its cash visibility, supported by sound practices and forecasts. The key strategy is leveraging the cash on hand to drive the business forward.

“A CFO told me that his CEO walked in his office and said we have a great opportunity to make an acquisition, but it’s going to cost us X millions of dollars,” said Gil. “Can we do it? The answer is, well, I need to look into it, but you could miss a pretty big business opportunity if you have to wait to make the decision. Companies have to plan and look at everything they have so they don’t miss this kind of opportunity.”

Two: Close Financial Periods Faster

Operationally, you can’t put idle cash to work without properly closing financial periods. Most finance teams experience a rush at the end of the month or quarter to reconcile bank accounts and payments. This is where automation and connected finance become critical.

“Another of our customers is construction company,” said Gil. “They have more than 1,000 bank accounts across 80 banks, and there’s a constant inflow and outflow of payments for critical projects that they are completing. Payments are coming in from clients, while they’re making payments to subcontractors or employees.”

“Now imagine reviewing over 1,000 bank accounts, looking across hundreds of thousands of transactions to match and reconcile between your bank statements and your ERPs and other systems you may have internally,” he said. “Those are the challenges that finance teams face on a regular basis.”

When finance teams are overwhelmed by manual processes, it’s hard to support the business effectively. Strategically, automating the financial period closing process can lead to significant improvements and drive organizational growth.

“Always be closing,” said Bodine. “I think we are getting to the point in the finance world where we’re going to see a more agile approach to closing periods. I don’t think that’s going to happen on an end of year basis, but during the year the ability to have systems in place to always be closing is becoming critical.”

Three: Digitally Transform Payments

Checks are the single most targeted form of commercial payment, yet 33% of payments worldwide are still made by check. Digitizing payments, contrary to what some may believe, reduces the risk of fraud.

“I met with a big university back in February and they were facing 10 check fraud incidents a month,” said McMeekin. “In December they had more in the previous six months than the previous three years combined.”

Breaking it down, let’s first understand how contemporary check fraud works. An organization mails a check to pay a supplier and waits several business days for it to arrive and be cashed. However, criminals intercept the check, often stealing it from the mailbox using a key purchased on eBay. The criminals then visit state business registration websites to create fictitious business names.

This process is often instantaneous, taking advantage of the delay in detecting the crime. This gives the criminals time to act. Digital payments, on the other hand, are not only more secure from the outset, but also make any fraudulent activity much easier to detect quickly.

“In my experience, there is no single better way to quickly improve cash flow than to get rid of paper checks,” Bodine said.

When digitizing payments and paying suppliers electronically, processes become more efficient. Organizations can time their payments strategically, controlling when cash leaves the company, and may also access rebates available with certain electronic payment methods.

Virtual cards are a secure payment type used for paying suppliers the exact amount of the invoice or invoices due. They also offer rebates similar to traditional credit cards. The result is a range of benefits, including safe, faster, more trackable payments.

“We get a bunch of suppliers accepting these payments through the payment network,” said McMeekin. “What we see is that they can typically go from spending two hours a day on reconciliation down to something like 20 minutes.”

Four: Do More with Less

To preserve cash, organizations are asking their employees to do more with less. This often leads to frustration, cutbacks, extra hours, employee burnout, and inadequate tools for the job, ultimately impacting quality.

But there’s a way to do more with less—more effectively. Companies should reevaluate their processes with a fresh perspective and approach tasks more intentionally. It’s important to focus on working more efficiently, maximizing the value of current resources, and leveraging the skills within teams to boost productivity.

“I recently talked with a very decentralized, multi-site healthcare system who said our automation gave them 76 hours a week back,” said McMeekin. “They went from extremely overworked to a regular amount of work and spending less time on repetitive mundane tasks to more strategic initiatives like supplier sourcing, which is leading to a better culture.” 

Five: Adopt an Enterprise-Wide Culture of Cash Excellence

The era of bloated, slow-moving organizations is over. Companies need to learn to do more with less and operate with the agility of a Formula One car, or risk being outpaced by competitors.

This requires an enterprise-wide culture of cash excellence, starting with integration and interoperability. Finance teams need to connect seamlessly across the organization, achieving integrated and automated bank connectivity.

“Every member of the team is going to do better work when engaged and feeling valued,” said McMeekin. “Organizations with higher rates of employee engagement have 18% higher productivity compared to companies where employee engagement is low. So you’re not only getting the results of automation, you’re also getting the results from added engagement.”

Gil added: “The excellence of cash is not just about how much you have today, but how much you’re going to need tomorrow. Are you preparing your company for what’s coming next?”

The post Five Ways to Effectively Optimize Cash Flow appeared first on PaymentsJournal.

Project Agora, the cross-border payments project proposed by the Bank for International Settlements (BIS), has received the backing of 41 private financial institutions.

Announced earlier this year, the project has now reached the design stage. The objective of Project Agora is to examine how tokenized commercial bank deposits can be integrated with central bank digital currencies (CBDCs) on a centralized platform.

In the current system, cross-border payments involve two separate actions: messages are sent to banks detailing how clients should be credited, followed by the transfer of funds. Tokenization technology has the potential to unify these processes, making payments more secure and efficient, and allowing banks to update their ledgers in real time.

“Unified ledger is all about disrupting the legacy model of correspondent banking and making cross-border less expensive, less risky and more efficient,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “It also opens up payments to previously unbanked demographics. What isn’t being spoken about much is the potential for this to be the infrastructure that ties together instant payments from around the globe, which does not yet exist. The players involved in Project Agora are the obvious candidates to make this happen.”

Structural Inefficiencies

The unified ledger concept behind Project Agora addresses structural inefficiencies in the existing international payments system. Due to the increase in fraud and the vulnerabilities of cross-border payments, the project emphasizes establishing a standard where Know Your Customer verification and anti-money laundering checks are central.

In addition to tackling fraud, a cross-border payments standard will have to account for various country-specific regulatory and technical environments, as well as different time zones.

Because of those variabilities, the unified ledger in Project Agora is designed with an open architecture that can be programmed and modified. In addition, tokenized deposits and CBDC will be housed in separate sections of the unified ledger, with their interactions governed by smart contracts.

Driving Innovation

BIS is a consortium of seven central banks, including the Bank of France, Swiss National Bank, Bank of Japan, Bank of Korea, Bank of Mexico, Bank of England, and the Federal Reserve Bank of New York. The umbrella organization’s goal is to drive innovation in global financial systems.

The consortium also includes private sector participants, with some of the 41 members being Visa, Mastercard, JPMorgan Chase, Swift, and Monex. Participants in Project Agora are expected to take part in the project until the end of 2025, when the consortium will release its findings.

The post Financial Firms Join Project Agora to Develop Cross-Border Payments Standard appeared first on PaymentsJournal.

Payroll is fundamentally about trust. An employee’s salary is often their only source of income, and they trust they will receive their paycheck on time and in full. If there are delays or errors, it can consequentially affect a company’s ability to attract and retain talent.

With globally distributed teams and growing employee expectations for faster access to wages, instant payments should be considered–but always keeping country-specific nuances, fraud risk challenges and prevention measures in mind.

In a recent webinar, The Death of the Payday, Peter Tapling, Managing Director at PTap Advisory, Albert Owusu-Asare, CEO at Cadana, and Sunil Joshi, Senior Director of Product Management at Nium, discussed how emerging payment technologies can transform the payroll experience.

Country-Specific Nuances

Payments systems, and the regulatory frameworks that govern them, are unique to each country. That means global payroll platforms must account for distinctions with not just each employer, but with each employer’s country.

For example, a wire transfer in U.S. dollars can take anywhere from minutes to days to arrive, depending on the destination. The cost of the wire can fluctuate based on the sending bank, intermediary banks, and the destination bank.

“The complexity increases with local payment methods like India’s UPI, the UK’s Bacs, or RTP in the U.S.,” Joshi said. “All those payment platforms have different timings, costs, amount limits, and metadata. Payments to tax agencies or third-party benefits providers add an additional challenge, because they often require specific payment methods or the inclusion of metadata for reconciliation, and requirements vary by recipient.”

In addition to payments scheme differences, the regulatory environment in each market can impact a payroll platform. For example, the General Data Protection Regulation (GDPR) in the European Union imposes strict rules on the transfer of personal data outside of the EU. Non-compliance with GDPR and similar regulations can lead to significant penalties.

Some countries like China, India, and Argentina, have currency controls that restrict or regulate the flow of their national currency out of the country, or that limit conversions into foreign currencies. Many countries require payment service providers to obtain specific licenses or registrations to operate legally.

Fraud Challenges

The complexity of global payroll operations means fraud is a constant challenge. It can be difficult for companies to verify that the right individual is being onboarded or an account isn’t linked to suspicious activity. Account verification is even more critical when using instant payments rails because of the speed and the irrevocability of the transfer. The growing consumer adoption of digital wallets and mobile money services in addition to traditional bank accounts also increases the opportunity for fraud.

For payroll platforms that serve small- to medium-sized businesses, there is a significant risk of onboarding a fraudulent business that will use a payroll service to steal funds from an unsuspecting third party’s bank account and transmit it to fake employees.

“There have also been cases where a criminal takes over an employer’s account and leverages it to launder stolen funds, often causing losses that are significant enough to wipe out the profit margins of a payroll platform. In other instances, employee profiles have been taken over by cybercriminals who redirect the worker’s paycheck to a different account,” Joshi said.

Prevention Mechanisms

Though fraud is a formidable challenge, there are ways to mitigate it. A robust risk check during onboarding can help payroll services identify fake employer profiles. In addition to performing a basic Know Your Business (KYB) check, a payroll provider should also evaluate an employer based on hundreds of other risk parameters (e.g. country of origin, IP address of applicant etc). They should also ensure the business owner has a clean criminal record and confirm the employer’s bank account is owned by the business and in the owner’s name.

Fraud that is perpetrated through account takeover can also be mitigated by strong security practices and limits, or step-up authentication controls, based on suspicious behavior patterns. That could be when an employer or employee suddenly links a new bank account, or when the name on the account doesn’t match the employer or employee.

“There’s always high risk when moving money,” Joshi said. “Someone could steal bank credentials and send fraudulent payouts, and often payroll platforms are left holding the bag. There must be strong fraud prevention mechanisms with every payment. However, even though fraud prevention is critical, it should never introduce unnecessary friction into the customer experience.”

Selecting Solutions

Fraud threats coupled with country-specific challenges can make it hard for payroll platforms to navigate global operations on their own, especially without the scale and experience of processing payments in each of these countries.

The best way to mitigate that complexity is to select a partner that has substantial experience, and collaborate on a strategy to test and launch payroll services in each market. Due to country-specific nuances, it’s critical to find a platform that can deliver comprehensive payroll solutions through a single platform and a single API.

The solution should do more than provide access to instant payments rails. A payroll provider should select a partner that can help them build an understanding of each market and determine the appropriate payment method for the situation. For example, Nium, a real-time cross-border payments platform, has helped global payroll firms, pay employees and contractors around the world.

“Access to real-time payment schemes has become the table stakes for global payroll operations,” Joshi said. “The differentiators among payments partners will be high success rates, country-specific customizations, effective fraud risk controls, and a collaborative mindset.”

The post The Impact of Instant Payments on Payroll appeared first on PaymentsJournal.

Access to emergency funds provides peace of mind, especially when many people find themselves scrambling to cover expenses. Given the needs of younger consumers, liquidity and cash flow issues are becoming increasingly important for financial institutions to address.  

Changing regulations offer financial institutions an opportunity to rethink how they are meeting these customer needs through offerings like overdraft protection and small-dollar lending. In a recent PaymentsJournal podcast, Jeff Burton, Vice President and General Manager at Fiserv, spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research, about liquidity products that can keep these customers in the fold.

Liquidity Affects Everyone 

In the past two years, just over half of consumers have needed access to short-term emergency funds to pay their bills. While lower-income consumers are more likely to need funds, nearly half those earning between $100,000 and $149,000 have also needed short-term emergency funds. It’s not a question of wealth, but of available cash flow.

For customers who maintain deposit relationships with financial institutions, liquidity is a key driver of success. Half of all deposit customers will need liquidity assistance at some point.

 “Loyalty can be earned by how organizations bring these liquidity products to market,” Burton said. “Alternatives are good, options are good, but the key is addressing the client need.” 

Consumers can’t necessarily predict if or when they’ll have a liquidity crunch. When a crisis arises, they want certainty in resolving the issue, to address the problem immediately, and assurance it won’t hurt them long-term. Having a suite of easily accessible solutions can provide peace of mind to customers choosing among institutions with otherwise similar product offerings.  

Remember, cash flow is not necessarily linked directly to a customer’s net worth. While products addressing short-term cash flow needs can particularly appeal to younger or less wealthy customers, they offer real value across all generations and customer segments. 

“Being able to get them through that without a long-term commitment on a credit card debt or a personal loan forms a good bridge with the customer that will have a lasting relationship,” said Riley. 

Overdraft Alternatives

More than a third of account holders had an overdraft in their primary checking account in the past year. Among Gen Z, that number rises to more than half. These customers are precisely the ones institutions need to engage to grow deposits over the long term. To capitalize on this segment, many banks are offering smart alternatives to overdraft protection, providing value beyond replacing revenue from overdraft fees. 

“There’s a lot on the table right now relative to pending overdraft regulation, specifically for the large institutions,” said Burton. “They’ve cut back on the amount of items that they can charge for on a daily basis. Programs like fee forgiveness give clients a specific period of time where they can effectively cover the overdraft. Those types of changes were all positive for the industry, but what the additional regulation will do is unclear. If they move forward with the benchmark fees being proposed, organizations would likely constrict the amount of credit they make available through the overdraft program.”

With about 30% of customers leveraging overdraft service, demand is not going away. It’s important for alternatives to exist within the bank’s framework, not just outside it.

Some clients needing overdraft protection don’t repay by choice, while others don’t repay out of necessity. By offering alternatives, banks can address both segments. Clients trying to protect their income can manage fees accordingly. For those struggling with their budget, an extended repayment period provides additional time. This transparency allows consumers to opt in and choose when to use the product. 

Small-Dollar Lending

Small-dollar lending programs began in the ‘90s with the belief that clients who didn’t qualify for traditional lines of credit could benefit from smaller lines. Most clients needing liquidity typically require under $1,000. Small-dollar lending programs serve these clients by offering flexible repayment options, a critical concern for consumers who frequently feel strapped for cash.  

The lack of exposure to these products represents an opportunity for financial institutions to provide an effective solution that many customers are unaware exists. Those who have used these programs tend to use them frequently and enthusiastically. Nearly half of those who have used a small-dollar lending program say it was better than any other similar option they’ve tried.  

Four in 10 consumers say they would use a small-dollar lending program at least yearly, including 30% of Gen Z consumers. These programs could also be an attractive tool for deposit growth, as 44% say a small-dollar lending program would lead them to consider switching financial institutions. 

For lending thresholds of $500 to $1,000, most organizations will not want to spend much time underwriting these loans. So the process has to be highly automated.

“There’s an axiom in banking that says it cost as much to make a $5,000 loan as it does to make a $500 loan,” said Riley. “Engineering that efficiency is essential.”

The flip side is small dollar collections. Integrating a program like this into a traditional credit collection process can be overkill, so many organizations have chosen to simplify that process as well. If the client is delinquent or missing payments, they’ll issue a notification advising their intent to perfect their right to offset. This way, they can manage all of these small data losses through the traditional deposit collection process.

Engaging the Customer

A well-constructed suite of liquidity products can help customers of all types, improving the banking experience, driving engagement and loyalty, and supporting deposit growth. However, these products must be tailored to a specific institution’s customer needs. Third-party vendors with extensive knowledge of proven solutions can help ensure financial institutions implement the right set of products to build a better future alongside their customers.  

In combination, small-dollar lending programs and solutions reduce the conditions that cause overdrafts and give financial institutions tools to fill a potential void in a new overdraft environment. They also give institutions a way to offer depositors more flexibility than the competition, keeping customers better engaged over the long term as they build their wealth.  

The post Filling the Gaps in Cash Flow Needs   appeared first on PaymentsJournal.

Visa and Revolut are launching Instant Card Transfers, a platform designed to mitigate the challenges of cross-border business payments.

Organizations that transfer funds internationally have long contended with high transaction fees and prolonged processing times. In addition, each country has its own set of regulations for cross-border payments. Instead of searching for IBAN numbers and Bank Identifier Codes, Revolut’s business clients will only need a card number to send money internationally.

Instant Card Transfers is expected to reduce the multi-day delays often associated with cross-border payments, with many transactions reaching their destination in less than 30 minutes.

Significant Strides

The new offering will be available in over 78 countries and support 50 currencies. This platform gives small- to medium-sized businesses an opportunity to expand their global footprint, although it will initially be open only to UK and EU members.

Since its inception in 2015, UK-based fintech Revolut has made significant strides, including securing its long-awaited UK banking license. The fintech has also announced plans for U.S. expansion, although it has not yet filed for a U.S. banking charter.

A Global Framework

Commercial payments have become so complex that even many seasoned financial professionals may not grasp all their nuances. With cross-border business payments, substantial sums change hands through various methods, and companies have to account for currency conversions.

The demand for cross-border solutions is unlikely to decline given the ever-growing globalization of business. Progress toward establishing a global framework for cross-border payments has been slow, but platforms like Swift and BIS’s Project Agora are designed to address this gap.

However, the most effective candidates for facilitating global cross-border payments already have a framework in place.

“There are several options that could fill that gap and deliver the infrastructure for cross-border payments, but it’s still not clear which one will emerge,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, in a previous conversation with PaymentsJournal. “Visa and Mastercard would be perfect candidates for cross-border payments because they already have an established global highway. It could be a great addition to their business, especially if there’s a reduction in credit card interchange fees.”

The post Visa and Revolut Collaborate on Cross-Border Business Payments Platform appeared first on PaymentsJournal.

The rapid growth of instant payments in the U.S. has captured significant attention across the payments and banking industry. As digital transactions become increasingly integrated into daily life, the estimated value of the instant payments market is set to soar, reflecting both consumer demand for speed and efficiency and the ongoing innovation within financial technology.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Movements in Global Commercial Payments and Banking: 2024 Edition

Estimated Value of U.S. Instant Payments 2024-2028

• 2024 – $4 T
• 2025 – $8 T
• 2026 – $16 T
• 2027 – $27 T
• 2028 – $37 T

Estimated value in Trillions of U.S. Dollars

Source: Deloitte Insights and Association of Financial Professionals, 2023

About Report

Global commercial banking and payments are undergoing rapid transformation, spurred by advances in technology, shifting corporate practices, and emerging market trends. Businesses are under pressure to adapt quickly, staying competitive, mitigating risks, and seizing new opportunities. One of the most significant trends is the increasing adoption of instant payments worldwide. As businesses begin to mirror the success of instant payments in the consumer sector, this trend is expected to gain even more momentum.

This report by Javelin Strategy & Research examines these ongoing changes in areas such as cross-border transactions, emerging corporate payment methods, regulatory compliance, anti-fraud efforts, and the prospects for non-systemically important banks. Now is a crucial moment for businesses and their banking partners to adopt modern messaging standards, embrace automation, prioritize sustainability, and more, ensuring they stay ahead in this fast-evolving landscape.

The post What is the Estimated Value of U.S. Instant Payments, 2024 – 2028? appeared first on PaymentsJournal.

The largest corporations and financial institutions make payments and transfer funds at a magnitude that far exceeds consumer transactions. However, even many seasoned financial professionals may not fully grasp all the nuances of commercial payments.

Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, asked the leadership at the foremost banks and corporations about the most pressing topics in the commercial payments industry. Their main request was for a guide detailing the fundamentals of commercial payments which would explain the intricacies of commercial payables and receivables.

Because that training hasn’t been developed, Bodine created A Modern-Day Primer on Commercial and Enterprise Payments to be an introduction to commercial payments for those who are new to the space, whether it be for college grads that have just been hired, seasoned professionals who have moved into commercial banking, or leadership who are looking for ways to pass on knowledge to their staff.

Global Frameworks

In addition to the substantial sums involved, commercial payments also utilize a wider array of instruments.

Corporations use wire transfers, ACH transactions, paper checks, and now even the instant payments systems that have gained traction globally, such as Brazil’s Pix and India’s UPI. Payment methods such as electronic funds transfers (EFTs) and direct digital transfers between banks are also seeing increased use in commercial applications.

Adding another layer of complexity to the commercial payments landscape is the growing demand for cross-border instant payments. In many cases, there is simply no infrastructure to support these transactions. For instance, there is currently no instant payment rail between the United States and India.

“There are several options that could fill that gap and deliver the infrastructure for cross-border payments, but it’s still not clear which one will emerge,” Bodine said. “Visa and Mastercard would be perfect candidates for cross-border payments because they already have an established global highway. It could be a great addition to their business, especially if there’s a reduction in credit card interchange fees.”

Cross-Border Contenders

Beyond credit card companies, Belgium-based Swift is an interbank messaging system that has built a dominant framework for cross-border payments. A constant challenge in global payments is the sheer amount of time it takes to complete a transaction. With Swift’s GPI system, 50% of payments are credited to the beneficiary within 30 minutes.

Another key player in the cross-border payments space is the Bank for International Settlements (BIS), a consortium of the world’s central banks, including the NY Federal Reserve, the Bank of England, and the Bank of Japan. The consortium released Project Agorá, built on a unified ledger model.

The purpose of Project Agorá is to develop a way that tokenized commercial bank deposits can be integrated with tokenized wholesale central bank money on a single platform. In the current system, payments are processed through messages sent to banks, detailing how to credit clients. This means payment communication and fund transfers are two separate actions.

Tokenization technology has the potential to merge these two processes, allowing banks to update their ledgers in real-time. Automated ledger updates not only improve efficiency, but also help institutions remain compliant with Know Your Customer and anti-money laundering regulations.

“As new tech emerges, the further companies move away from the traditional system of correspondent banking that has dominated the industry,” Bodine said. “Global commercial payments used to be the wheelhouse of large commercial banks. With the arrival of fintechs, blockchain, and other innovations, it’s not just the blue bloods who can compete in cross-border payments.”

Eliminating Checks

One of the main issues in the commercial payments space is the continued reliance on legacy payments methods. Globally, roughly 33% of payments are still made using paper checks.

“For over 30 years, I’ve been talking about the elimination of paper checks at every chance I get,” Bodine said. “It’s finally happening, but it might not be for the efficiency reasons you would expect. Believe it or not, it’s more due to environmental, social, and governance (ESG) initiatives.”

“With all the payments alternatives, it’s an easy check box on an ESG initiative to simply get rid of checks,” he said. “You are helping the environment, increasing efficiency in your organization and potentially mitigating fraud.” 

A Training Centerpiece

Due to the lack of educational resources in the commercial payments space, many financial professionals seek more thorough solutions. For this reason, Bodine noted that his latest report is just the tip of the iceberg.

“I want the Modern-Day Primer on Commercial and Enterprise Payments to be positioned as the centerpiece of training for those new to the commercial space,” Bodine said. “It would be an excellent addition to a more comprehensive training program that includes seminars and video instruction. Look for that soon.”

The post The Complexity of Commercial Payments Isn’t Often Understood appeared first on PaymentsJournal.

The role of the Chief Financial Officer has evolved significantly in recent years, with finance offices increasingly tasked with driving business growth. As technology requirements and banking relationships grow more complex, CFOs often find it challenging to maintain the cash visibility necessary to optimize working capital and make informed strategic decisions.

In a recent PaymentsJournal podcast, Leo Gil, VP of Product at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the expanding role of the CFO and the ways finance offices can use automation to drive change in organizations.

Profound Importance

Visibility into an organization’s consolidated cash position is important, especially in the face of macroeconomic headwinds like interest rate fluctuations, market conditions, and supply chain disruptions. The CFO’s office holds primary responsibility for cash management and visibility, and as the importance of these aspects has elevated, the strategic role of the finance office has been amplified.

“CFOs these days are in a unique position,” Bodine said. “They know the financial elements of the business better than anyone, but they have also become key strategic contributors in an organization.”

The finance office works to maximize returns by reducing interest expenses and borrowing costs. It also allocates funds to investment accounts that drive better growth and profitability. Over the past few years, finance offices have had to simplify their operations to get a better return on investment, especially from technology.

Companies have had mixed results in those endeavors, and the size of the organization isn’t always the determining factor. Some small companies have full cash visibility and make appropriate, strategic investments. Some larger companies lag because they have too many disparate systems and excess complexity.

Unfortunately, many companies still rely on manual processes. They might log into multiple banking portals, extract the data, and combine it all into a spreadsheet.

“Technology can mitigate manual processing, but issues arise when companies take a big-bang approach,” Gil said. “They allocate substantial capital and resources to implement sweeping changes in an organization, hoping for an immediate result. They’re not willing to go through a long-term revamp or implementation to see results.”

Complex Banking Relationships

Some organizations have sought to solve their financial issues by increasing the number of banks they partner with. Other companies diversified their banking relationships in response to recent banking failures.  

A company that previously managed three banks may now have expanded to 10 or more banking relationships, adding significant complexity. This expansion can make it challenging for the finance office to get a consolidated view of its cash position.

As the number of banking relationships increases, the importance of automation technology becomes even more pronounced. Businesses that rely on manual processes to manage multiple bank relationships will inevitably face the burden of constant financial aggregation in their daily operations.

“Aggregating bank statements might take two hours a day, then they must generate cash positions and cash forecasts, which takes three hours,” Gil said. “Then they need to generate liquidity forecasts and reconciliations, which takes another two hours. Before you know it, the day is over.”

Manual processes are inherently inefficient, and when data streams originate from multiple sources, finance offices struggle to manage daily operations effectively. If the finance team’s entire focus is consumed by operational tasks, they will never evolve into the strategic leaders that companies need.

Automated Consolidation

Organizations should have a fully automated, consolidated view of all their cash positions. Once they have accurate cash visibility, the next step is cash forecasting. Businesses don’t just need to know their position today, they must know where the company will be at the end of the week, month, and quarter.

Finance offices operate in cycles. In each period, whether it’s monthly or quarterly, they manage cash and payments. They perform reconciliations and comply with regulations. They make sure operations and payments are secure. Then they close the period out.

“There’s always a rush at the end of the month or the end of the quarter, where everyone is trying to find information across different systems and in ERPs, and combine the data,” Gil said. “There’s always something missing, and it’s a constant struggle.”

That complexity can be reduced by automation, and that allows finance teams to become more strategic. They can weigh decisions about potential acquisitions, or how to allocate cash for investments. They can make decisions about borrowing, and about moving funds between banks.

If it’s a global company, the CFO’s office can give guidance on currency conversions or foreign exchange trading. The goal is to minimize expenses and to react quickly to business needs.

Preparing for Instant Payments

The acceleration of instant payments adoption will soon impact businesses substantially. Ultimately, every money movement will be affected.

“If you transfer money into an investment account, if you borrow from a line of credit, or if you move money between accounts across different banks, those transactions become payments,” Gil said. “For some businesses, the ability to react quickly and move funds without waiting three to five days for payment settlement can be critical.”

In industries that are tied to market conditions, such as the oil and gas industry, every minute counts. Instant payments give companies the ability to react to market conditions and allocate funds quickly, which could save organizations millions.

Simplicity and Usability

Even though there are an increasing number of technology solutions, finance offices should concentrate on simplicity and usability. Instead of focusing on large systems with many complex features and functions, the CFO’s office should be agile and drive benefits to the business in an incremental way.

“There’s an inversely proportional relationship between value and effort,” Gil said. “Especially with technology, you can get 80% of the value with 20% of the effort. Of course, it can work vice versa. CFOs must be aware of those points in their organization and adapt accordingly. They must constantly work to drive return on investment, because that’s how CFOs help their organizations thrive.”

The post The Elevated Role of Cash Visibility and Automation in the CFO’s Office appeared first on PaymentsJournal.

Paying bills is an essential part of life, but it’s a task that has become increasingly complex. Because bills often come in various forms and require different payment types, it can be hard for consumers to stay on top of their finances.

In a recent PaymentsJournal podcast, Derek Swords, VP, Head of Product, Bill Pay at Fiserv, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the challenges consumers face when paying bills and the opportunities financial institutions have to provide value for their customers.

A Fragmented Landscape

The volume of bills consumers receive has increased over time. In the past, consumers may have sent paper checks by mail to make those payments, but consumers now receive and pay bills in a wide array of methods.

Customers could pay a bill electronically through their bank, mail a paper check, or go to a biller’s website and make an ACH payment directly. Consumers receive bills via mail in some cases and email in others. All those factors have led to a significantly fragmented customer bill pay experience.

To consolidate that experience, new payment networks have been constructed on a digital-first framework. While the volume of bills is increasing consumers are increasingly paying billers directly. There has also been a rise in automatic payments from credit cards. Though checks can be problematic, it will take time for checks to be phased out because many smaller billers still rely on them.

Consumers are becoming more familiar with different payment methods, though many younger consumers may still not be aware that bank bill pay is an option. However, there hasn’t been significant innovation in the traditional bank or credit union experience, so many financial institutions are lagging customer expectations.

“Consumers are evaluating other payment methods because they want enhanced clarity, faster payments, and more payment choice,” Swords said. “They’re using their phone instead of the traditional desktop experience because it provides transparency and increased access. What they’re really looking for is an offering that rolls all their obligations into one, and that creates an opportunity for financial institutions.”

Around 85% of customers indicate that they would rather have a single, combined, integrated experience. Aside from simply viewing bills, consumers also want to make all their payments from that central, mobile platform, and financial institutions should keep that in mind as they design their experiences.

Beneath the Hood

In many cases, customers adopt a service based on the quality of their first bill pay interaction, so financial institutions should make it simple for customers to find their bills and enroll in applicable programs.

“Onboarding is extremely important because it lets customers know the capabilities beneath the hood, if you will,” Swords said. “It’s about informing customers about the offering and getting them engaged. Once they get there, the consumer should have full control of the payment, transparency on when the payment will occur, and confirmation the payment happened.”

Thorough onboarding will be critical as the market heads to faster and, ultimately, real-time payments. Instant settlement makes it even more important for institutions to provide an accurate, transparent experience. When customers get notifications, they should be able to immediately access their mobile app, make the payment, and get back to their lives.

“It’s not like the traditional bill pay model, where they stacked their bills by the desk and paid them one by one,” Swords said. “That’s not how consumers work today. They want an on-demand experience where they can get things done on the go and get advice along the way.”

An Advisory Experience

The advisory aspect is often overlooked in the bill pay experience, but innovative products now help customers proactively manage their finances. Timely push alerts and messages are critical functions. It’s not optimal for an accountholder to miss a bill because they were busy.

The advisory process should also be ongoing. After a customer sets up a bill, an institution might work to eventually transition them to an automatic payment. FIs might also offer customers the option to sign up for notifications or group certain types of bills. Banks and credit unions should inform customers about the different payment rails and the benefits of each.

“If a customer has a bill due tomorrow, they should be advised on how to use the fastest payment the biller accepts,” Swords said. “The goal is to make sure the payment is on time, the customer has a great experience, and users understand when money is sent or received.”

Financial institutions are constantly working to make it easier for accountholders to pay anyone, anywhere. There is an increasing demand for international payments, and that includes bill payments.

“It could be sending money overseas to family or paying for your daughter’s wedding in Italy, but customers want the ability to send money worldwide,” Bodine said.

The Future of Bill Pay

Whether a payment’s destination is domestic or international, the process should be seamless. The goal should be to design a user experience in which the customer doesn’t have to think about which rail to use or which tab to click on.

Many companies are incorporating intelligence that will make it easier for customers to discover the bills that are available for them to pay. From a ZIP code, for example, a user could be matched up to the local power company. With permission, a bank could do a soft touch to a customer’s credit report, which gives the institution insight into the bills a user pays.

Many upcoming bill payment initiatives revolve around small businesses. That includes a push for small businesses to self-enroll to receive electronic payments because checks are still a staple for many businesses. Card payments are also beginning to pick up steam with small businesses, because a credit card can offer an attractive short-term line of credit.

“Whether it’s for consumers or businesses, the goal is to create a profound, smart, all-in-one experience where users can see all their obligations and make any kind of payment in an advisory environment,” Swords said. “Bill pay is an essential service that drives digital engagement and loyalty for financial institutions, but it’s not enjoyable for most customers. For financial institutions, however, bill pay is a both a competitive necessity and a substantial differentiator.”

The post A Competitive Differentiator: How Financial Institutions Can Leverage Bill Pay appeared first on PaymentsJournal.

In today’s complex business landscape, maintaining precise and transparent financial records is not just recommended—it’s essential. Payment reconciliation is a critical, yet often overlooked, task fundamental to ensuring an organization’s financial well-being.

This process involves meticulously aligning sales transactions recorded in a company’s accounting books with those on bank statements and other financial documents, ensuring every dollar is accurately accounted for.

Though it might seem straightforward, the implications of payment reconciliation are vast and can influence everything from daily operations to strategic corporate decisions. Proper reconciliation can uncover discrepancies, prevent fraud, and ensure regulatory compliance. In turn, this accuracy influences daily operations, allow for smooth cash flow management and reliable financial reporting.

Understanding Payment Reconciliation for Merchants

Payment reconciliation is not just about maintaining accurate financial reporting and effective financial management; it’s also a robust security measure. By gathering all relevant financial data and rigorously comparing each transaction against bank entries, businesses can identify discrepancies that protect against potential threats. Discrepancies could occur due to timing differences, entry errors, chargebacks, or unauthorized transactions.

Addressing these issues is essential to upholding the integrity and transparency of financial information and detecting and preventing fraud. Moreover, the process plays a vital role in validating a business’s financial integrity, particularly in environments where fiscal discrepancies can lead to severe legal consequences. Regulatory bodies often demand detailed financial reports and reconciled accounts to ensure businesses comply without delay or inaccuracy.

Businesses must consider several factors when approaching payment reconciliation to ensure it enhances their financial management and benefits their customer base. The volume of transactions, the diversity of payment methods, and the geographic scope of operations can complicate the reconciliation process, making robust systems and processes crucial. By prioritizing software solutions that offer automation and integration capabilities, businesses can handle complex transaction environments more efficiently.

This approach not only simplifies reconciliation but also significantly improves cash flow management, financial forecasting, and operational efficiency, especially when selling through multiple channels. Ultimately, these improvements benefit both the company and its customers, fostering trust and ensuring smooth financial operations.

Reconciliation in the Digital Era

The strategic benefits of payment reconciliation extend beyond maintaining accurate financial records; it also provides valuable business insights that inform decision-making at all levels, from assessing division profitability to planning budget allocations. This process has significantly evolved in the digital era, with technology streamlining and enhancing accuracy.

Automated tools now handle the bulk of sale to cash transaction matching, reducing human error and the intensive labor of traditional methods. These digital solutions swiftly identify discrepancies across multiple platforms, enabling continuous monitoring of financial transactions. This not only helps businesses maintain tight financial control in a complex digital landscape but also enhances their ability to respond quickly to any irregularities.

How to Streamline the Reconciliation Process

Creating an efficient payment reconciliation process presents a significant opportunity to enhance financial efficiency and bolster the bottom line. The future of payment reconciliation lies in strategic partnerships with payment solutions providers. These partners offer sophisticated tools that integrate seamlessly with a company’s banking systems and accounting software, enabling real-time transaction matching of a sale, to inventory, and then to cash, immediately detecting discrepancies. This level of automation significantly reduces manual effort, minimizes errors, and ensures that financial records are consistently up-to-date. Such accuracy is crucial for timely reporting and effective decision-making.

To better manage payment reconciliation, businesses must have access to advanced analytics and tools capable of handling multiple currencies and diverse payment methods, essential for operating in the global market. Leveraging these partnerships allows companies to streamline their financial operations, reducing the complexity and time required for reconciliation. This efficiency empowers businesses to focus on growth and strategic objectives, using solid financial management as a foundation for success.

The post Optimizing Financial Integrity: The Role of Payment Reconciliation in the Digital Era appeared first on PaymentsJournal.

Fleet cards have become an essential tool for managing the fuel and maintenance expenses of commercial fleets, regardless of size. These specialized payment solutions offer fleet managers a streamlined and efficient way to control costs, track expenditures, and enhance operational efficiency.

The prevalence of these cards has grown significantly, driven by advancements in technology and the increasing complexity of fleet management. Whether overseeing a small business with a handful of vehicles or a large enterprise with hundreds, these cards provide critical insights and control mechanisms.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Fleet Cards 2024: Small Fleets Are an Opportunity

Global Fleet Card Usage (2023)

• 74% – Large fleets (more than 100 vehicles)
• 49% – Midsize fleets (25 to 99 vehicles)
• 23% – Small fleets (2 to 24 vehicles)

Source: Visa, July 2023

About Report

Nothing stays the same for fuel card providers, or for the fleet operators that rely on them. Declining fuel costs in 2023 cut into fuel card companies’ revenues, sending them off in search of other growth opportunities. Some of those opportunities exist in catering to smaller fleets by drawing them in with a card product and cross-selling other services. 

This Javelin Strategy & Research report looks at the fleet market and where things are headed. Vendor strategies would do well to focus on mixed fleet needs and electric vehicles, use fleet cards as entries into bigger relationships with fleet managers, and learn from newer market entrants that use sleek, modern apps to drive business.

The post Does Fleet Size Impact Fleet Card Prevalence? appeared first on PaymentsJournal.

The payments industry has undergone more change in the past few years than it has in the preceding few decades. The rise of instant payments, the arrival of fintechs, the consumerization of payments, and the onset of open banking have driven significant shifts in the business payments terrain.

In a recent PaymentsJournal podcast, James Richardson, Head of Global Product Solutions at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how businesses can revolutionize the way they pay and get paid.

Searching for Watering Holes

Two of the most common business payment themes on the minds of chief financial officers are how to solve for fragmented technology and how to integrate fragmented processes.

“Generally speaking, corporates believe there are smarter ways of solving for business payments than the technology that’s accessible to them provides,” Richardson said. “They’re rationalizing their vendor relationships and looking for more meaningful strategic partnerships to help them streamline business payments.”

Many large corporations simply don’t have the staff to pursue new revenue streams. Though they realize fintechs can address those gaps, companies are often unsure how to proceed. Fintechs can also be uncertain how to position themselves to businesses.

Optimizing business payments is that much more difficult because of the sheer amount of information available to companies. It can be tough for businesses to get tangible insights into what is changing in their industry.

“They’re looking for sources,” Richardson said. “They’re searching for the watering holes where they can find the latest on the industry, because it’s critical to find out what the best in class is doing. It used to be businesses could speak to their bank and get all the information they needed. Now corporates have more multibank relationships than ever before.”

Companies recognize that they should be more independent and less reliant on their bank. Financial institutions and fintechs have rushed to offer solutions, fueling competition. The competition has been beneficial for businesses because they now have an array of solutions to choose from.

A New Wave of Change

In European markets, there are more payment types, a situation that creates choices for customers and companies. As more options become available, U.S. CFOs must consider the most effective way to modernize payments. It could mean moving from paper-based payments to electronic payments or making cross-border payments more effectively.

The ability to modernize through connected solutions is greater now than it has ever been, but adoption has been slow. According to a 2022 AFP Payment Survey, over 90% of U.S. businesses accept checks for incoming payments, and 86% use checks for outgoing payments. In most cases, it’s not for lack of better options; it’s because that’s the way things have always been done.

“Cracking the behavior is critical,” Richardson said. “Frankly, it’s a cultural thing. It’s already being done in other countries, but over the next few years, moving away from checks will be significant to overcome for U.S. companies. Once that happens and CFOs’ eyes are opened, they will see a new wave of change within their organizations.”

Though many businesses don’t want to process paper in and paper out, they are concerned about fraud. That means checks might stick around.

“We aren’t likely to see a government mandate in the United States where checks would be completely mandated out of the payment system,” Bodine said. “That means we aren’t likely to see an eradication of checks until there is a concerted effort by the largest corporations in the world to get rid of them.”

Navigating the Fraud Crossroads

The complexities of fraud have brought companies to a tough juncture. Criminals now operate as if they are businesses, and if an organization is targeted, it’s not by chance. Bad actors are looking for weaknesses. If they find one, they will conduct deliberate, purposeful attacks.

“The opportunity for corporates is to actively search out best practices and not become the laggard,” Richardson said. “If you’ve got your head in the sand with fraud, you run the risk of getting hit twice. One, it’ll affect your cash flow because you’re making slower payments. Two, fraudsters will prey on those that are the weakest or the slowest to move. You don’t want to be in that category.”

In addition to outside threats, businesses must be aware of insider fraud, which can hurt an organization just as much. To mitigate that threat, businesses should create a culture where the company’s money belongs to every employee. It’s everyone’s responsibility to make sure those funds are safeguarded.

Employees should know it’s appropriate to challenge suspicious transactions. It will become even more important as tech develops and criminals have better tools. Although new technology can increase fraud risk, it can also mitigate it. For instance, business payment networks can provide absolute verification of the relationship between the account sender and the account receiver.

“Fraud prevention should be a priority, but it’s also an ongoing process,” Richardson said. “That’s when it’s important to have those watering holes, to check your sources to find out the latest on fraud prevention. More knowledge makes corporates more independent. It’s critical if they’re thinking about a broader payments structure that reaches beyond their own shores.”

Rapid Time to Value

If companies embrace the technology that’s available as a service solution, they will find it won’t take long to get up to speed. Partners can quickly connect solutions that will optimize a company’s payments systems.

“Partner, partner, partner with an exclamation point,” Bodine said. “The data shows that if you want to see improvements in efficiency, costs, and long-term sustainability, it’s best not to attempt payments modernization internally.”

Payments partners can now onboard businesses in days or weeks as opposed to months or years, so there is a rapid time to value. Though some U.S. companies may be cautious, the businesses that modernize their payments systems soon will be best positioned to reap the rewards.

“Recognize the payments landscape has changed quite significantly,” Richardson said. “It’s a smaller world now. But if you look at what other countries are doing, you’ll be encouraged about what’s coming your way.”

The post Rapid Time to Value: Modernizing Business Payments appeared first on PaymentsJournal.

After years of restrictions and uncertainties, people are eager to travel the world again, whether for leisure, business, or reconnecting with loved ones. As a result, international travel is getting back to—and in some cases even surpassing—pre-pandemic levels. 

Dynamic Currency Conversion, or DCC, is making the travel experience more seamless. On a recent PaymentsJournal podcast, Ed Robles, Senior Director of Sales, Business Development at Euronet Worldwide, spoke with Albert Bodine, Director, Commercial and Enterprise Payments at Javelin Strategy & Research, about how simplifying currency management can create new revenue opportunities for financial institutions.

Finally, Transparency in Currency Exchange

Travelers today expect to manage their finances abroad with the same ease and convenience they enjoy at home. Historically, this has been a challenge given the range of currencies international travelers have to deal with and the limited number of exchanges available. DCC is changing that.

DCC, which is offered at ATMs and point-of-sale terminals, allows international travelers to pay or withdraw money in their home currency instead of the local currency. Essentially, when a traveler uses their credit or debit card abroad, they’re given the option to convert the transaction into their home currency at the point of sale. Travelers can lock in the exchange rate at the time of the transaction, avoiding the uncertainty of fluctuating rates.

One primary benefit is transparency. Travelers can see the exact amount they’re spending in a currency they understand, which helps with budget management and eliminates the guesswork of exchange rates. DCC also provides a better exchange rate compared to traditional currency exchanges, reducing the overall cost of foreign transactions. 

“If you are withdrawing pesos in Argentina and you don’t know what the conversion rate was, DCC will convert and provide the rate for you,” said Robles. “You have the option as the cardholder to accept or deny the transaction based on the conversion. If you accept, your receipt will give you exactly the same numbers you’ve seen on the screen, so you know what you paid for in your home currency, even though the money you’re withdrawing is the local currency.

“As it gets back to your bank, that same amount will be on your statement at the end of the month,” he said. “You don’t get hit with international fees or any other conversion fees.”

One common difficulty travelers face is the high fees associated with withdrawing cash abroad, along with fluctuating exchange rates that make it hard to know exactly how much they’re spending. Finding ATMs that accept their cards and offer reasonable rates can be an added inconvenience and time-consuming. 

“At Javelin we analyzed some of the routes around the world,” Bodine said. “We found that if you were to send $200 through traditional correspondent banking means, in some cases that would cost you $104 in fees on one of the routes. You’re talking about 52% of the transmitted amount in fees that the intermediaries are taking.”

“I remember the days where, whether it was for a personal transaction or even a business transaction, cash was required, and we had to partake in some type of hedging activity,” he said. “I love the transparency aspect of dynamic currency conversion, where you can see the fee structure on the front end, and the cost that it drives down.”

Reversing the Transaction

On the other hand, some travelers may have leftover local currency as they prepare to return to their country of origin. While not yet widely available, technology exists to convert foreign currency back to dollars or another home currency. Euronet is in the process of certifying certain ATM models to handle this conversion.

Robles pointed out that this is an important service for overseas travelers to avoid the double whammy of currency exchanges. “We get hit by a 17% to 20% conversion rate at the airport kiosk,” he said. “When we want to exchange it back to our local currency, we get hit again.”

Benefits for Financial Institutions

For financial institutions and merchants, DCC brings several advantages. By enhancing customer satisfaction and providing a valuable service, it can lead to higher transaction volumes as customers are more likely to use services that offer transparency and convenience. Moreover, financial institutions and merchants can find additional revenue streams through better exchange rate margins and increased usage of ATMs and POS terminals. 

Euronet recently noticed an emerging trend after reviewing reports with one of their clients. They noticed a significant number of exchanges involving the Australian dollar in a particular area with a large Australian population. Euronet notified the bank, which then notified their merchants.

One of the merchants, a restaurant, decided to incorporate an Australian beer into their menu and advertised it to the local community. As a result, Australians started coming to the restaurant for dinner, drawn by the familiar offering.

“And the way that happened was through the DCC analytics that we provide our customers,” said Robles. “By noticing that there were a lot of Australians in the area, ready to spend money, their revenues went up.”

The post Reinventing Currency Exchange for Global Travelers appeared first on PaymentsJournal.

New cross-border payments solutions are offered seemingly every day. These solutions use everything from stablecoins to pay-by-bank platforms. However, international wire transfers still play a crucial role in money movement, and that’s not likely to change anytime soon.

In a recent PaymentsJournal podcast, Justin Jackson, SVP, Head of Enterprise Payments at Fiserv, and John Min, Chief Economist at Monex USA, discussed the present and future of international wire transfers and the methods financial institutions can employ to leverage this powerful tool.

Functional, Secure, and Reliable

Wire transfers have a place in the payments landscape because they function more efficiently than the alternatives. They’re secure because banks on both ends of the transaction are constantly monitoring its status. Wire transfers are also more reliable because of the beneficiary information that accompanies the transaction and ensures that the payment is routed to the right account.

Account-to-account and P2P payments, which have grown immensely in the past few years, have limits on transfer amounts. Wire transfers can far exceed those limits, moving tens or even hundreds of millions of dollars. They also have international reach, which is vital to companies doing business around the globe and are often a lifeline for consumers with family overseas.

International wire transfers do have downsides, however. Issues often arise because financial institutions aren’t aware of all the aspects of the transfer process.

“One theme that keeps coming up is transparency,” Jackson said. “You don’t know how many intermediaries are going to be handling the transaction and what their timelines are. How long is it going to take them to deliver your funds to the next link in the chain? Most importantly, you don’t know the fees they’re going to charge you.”

The Hidden Costs

When sending overseas, American institutions can wire funds in U.S. dollars or in the recipient’s currency. It can be convenient to send in dollars because the institution doesn’t have to calculate foreign exchange (FX) rates, but convenience comes at a cost.

“Once the dollar hits the foreign account, it has to be converted,” Min said. “At this point, you have no control over the exchange rate or the markup on that transaction. The recipient bank or the financial institution can apply whatever rate it wants, and therefore the hidden costs could be significant. It could be as much as 2 to 3 percentage points.”

The fees come directly out of the transfer’s funds. A business owner, attempting to pay an invoice for €10,000, might find out that only €9500 of the wire transfer was applied to the invoice. That leaves the owner no choice but to send another wire transfer to cover the shortfall, and that payment could also incur fees.

Because of government regulations, institutions might run into roadblocks when trying to conduct transfers in certain currencies. The U.S. State Department has mandated a list of currencies that are prohibited for foreign transfer.

“Some transactions are in a gray area,” Min said. “Sending money into Brazil, for instance, is cumbersome. It’s not just sending the funds. The recipient has to receive paperwork and complete it. Sending money into China can be very difficult because of the regulatory oversight. If you send U.S. dollars into different foreign currencies, then different regulations apply and different fees apply.”

Value-Add Fees

Because of fluctuating FX transfer rates and shifting government regulations, international wire transfer fees can vary substantially.

“The fee could be as low as zero dollars,” Jackson said. “It’s not exactly free; it’s included in the relationship with the financial institution. Fees could also be as high as $50 per wire transfer, but they average around $45. It’s typical for the sender to pay a fee to send a wire transfer, and it’s not atypical for the recipient to be charged a fee by their own financial institution.”

Fees can be a value-add for banks and credit unions because they create an income opportunity.  All pricing is negotiated in every FX transaction, so institutions can earn revenue from the markup on currency conversion.

“There’s no one fixed price or one fixed markup rule, so it’s up to each institution to mark up whatever they can get away with to some extent,” Min said. “If you’re doing an FX transaction with a company like PayPal, you could be facing a 250 to 300 basis point fee. It’s a very lucrative revenue source for financial institutions.”

At a 300 basis-point rate, a $10,000 transfer sent overseas incurs a $300 charge. The financial institution gets all the markup share if the transaction is originated through the bank or credit union instead of a third party. Reducing the fee to 100 basis points would still mean $100 of income to the institution and a $200 savings for the sender of the payment.

Asking the Right Questions

Because of the complexity involved with international wire transfers, many institutions have turned to partners. There’s a level of due diligence that should always be applied to partnerships, but it’s especially true of foreign exchange services. Banks and credit unions must ask the right questions to ensure a partner can truly support their needs.

“Institutions should look at their customer base and the types of transactions they’re likely to perform,” Jackson said. “Then ask partners about the currencies they support. How do those line up against the transactions my accountholder base wants to execute? What are the exchange rates? What are the fees? They should also find out any additional fees based on markup.”

The duration of the transfer is another key question. The standard banking practice for international wire transfers is the day the transfer is initiated plus two. If the transaction is conducted today, the money usually appears two days later. That delay is caused by batch processing, because many banks can conduct transactions only during set hours.

Partner companies often operate 24/7, so transactions can be completed the same day or the next day. Many partners have also established branches in other countries, which can speed up transactions and make exchange pricing more competitive.  

“The benefit of working with a fintech partner is they’re plug-and-play,” Jackson said. “It connects into your core account processing system; it’s wired into your institution’s online banking system. It fits into your existing reporting structures and data structures and uses existing connectivity. It’s easy and simple, and there’s not a big technical lift.”

While there are strong benefits to working with partners, institutions must ensure they’re working with a regulated money services company. In the United States, that means they’re licensed to operate in every state and at the federal level. It’s critical that financial institutions aren’t assuming any additional risk by working with a third-party partner.

Growing Globalization

Institutions that are using their own systems to send U.S. dollars through an intermediary are leaving an opportunity on the table. Despite talk of deglobalization, more businesses than ever are getting involved in international commerce. As that trend increases, companies will look for more efficient ways to send money.

“You’re able to give your customers a better service while providing them cost savings and generating income for your institution,” Jackson said. “Foreign wire transfers and foreign exchange services can be a valuable offering because they’re a win-win for your institution, your customers, and the recipients of their payments.”

The post A Win-Win: Leveraging International Wire Transfers and Foreign Exchange Services appeared first on PaymentsJournal.

In the past, the chief financial officer’s role has been somewhat relegated to the financial aspects of a business. Now, CFOs face a challenging array of responsibilities that include payments modernization, fraud mitigation, and the selection and implementation of technological solutions.

In a recent PaymentsJournal podcast, Jeff Feuerstein, SVP of Paymode-X Product Management and Market Strategy at Bottomline, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the obstacles CFOs face and the role technology plays in the finance office.

The CFO’s Agenda

Though CFOs have a lot on their plate, three key themes highlight their agendas. The first is payments modernization, which is an integral part of a company’s digital transformation. This could include the migration from paper checks to electronic payments. It could also involve the transfer from paper invoices or documents to data that can be leveraged across the enterprise.

“The next big theme is fraud and risk mitigation,” Feuerstein said. “Recent research shows business email compromise has grown over 70% year over year. Fraud is riddling organizations in such a way that CFOs are concerned about when, not if, their company will get hit by an attack. How do we protect ourselves and our businesses?”

Because of the tough interest rate environment, the last priority on CFOs’ agendas is their organization’s cash position. Understanding their working capital enables leadership to fully grasp where they stand at all times and make more informed business decisions. On top of those three themes, CFOs must keep their organizations up to speed with the latest technology, which hasn’t traditionally been a part of the role.

“What’s surprising about some of these discussions is they actually involve CFOs,” Wester said. “In the past, CFOs were tangentially involved with discussions about technology, especially payments, but not in a way where they were decision-makers. CFOs are now coming into these discussions fully informed on what’s going on in the space.”

Companies were often divided between the business side and the tech side, but that division has eroded over the past few years.

“This side spoke business, this side spoke tech, and someone had to translate,” Wester said. “Though there are still times when that divide exists, now everyone in the CFO’s office has a strong understanding of what’s going on in the technology side.”

Obstacles Facing Finance Offices

Another change to the CFO’s role is that, 10 to 15 years ago, the finance office was very focused on the enterprise resource planning as the general ledger.

“There were not as many of what I’d call ‘point solutions,’” Feuerstein said. “Today, you’ve got several different point solutions, whether it be AP automation, AR automation, cash management products, cross-border solutions. CFOs are leveraging all these solutions and tying them together in a way that’s interoperable across the organization. It doesn’t just improve the efficiency of the CFO’s office; it brings revenue to the bottom line.”

One of the main responsibilities of today’s CFO is to understand all the solutions that are offered and how they can be leveraged. Given the number and complexity of those solutions, it can make for a difficult task. But the different perspective can also lead to new insights and improved partner relationships.

“They’re much better equipped to engage with partners,” Wester said. “They know what they should be able to get, and they’re judging those partners accordingly. It holds the partners’ feet to the fire somewhat, because they now have an entirely new constituency they have to serve.”

Though that represents a challenge for partners, it’s an opportunity as well.

“The bar has been raised for partners, and the competitive landscape for them is tougher than ever,” Feuerstein said. “But it also creates opportunities for partners to work with customers who are well-informed and fully understand their solutions. If partners are looking to elevate their game, those are the types of customers they should look for, because it elevates both companies.”

Leveraging Tech and AI

Finance teams are no longer simply cost centers for organizations. Payment strategies delivered by the CFO’s office are driving not just product innovation but also accounts payable automation and revenue back into the organization in the form of rebates.

Payment networks that can improve automation and generate rebates are a vital part of the transition away from the cost center model. Leveraging technology is the key, which could be through a virtual card, a premium ACH product, or a financing solution. The most powerful technology for finance offices, however, is likely to be artificial intelligence.

“In regard to AI, there will be both sustained innovation and disruptive innovation,” Feuerstein said. “The sustained innovations are those marginal gains that are improving existing processes, like answering questions faster at the customer support center. Disruptive innovation will be in areas like supplier onboarding or contract management that will be completely reinvented because of new language models.”

AI can also be a critical tool in the fight against fraud. AI can mitigate fraud in several ways, including:

• Identifying anomalies in customer spending habits
• Cross-referencing account behaviors against fraudulent characteristics
• Flagging fake account creation
• Analyzing customer communications for suspicious activity
• Neutralizing credentials-based attacks by malicious bots

Though companies should use technology to the fullest, they must also understand its limitations. For example, as the tech develops AI is likely to flag false positives.

“AI is clearly the topic that everyone wants to talk about, but we know that AI isn’t a magic wand,” Wester said. “It’s not going to fix substantial problems that exist within an organization. And AI is being offered and implemented everywhere. If everybody is using the same tools, then the gains will be the same across all organizations. The real question is whether your business is using the tool in ways nobody else is.”

Though companies must get creative with AI, they shouldn’t wait for inspiration to strike. There will be a first-mover advantage for those companies that adopt AI early and find ways to use it in their businesses.

Final Thoughts

A recent U.S. Bank survey found that 45% of CFOs say they’re just starting their journey toward digital transformation. For finance offices, the landscape is far more complicated than it’s been since the financial crisis. Interest rates are still rising, and cash flows are king.

“Look for the areas where you can drive the most amount of change in your organization,” Feuerstein said. “It could be working capital, security and risk mitigation, or automating those paper-based processes that are sticking in your organization. In the U.S., there’s going to be $32 trillion in spend flowing around, so there’s tons of white space in this market.”

“We’ve been talking about digital transformation for a long time, but we’re still really at the beginning,” Wester said. “The most important message to decision-makers is that this is the time to do it. Just because there’s a lot of white space doesn’t mean other companies aren’t doing the same things. It’s an important time to evaluate your payment strategy and digital transformation plan and make those moves.”

Discover other trends and topics being discussed in the CFO’s office in the Bottomline 2024 Business Payments Outlook. Get insights from Bottomline subject matter experts, along with industry partners and influencers.

The post We Speak Tech: How CFOs are Reinventing the Enterprise appeared first on PaymentsJournal.

The United States has been slow to fully embrace the open-banking philosophy, but there are signs the shift is accelerating. As more Americans link their banking, credit, and financial accounts, they expect customizable payments solutions, faster access to funds, and increased control of their financial wellbeing.

Globally, the open-banking market is expected to top $130 billion by 2028, fueled by consumer demand and technological capability. A report from Ripple, Trends in Regional Payments: Inside the Evolving Global Payments Landscape, examines how payments are changing worldwide and the trends driving North American adoption.

Benefits to Open Banking

Third-party companies are at the center of the open-banking model. Banks give approved third-party platforms access to their clients’ accounts, and the platforms can then perform payments and share financial data.

Though Americans have been reluctant to grant access to third-party platforms, the benefits outweigh the risks. Open banking gives businesses and consumers the ability to accept more revenue streams and grant access to more financial products. The model also increases the number of customer touchpoints, which creates the opportunity for personalization.

In many cases, third-party providers can also process transaction data faster. Increased transparency into creditworthiness should make credit scores more accurate, aiding lenders and consumers.

Imminent in North America

Europe has spearheaded the open-banking movement. In the UK, account-to-account (A2A) payments increased by 280% year over year in 2023.  But the United States is trending upward, with 71% of consumers indicating they prefer to make purchases and pay bills from their bank account.

Open-banking solutions gained ground in North America in 2023, exemplified by the partnership between Coinbase and a Canadian A2A infrastructure provider designed to offer alternatives to the traditional banking experience.

The open-banking model keeps banks and fintechs competitive and drives margins down. In turn, that will push traditional banking institutions that dominate the U.S. market to look for alternative ways to boost revenue and cut costs. Open-banking innovations, especially distributed ledger technology, can solve those issues.

Though Americans’ hesitation to adopt open banking has centered on security concerns, third-party platforms are innovating to keep payments safe. Data from the Financial Data Exchange (FDX), a nonprofit organization driving U.S. open-banking adoption, indicated that in 2023 more than 30 million Americans converted from credential-based account access, using IDs and passwords, to tokenized API access.

The FDX believes open banking is imminent in North America because of consumer preferences but also because of a more established regulatory framework. Still, more consumer education is needed. Visa recently reported that 87% of Americans have linked their bank accounts to third-party companies, but only 34% are aware of how the process works.

The Arrival of FedNow

Instant payment rails should also serve to drive the open-banking movement. FedNow, the instant payments service launched by the United States Federal Reserve, gives U.S financial institutions of all sizes the ability to deliver fast, customizable payments services.

Launched in mid-2023, the rail should bolster the awareness and adoption of open banking. That growth should become exponential as more financial institutions understand the service’s benefits.

Accessibility is chief among the advantages. FedNow is available to small businesses, large corporations, and individuals. Real-time rails will make U.S. businesses more competitive because they can operate with the same speed and precision as their global competitors. FedNow also improves the efficiency of payments and settlements.

Because customer expectations will likely increase after they use the service, FedNow should push financial institutions to innovate. Financial flexibility for businesses and consumers will expand as more avenues for revenue are available.

On the downside, financial institutions are likely to feel more pressure to increase spending on tech stacks to meet the demands of solutions like FedNow.

The Universal Language

Because of the complexity involved with connecting global open-banking systems, there must be a universal language that can translate messaging between financial institutions. ISO 20022 is the messaging standard that allows companies to securely share financial information worldwide. It’s an essential tool to support payments modernization and plays a crucial role in facilitating instant payments.

The standard should reduce transaction errors, even in cross-border payments, while making transactions faster and safer. ISO 20022 provides an established, robust common language between businesses and banks that puts a halt to end-of-day batch file payments processing and fully integrates with real-time payments.

ISO 20022 also delivers better analytics, improving financial institutions’ decision-making. Operational efficiencies should improve as companies are able to exchange enhanced remittance information. The standard should also eliminate the need for manual processing, reducing inaccuracies.

The ISO 20022 messaging standard is the foundation for FedNow, but it also offers the payments service the capability to evolve as the payments landscape changes.

What’s In Store for Stablecoins

Stablecoins are digital currencies tied to the value of a fiat currency, such as the U.S. dollar. These types of digital assets allow for direct transactions between customers and merchants, thus reducing transaction fees.

The currency is also cryptographically secure, meaning it is fully predictable and unbiased. Users can settle transactions in near real time without double payments or other settlement issues. Established on distributed ledger technology, stablecoins can serve as a bridge from the traditional Web2 financial model to the innovative Web3 economy.

PayPal made a substantial move into the stablecoin market in 2023, launching its dollar-based stablecoin, PayPal USD (PYUSD), which can be redeemed on a one-for-one basis with U.S. dollars. The new stablecoin makes for speedy and accurate payments, but it also has intriguing applications as a cross-border payment option. The emergence of PYUSD is a milestone that further legitimizes alternative payments and boosts the profile of digital currency.

While there are still regulatory hurdles in store for stablecoins, the backing of fintechs, banks, and governments is speeding the adoption. In the United States, there has been bipartisan support for the Clarity of Payments Stablecoin Act. The legislation is designed to accelerate stablecoin adoption and foster innovation.

Learn more about the changing landscape of payments in North America and beyond.

The post Trends in Regional Payments: Spotlight on North America appeared first on PaymentsJournal.

Organizations turn to fintechs for payment solutions that are as efficient and seamless as the transactions they facilitate. However, behind these smooth interfaces lies a labyrinth of challenges. Security concerns, regulatory compliance, and constant technological upgrades are just a few of the hurdles fintechs must navigate to provide what appear to be simple solutions. For clients, the expectation is straightforward: a payment solution that works flawlessly. The intricate complexity involved in meeting this expectation, though, often goes unnoticed.

It’s easy to make something simple complicated. But it’s difficult to make something complicated simple. In a recent PaymentsJournal podcast, Kieran Draper and Tom Jennings, the U.S. and EU/UK CEOs of B4B Payments, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, spoke about the strategies fintechs employ to ensure their solutions remain both effective and invisible to the user. Highlighted is the delicate balance between simplicity and complexity, especially in the world of international embedded payments.

Fintechs Deal With a World of Complexity

Ideally, payments get processed with the press of a button, no different from dialing a number and knowing, without having to think about it, that the right person will answer. Customers making payments expect something simple and effective.

But it’s a challenging environment for fintechs right now as they try to deliver that experience, with their funding drying up and regulators coming down on them. On the upside, it’s also a vibrant market. Demand is expanding, as more and more businesses seek to make payments across geographic boundaries and across platforms.

“For a fintech like us, there are a tremendous number of things that we need to take into consideration,” Draper said. “The transactions need to be secure, we have to be compliant in multiple jurisdictions, and the solution needs to be auditable. The trick is to try and figure out how to present a solution to these businesses that shields them from all of this complexity.”

One area with great complexity for companies is offering services across borders and the need to juggle varying regulations and payment methods. To take one example, B4B works with maritime businesses that make and receive payments in multiple currencies, preferably on local rails to keep the costs down.

“Sometimes a ship won’t be allowed to leave port, for example, until they’ve made a payment,” Jennings said. “They need to provide the proof of payment. Traditional banks don’t provide you that information in an easy way, but with our platform, you can just download proof of payment and show it to the port authorities, and the ship can leave the harbor.”

This is the essence of “embedded finance”. When they subscribe to a payment solution, they can embed it into their experience to the point that it becomes transparent to anybody who has to interact with it.   

Keeping Up With Regulations

Another layer of complexity comes from the increasingly stringent anti-money laundering (AML) laws, consumer protection regulations, and information risk management requirements. Navigating these regulations is a daunting task for clients. In the U.S., multiple layers of federal and state AML laws create a challenging compliance landscape, while globally, each country has its own specific AML requirements that continuously evolve. Managing these diverse and ever-changing regulations is an overwhelming burden that clients cannot be expected to handle on their own.

“The market is moving so quickly that you can’t even imagine where we’ll be six years from now, let alone six months,” Riley said. “Regulators have to be more conservative, because they don’t know where the markets are actually going. And then you have business risks that move quicker. Fraud increases when criminals can move quicker than large institutions. Just being able to keep the pace becomes essential.”

“The bar is so high now,” Jennings said. “It’s not just what’s current, but it’s also the horizon planning. You’ve got Dora in Europe, you’ve got PSD 3 coming up, and we’ve got no doubt new AML directives around the corner. It’s constant.”

To help address this, B4B has built a single global platform that is common across all territories of the world, with a single global data processor and a single set of APIs. That allows customers to subscribe to one solution, one set of services that gives them access to tremendous capabilities in the background.

Payments From Every Direction

B4B’s channel partners are typically very well established in their own industries and have tremendous experience, but they are also busy and expanding. They are typically good at managing their core business and managing their own customers. But they’re not adept at managing the payments or banking functions that they need to operate smoothly.

Universities are a great example. The payment functions that go with a university’s basic functions are incredibly complicated. Tuition is coming in directly as well as through multiple government sources and scholarships. There’s a whole infrastructure for things like tickets to football games or baseball games, with maybe a different one for the arts department. The best strategy, and the best use of resources, is to let the university target what it needs to do and let the back-office functions get optimized.

“They can very easily find justification for working with a fintech like us,” Jennings said. “Both the students and the administration can see exactly in real time how their money is being spent. It’s convenient for the students, because they’re not very good at handling physical cash and loose cards and that kind of stuff. And we can manage all of that.”

Simplifying financial services is vital to retaining customers. Organizations of all sizes and services must make the complexities of payments invisible for their clients—no matter how complex those things are for the back office.

The post Making a Complex Payment Situation Simple for Your Customers appeared first on PaymentsJournal.

PayPal plans to use its massive repository of user spending data to create an advertising sales network. The payments platform, which includes Venmo, has more than 400 million users worldwide and processed around $6.5 billion in payments in Q1 2024.

According to the Wall Street Journal, insights into all of these transactions will be available for purchase not only by PayPal’s current advertising customers but also by outside advertising firms. These companies can then create ads specifically targeted at consumer segments like frequent travelers or luxury item buyers.

In a similar move, JPMorgan Chase recently announced it would sell advertisers access to its customers’ banking histories. While PayPal might be the latest financial firm to auction its users’ spending information for ad revenue, it’s likely not the last.

“Payment transactions and spend habits are a treasure trove of data for an advertising firm,” said Benjamin Danner, Senior Analyst, Credit and Commercial, at Javelin Strategy & Research. “Knowing where customers have shopped in the past is a great predictor of their purchase habits in the future. You can certainly expect more traditional financial institutions and fintechs to follow the lead of JPMorgan Chase and PayPal.” 

Option to Opt Out

The announcement might raise eyebrows since PayPal was investigated for a series of privacy concerns over the past few years. The company drew a $15 million fine from the Consumer Financial Protection Bureau in 2015 for enrolling and billing thousands of customers in its credit services without their consent.

By default, PayPal users will share their spending habits with the new ad network, but they will be given the option to opt out. The company also plans to be cautious with ads and promotions targeted at Venmo users because it doesn’t want to deluge the app’s younger and more social-media-oriented user base.

This latest data-driven effort comes after the January launch of PayPal’s Advanced Offers platform. Advanced Offers uses artificial intelligence to sift through customer data and give users personalized promotions and cash-back rewards. It also allows advertisers to deliver personalized ads to PayPal customers, an approach that has reportedly already been tested by eBay.

The post PayPal to Leverage User Spending Data for Ad Network appeared first on PaymentsJournal.

In the minds of many, blockchain is synonymous with cryptocurrency. However, the technology can be much more than a framework for crypto transactions. B2B blockchain could serve as a powerful solution to the longstanding challenges businesses encounter in sending, receiving, and recording payments.

This transformative shift is already underway for the one million businesses that have migrated to the Paystand platform. The company recently acquired Teampay, and the two companies collectively processed over $10 billion in B2B transactions since their inceptions. That’s roughly 2% of a market that’s expected to grow by more than 40% by 2028.

“Blockchain is going to be a game-changer,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “Sending payments over legacy rails and structures, also known as correspondent banking, is costly and opaque. I’m very bullish on blockchain shedding some of its tie-in with crypto and making a mark on the B2B rail space.”  

DeFi in Traditional Spaces

Consumers have long benefited from seamless and accurate payments through peer-to-peer (P2P) platforms like Venmo. Meanwhile, businesses have grappled with outdated accounts payable (AP) and accounts receivable (AR) processes that can be inefficient and expensive. Paystand aims to bring the P2P experience to business payments.

The company’s network is built on the Ethereum blockchain, which allows for reliable and quick payments with no fees. According to Paystand CEO Jeremy Almond, adding Teampay to the fold, “not only revolutionizes payments and creates a seamless, fee-free B2B network, but also ushers decentralized finance into traditional spaces.” 

Bold Moves

Paystand hopes to offer relief for B2B customers who have suffered under persistent inflation and high interest rates for some time and are looking to cut costs. To capitalize on that environment, the company has made several bold moves beyond the Teampay acquisition.

It recently bought full dynamics integration with Microsoft Dynamics 365 Business Central, and the initial application for Dynamics users will be Paystand’s ability to streamline AR.  

Bodine, who examined the role of B2B blockchain in his recent report, Movements in Global Payments and Banking: 2024 Edition, noted: “As it moves away from crypto, blockchain will be extremely influential. Particularly in cross-border payments, where the situation is ripe for a new way to send payments. Then comes cross-continent and cross-ocean.”

The post Blockchain-Based B2B Platform Aims for Venmo-esque Experience appeared first on PaymentsJournal.

The commercial banking and payments industry is undergoing a powerful metamorphosis. The onset of new technology has drastically altered corporate and consumer expectations. With so much flux, businesses are constantly working to stay competitive, mitigate risks, and set themselves up for the next wave of transformation.

In his new report, Movements in Global Commercial Payments and Banking: 2024 Edition, Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research examines the seismic shifts in banking trends, including instant payments, ePayables, and cross-border payments. He also points to aspects of the traditional banking system that will be left behind.

The Impact of Instant Payments

Although instant payments may represent the future of banking, their impact is already being felt across the banking landscape. FedNow, launched in July 2023, has seen significant growth, with the number of participating banks increasing from 300 by the end of the year to 400 in early 2024. Bodine expects that positive trend to continue.

The demand for instant payments extends beyond the borders of the U.S.—it’s a global phenomenon. India’s UPI and Brazil’s Pix have led the global instant payments charge, collectively facilitating over 100 billion transactions in 2022.

“We’re seeing the dramatic use of instant payments in India, Brazil, and Asia, and it’s picking up steam in the European Union,” Bodine said. “The real tipping point is going to be when we see the cross-continent and cross-ocean payments influx, and I don’t think we’re too far away from that happening.”

As the instant payments movement gains momentum, certain traditional banking practices are likely to be phased out, with paper checks leading the pack.

“It boggles my mind how paper checks are still around and how prevalent they are,” Bodine said. “I think we’re going to see intentional movements away from checks, perhaps driven by governments or large corporations or banks, where they will look to eradicate paper checks by any means possible. There could even be tax incentives or financial rewards to get consumers to stop using and receiving paper checks.”

Non-Systemically Important Banks       

Checks may not be the only fixture of traditional banking facing obsolescence. Bodine believes the tough conditions in the industry, forced by persisting high interest rates, will continue to put enormous pressure on small-to-midsize banks.

The pressure may lead to an increase in bank failures, with no safety net available for institutions deemed non-systemically important.

According to the U.S. Department of the Treasury, a systemically important bank is defined as one whose failure or disruption could pose a substantial risk to the stability of the U.S. financial system by potentially causing liquidity or credit problems to spread among financial institutions or markets.

Given the growing public aversion to government bank bailouts, Bodine sees issues ahead for non-systemically important banks. If they falter under the weight of high interest rates, governments aren’t as likely to step in and save them anymore.

“The salient point being, if you’re a company, especially a large company with deposits concentrated in a non-systemically important bank, you better be darn sure that bank is on solid footing,” he said. “If you’re not, then I hate to say it, but you should be not with that bank.”

Vehicles of Disruption

The transformation of the banking landscape isn’t over, as technology is changing exponentially. Bodine expects to see the continued rise of Automated Clearing House (ACH), which has been on the steepest trajectory of any payment type.

He also expects to see the continued adoption of ePayables, which are based on credit card lines, even though no physical card is used. EPayables are a strong alternative to wire transfers for sending large amounts, as these transactions often cost less. They could also be a vehicle for cross-border payments, a segment that has seen surging demand.

Even though the use of wire transfers and correspondent banking has continued to be strong, Bodine sees faster, more secure, and more efficient methods displacing them.

“Vehicles of disruption are going to be instant payments and ePayables,” Bodine said. “Cross-continent and cross-ocean payments are likely to be driven by credit card companies. They already have this massive highway built, and they’re in every bank in every country in the world. They just seem to be the obvious choice to do cross-border payments.”

Learn more about the movements in global banking and payments. Also, look for the ePayables Scorecard Report on third-party vendors that will be available in the coming months to Javelin Strategy & Research clients.  

The post Instant Payments Drive Global Banking Transformation appeared first on PaymentsJournal.

Accepting payments in a timely and efficient manner is crucial to the success of any business, yet organizations often struggle to define solutions to improve existing procedures. U.S. Bank’s recent survey of 300 U.S.-based finance professionals uncovers several problems with business-to-business payments while also illuminating ways businesses can cut costs in this area.

Nearly three-quarters of finance professionals polled said that keeping payment acceptance costs low is highly important to them. These same professionals say it’s hard to demonstrate they can save money with a better approach to payment acceptance. More than half of respondents said they struggle to demonstrate sufficient return on investment. Fortunately, there is a demonstrable way to make these processes more cost-efficient.

Frustration With the Costs of Card Acceptance

Accounts receivable teams must continually evaluate and prioritize new methods of payment, a situation that presents additional demands on their time and increases the costs associated with commercial card acceptance. U.S. Bank’s research shows that many are unhappy with the results. Just 7% of finance executives are highly satisfied with their strategies to mitigate commercial card acceptance costs, and 41% are unsatisfied.

The numbers are even worse among C-suite executives, 13% of whom say they aren’t at all satisfied, with 40% saying they’re somewhat unsatisfied. The effectiveness of their card acceptance programs is causing concern at the very top of organizations.

What’s stopping leaders from being satisfied with their strategies? Executives surveyed said that interchange rates and fees are the most challenging issues in accepting B2B commercial card payments, followed by the overhead required to manage, collect and transmit the additional commercial card transaction data.

In the survey, 73% of respondents said keeping payment acceptance costs low is highly important as they try to control their expenses, yet just 7% of finance executives are highly satisfied with their strategies to mitigate commercial card acceptance costs. That’s where Level 2 and Level 3 processing comes in.

Lower Interchange Rates With Level 2 and 3 Processing

There are ways to reduce costs in acceptance processes, centered on capturing the comprehensive level of transaction detail required by Visa and Mastercard. Collecting additional transaction details at the time of payment authorization can help better authenticate the commercial card transaction and provide useful information for the commercial card issuer and the card holder. That means the transaction carries less risk of dispute, which may qualify the eligible commercial card payment for lower acceptance rates established by each card brand and reduce interchange rates by as much as 125 basis points.

These available lower interchange rates for Visa and Mastercard branded commercial cards are known as Level 2 and Level 3 processing. Here’s how the various tiers are defined:

• Level 1 processing requires standard transaction details such as payment amount and date of the payment.
• Level 2 processing adds applicable sales tax and a customer identifier to the transaction.
• To qualify a commercial card payment for Level 3 interchange treatment, more than 20 fields of line-item detail required by the involved card brands, must be captured and sent with every commercial card transaction authorization, including information such as tax ID, shipping ZIP, freight amount, item description, quantity and product code.

To realize Level 2 and Level 3 processing and those corresponding acceptance rate programs established by Visa and Mastercard, businesses must accept either purchasing cards, corporate cards, business cards or government spending accounts (GSA) issued by Visa or Mastercard.  

Under the Visa and Mastercard Level 2 and Level 3 acceptance programs, businesses can achieve significant interchange savings by gathering and passing on Level 2 and 3 data with their commercial card payment acceptance. Typical card-not-present (CNP) interchange rates from Visa for corporate cards range from 2.7% for Level 1 data, 2.5% for corporate card payments including Level 2 data and 1.9% for corporate card payments including Level 3 data. In the case of higher-value transactions above specific thresholds established by the card brands  – considered ‘Level 3 large ticket’ – published commercial card interchange rates drop to 1.45%.U.S. Bank’s survey shows that many businesses are missing out on these available interchange rates through the commercial card acceptance programs established by Visa and Mastercard. While 70% of the professionals in the survey said they transmit Level 2 data to their payment processor, only 58% said they send Level 3 data.

Time Is a Deterrent

Although Level 3 processing creates the greatest cost savings for commercial card payments, many organizations are deterred by the detail required to qualify transactions for it. For every commercial card transaction, 25 established data fields must be correctly completed and arranged in the correct order for every commercial card transaction. In addition, the authorization and settlement must be completed within 24 hours to avoid costly transaction downgrades.

When U.S. Bank asked finance executives from the organizations that send Level 3 data about the time their team spends assembling and entering that data, only 15% described it as insignificant, while 9% described it as very significant. On the other hand, non-C-suite finance executives overstate the time spent on collecting these details as significant or very significant, with 45% saying this. This suggests that individuals who deal with day-to-day receivable processes are more aware of the true time commitment to collect and transmit Level 3 data with their commercial card payment activity.

There’s no denying that the time spent entering and completing the necessary transaction data is a cost of its own. But lost time is not these executives’ only concern. When U.S. Bank asked them what challenges they face in transforming their B2B payments approach, their top response was a lack of organizational skills. Can employees keep up with the constant changes in and rules applicable to B2B payment types? And can the organization keep its training programs up to date?

This concern about a lack of expertise and familiarity with the card brands’ Level 2 and Level 3 programs is well-founded. If mistakes are made entering Level 2 and Level 3 data, eligible transactions will not qualify for the available lower interchange rates, resulting in higher acceptance costs. Even worse, mistakes may often go unnoticed for months, with potentially significant savings lost.

Exploring the Potential of Payments

In addition to the data on Level 2 and Level 3 reporting, U.S. Bank’s report, Powering Potential with Payments: The Commercial Card Optimization Opportunity, also includes additional findings:

• 30% of the organizations that accept commercial credit cards now accept virtual cards for B2B payments, and 55% have seen increased payments made with them in the past three years.
• Organizations with annual revenue above $500 million were much more likely to say they saw a “significant” increase in commercial card payments in the past three years.
• 57% of finance executives say that improving their commercial card processing approach would increase staff productivity, and 54% say it would improve staff morale.

Read U.S. Bank’s latest research report to learn more about how some organizations are evolving their digital processes for better efficiency.

The post Level Up: Optimizing the Benefits of a Commercial Card Program appeared first on PaymentsJournal.

Walmart has introduced buy now, pay later loans through One, its majority-owned fintech startup. The move puts Walmart in competition with a similar offering from Affirm.

Last year, Walmart announced its plan to offer BNPL services for self-checkout customers through Affirm at 4,500 of its U.S. stores. Since 2019, Affirm has been the exclusive provider of installment loans for Walmart customers. 

Currently, Walmart shoppers at select stores have the option to obtain BNPL loans from either provider for purchases starting at around $100, with annual interest rates ranging from 10% to 36%. These loans are applicable on various items such as electronics, jewelry, and power tools, but not groceries, alcohol, and weapons.

The move makes sense from a cost-saving standpoint, analysts say.

“The pitch that BNPL vendors make to merchants is that it attracts new customers and encourages them to spend more,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “The partnership with Affirm likely boosted sales for Walmart. But Walmart was having to pay between 2% to 8% processing costs to Affirm. Launching their own platform allows them to save significantly on processing and capture that extra spend from consumers. Affirm helped capture extra spend in the interim.” 

The Growth of One

It’s been a rapid rise for One, stemming from a fintech startup that Walmart launched in January 2021 in collaboration with Ribbit Capital. [RK1] Ribbit, interestingly, was also an investor in Affirm.

At the time, Walmart said that One would “provide users with an all-in-one financial services app to holistically manage their finances in one place.” One rolled out checking accounts for Walmart employees and a handful of online customers in September 2022. Its savings accounts began offering a 5% interest rate, well above the national average, as a strategy to  attract more business. The addition of BNPL to One’s offerings will further drive customers into Walmart’s financial ecosystem, presenting opportunities for cross-selling other products.

CNBC has reported that Affirm will continue to be available as a payment option at Walmart, but One is expected to receive much more promotion at the point-of-sale.

For its part, Affirm is used to coexisting alongside other BNPL lenders, so it is unlikely that the company will leave its partnership with Walmart. It has also begun exploring life beyond retail, offering BNPL loans for elective medical procedures.

The post Walmart Puts Its Own Stamp on BNPL appeared first on PaymentsJournal.

Even though the number of checks written continues to decline, mail theft remains on the rise. Beyond the theft of checks directly from mailboxes, there have been instances of stolen mail trucks. The ease of modifying checks allows criminals to simply wash and modify the payee’s name. 

Q2’s positive pay system, used by roughly 550 banks across the country, is on track to stop more than $2.5 billion in fraud this year. In a recent PaymentsJournal podcast, Bruce Dragoo, Manager, Solutions Consultant for Q2, and John Byl, SVP Product Development at Mercantile Bank of Michigan—a Q2 customer—discussed how to get people on board to combat check fraud with Albert Bodine, Director, Commercial and Enterprise Payments for Javelin Strategy & Research.

A Problem for Businesses of All Sizes

In 2022, around $720 million of fraud was identified and stopped by Q2’s positive pay system. Last year, that number doubled to $1.4 billion.

“It seems like it’s wider-reaching at this point and coming downstream to smaller businesses,” Byl said. “It had been historically viewed as a large corporate need, but it’s indiscriminate at this point—and it’s affecting everybody.”

A third of commercial payments globally are still made by check, which presents a huge opportunity for criminals. But only 30% of eligible businesses use positive pay, which matches the details on a check to the details on file with the bank to ensure its validity. Some related solutions cover just checks, and others cover ACH transactions, but they don’t address the gamut of everything a business may need.

“In some cases, having a great technology provider that can provide not only check but ACH positive pay, along with full reconcilement capabilities, can be a barrier to some of these institutions signing up for a full breadth of what they need,” Dragoo said. “It’s about being either reactive or proactive in regards to the financial institution selling positive pay. At some financial institutions what I’ll hear is that the only time that they sell positive pay to a customer is when they’ve had check fraud on their account and they’re reacting to the situation.”

Talking to customers before they open a checking account can be critical. If they are a small business or a corporate client, financial institutions can say, “We have a great solution for you that can help identify and stop check fraud before it even happens.”

The best value proposition for positive pay is stemming or eliminating the flow of funds out the door to fraud.

“We’ve gone through the evolution of being reactive and only bringing up positive pay when we’ve had check fraud or a customer’s asking about it,” Byl said. “What we’ve realized with this whole process is that many customers are not aware of what positive pay is, or why they might need or want it. We need to create awareness for our customers and help them understand how they go about implementing something along these lines.

“I’ve worked for institutions where we haven’t had a great solution in place, one that hasn’t been very user-friendly to work with. Thankfully, we have a solution today that is user-friendly and adaptive to our customers, so we can remove those barriers to entry for them and make it as an easier process as possible.”

Moving Beyond Legacy Systems

Some financial institutions are limited in how they can build out new revenue streams. Many of their resources go into supporting legacy systems. Having organization partners enables FIs to bolster the security of the products and services they offer.

“While 30% of the institutions we’ve surveyed are not charging for positive pay, of those customers that use it, 47% of them said they would pay for positive pay,” Dragoo said. “They understand the value of the solution itself in helping to stop any type of fraud that may be coming through their checking account. Several of our financial institutions actually have turned their treasury management team into a revenue generator just by selling positive pay at a nominal fee of $30 to $50 an account.”

Customers respond best to thinking of positive pay as a form of insurance against fraud. Q2’s approach has been not to nickel-and-dime their customers for each little tick mark that happens as part of the positive pay process but rather casting at it as a holistic product that can protect customers.

“It’s easy to build revenue models for positive pay, taking into account the mitigation of the fraud losses,” Bodine said. “Even if you’re partnering with somebody from the outside, it’s pretty easy to cover those transactional costs by eliminating those fraud dollars that are going out the door.”

Making the Case

Financial institutions can’t assume their customer base knows or understands what positive pay is and how it can protect them. Q2 has identified some essential items that financial institutions can use to increase the adoption of a good positive pay solution. Rolling out a solution that has check and ACH positive pay in it—and has great pay-name match reporting self-service for the customer—is a good first step.

Secondly, financial institutions should sell positive pay proactively by talking to customers at account opening. They should educate them on check fraud and what it looks like. Although some consumers may not have encountered fraud yet, they will understand the risks, especially when they hear a broader value proposition.

“Part of what where our successes come from has just been in helping our staff understand who our customers are and what sorts of fraud scenarios we’re seeing taking place in the market area,” Byl said. “We make it more real to people—this isn’t something that’s happening on one of the coasts. It’s happening around the corner where a mail truck has been robbed. Or these people dropped stuff in their mailbox and put the flag up and just walked away and didn’t realize people would have the audacity to just take that stuff out of there.”

Partnering with a dedicated provider is vital. “One of the strongest recommendations that we’re making at Javelin in the commercial enterprise practice area is that legacy bank structures are not really set up to do well moving forward,” Bodine said.

Q2 is looking at enhancing its pay-name match to make it even better. The company is also looking at embedding AI technology into the solution to help not only FI customers but also frontline bank staffers to sell positive pay to existing customers and prospects.

“As a Q2 customer, the biggest thing is having a partner who is willing to listen to you and engage in the conversation,” Byl said. “They listen to the feedback of their customers and make their product better. That’s been huge to know not just what’s happening in your neck of the woods, but how other FIs that they work with are implementing their best practices. Having that collective learning going on makes such a huge difference.”

Said Dragoo: “You’re the one that’s bringing us the ideas and bringing us what is happening in the market that we may not be seeing. We appreciate that partnership so that we can develop leading technology and make sure that we can help identify and stop fraud in the future.”

The post Positive Pay: An Underused Tool for Fighting Check Fraud appeared first on PaymentsJournal.

With Visa’s introduction of its Visa+ service to Venmo and PayPal users, attention now turns to the future of the instant payment service. Having integrated the major peer-to-peer payments networks, Visa has its sights on business-to-consumer partnerships. DailyPay, Tabapay, I2c, Astra, Brightwell, Cross River Bank, and Fiserv have all either implemented Visa+ for sending funds to customers or plan to do so this year.

The “killer app” aspect of Visa+ has always been the ability to send and receive money between different P2P services. This concept is now being expanded to offer interoperability to merchant clients, offering real-time business-to-consumer disbursements, streamlined transaction processing, and fraud management capabilities.

Sophia Gonzalez, Analyst for Debit Payments at Javelin Strategy & Research, foresaw these developments in a piece for PaymentsJournal last year. “As the demand for instant payments grows in the U.S., payment providers will need to catch up with the trend,” Gonzalez wrote. “It is providing an excellent opportunity for smaller payment providers to keep up with the demand as they leverage the technical infrastructure provided. We expect more payment providers to partner with Visa+ in the future.” 

Inside the Visa+ System

Visa+ allows eligible consumers to set up or enable a unique Visa+ “payname” account associated with a receive-only Visa token. A payname is a payment-specific address that frees users from having to share a phone number or other account details with other users, adding a layer of fraud protection. Visa stores the token on its own and links it to the user’s wallet account. 

The sender can submit payments by entering the recipient’s payname in their digital wallet. At that point, an Original Credit Transaction (OCT) is initiated as a push payment, pushing the funds directly into the cardholder’s account.

One advantage of Visa+ is that users are not required to have a Visa-branded debit or credit card to use it. This flexibility allows the service to support a wider range of payment-related use cases. With the expansion into B2C applications, we could see much more transactions like instant payouts for gig workers’ earned wages, creators’ earnings, and marketplace sellers’ sales proceeds.

As Gonzalez noted, there are millions of users across digital wallets, neobanks, and other payment apps who have embraced interoperability with Visa+ and given Visa’s sheer size and the volume of transactions flowing through their systems, this instant payment capability is expected to make a notable impact.

The post Visa+ Targets B2C Networks appeared first on PaymentsJournal.

The fastest-growing segment in the world of commercial card payments instruments is ePayables, especially in the realm of cross-border payments. This virtual card payment offers operational efficiency and flexibility for both buyers and their suppliers. It also presents a lucrative opportunity for banks that support such programs. Having a bank consultant who can assist enterprises in recruiting suppliers who accept this payment method has become essential.

In his new report Understanding Commercial Card ePayables: An Abridged Guide for Commercial Buyers, Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, looks at how ePayables programs are implemented, the potential benefits they bring, and the self-assessment enterprises need to do before settling on a course of action and choosing a partner.

Defining Terms

EPayables are akin to virtual credit cards that act as electronic payment alternatives to checks. “In the case of ePayables, you don’t present a card,” Bodine said, “It’s transacted from computer to computer, very similar to what used to be called electronic funds transfer. It doesn’t appear to either the buyer or the seller as anything like a traditional card transaction. The only common piece is that it is based on a card credit line.”

Although ePayables could be used for purchases of any size, the sweet spot for most enterprises lies in larger purchases, as well as recurring purchases like maintenance services. Bodine says that cross-border payments remains the strongest single use case for ePayables. “That’s where I see most of the growth for ePayables,” he said. “The card networks are already global, and they’re connected to every single financial institution. These payments can be very competitive on costs with methods like wire transfers.”

The biggest acceptance hurdle for ePayables to overcome is that suppliers traditionally wanted nothing to do with them. When the products were first introduced, issuing banks sweetened this payment option for their corporate buyers by offering them a rebate on each transaction. It was left to the buyers to inform their suppliers that they were using a new payment method—one that required the supplier to cover all acquisition fees. Bodine says it took “hand-to-hand combat” to get suppliers on board with this method.

There were compensations, of course. A fundamental principle of ePayables is that any supplier, in exchange for covering those fees, would be paid much faster than if it chose to be paid by a method like ACH, usually in 10 or 15 days rather than 30. A pillar of that principle is that the supplier, not the buyer, has control of the release of funds.

Two Types to Choose From

There are two variations of ePayables: supplier-initiated payment (SIP) and buyer-initiated payment (BIP), which are used in roughly equal measure. For SIP, the supplier controls the timing of funds once invoice verification and approval are received from the buyer. For BIP, the buyer still issues the verification and approves the funds but retains the timing of when the funds are delivered.

“The SIP makes a more level playing field between buyer and supplier,” Bodine said. “The whole value proposition that the buyer gives the supplier is that if you let me use a card to pay for goods and services, you are going to get paid faster. You can initiate the payment in, say, five to seven days. If I’m the buyer, and I’m going to the supplier to say ‘I’m going to use a card, and you have to pay all the fees, and on top of that I’m going to decide when you get paid’—there is no value to that proposition for the supplier.”

With ePayables, suppliers are responsible for the interchange fees imposed by card networks such as Visa, American Express, Mastercard, Discover, Capital One, or Discover to facilitate transactions. These fees, commonly structured as a percentage of the transaction value plus a fixed fee, impact the merchant’s operational costs. Moreover, suppliers may face assessment fees directly from card networks for the privilege of accepting their cards, with charges varying based on such factors as transaction volume and industry sector.

Suppliers are also subject to merchant fees, which compensate the merchant bank for “acquiring” the transaction. With these headwinds, it’s vital to present a strong value proposition for suppliers.

Learn more about the state of ePayables. Bodine is currently preparing a Scorecard Report on third-party vendors in the ePayables space. That report will be available in the coming months to Javelin Strategy & Research clients.  

The post Making the Case for an ePayables Program appeared first on PaymentsJournal.

A successful payment acceptance policy encompasses flexibility, convenience, and, above all, economic efficiency. However, it can be hard to hit all of these marks in an ever-changing payments landscape.

During a recent PaymentsJournal webinar, Mike Passifione, Vice President of Payments for Billtrust, spoke to Albert Bodine, Director of Commercial Enterprise Payments at Javelin Strategy & Research, about what it takes to build an effective payment acceptance strategy. They discussed automation, dynamic pricing, and why businesses like to pay with credit cards.

Creating a Policy

The first step of any payment acceptance policy is identifying the target audience, timing, and locations for accepting payments. This could be at the point of sale, during cash-on-delivery transactions, e-commerce or in B2C and B2B environments. Ideally, you want to maximize your chances for customer engagement. And having the necessary technology to adhere to a policy becomes extremely important. Having a written policy that lacks full execution is the equivalent of not having a policy.

Despite the desire to satisfy customers, it’s essential to adhere to established protocols. “As an example, a rule of mine is I do not take a credit card payment for a late payment or from a customer over the phone after they’ve been invoiced,” Passifione said. “If I were a sales rep in that scenario, and I’m trying to please my customer, I might make an exception to that rule to get the money in the door and deal with the backlash later.”

Policies must strike a balance between meeting suppliers’ and buyers’ needs. As in any relationship, both parties must benefit. It’s the technology that will enforce this balance, rather than relying solely on your employees. . This approach sets the stage for success for your both your business and for the accounts receivable team.

Digitizing and automating the payments experience offers immense value, allowing you to consider the types of payments you prefer, such as ACH, card, check, or electronic data interchange—and how they are processed. Then, you can evaluate the types of cards and formats you accept, keeping in mind that each buyer may have preferences for interacting with merchants or suppliers.

It’s important to consider the costs associated with accepting each type of card. Can you establish rules that allow you, as a supplier or merchant, to benefit more from these transactions?

“You can say, ‘Yes, I’ll take that card, but I prefer if you pay me within 10 days of my invoice,’” Passifione said. “If not, I’m going to push you towards ACH, because that’s what makes sense for my company.”

Surcharging, too, has grown more popular in recent years in the B2B space. It can be the most punitive way of conducting a transaction because there is an impact on the buyer.

“The surcharge is an interesting development,” Bodine said. “When we originally came to market with virtual cards, the value proposition was, ‘I’m going to pay you in net 10.’ As the supplier, I’m going to be more OK with paying 200 basis points for those funds than they would be if it was net 30. When you go into a buyer-initiated payments scenario, you take that control away from the supplier being able to pull the payment when it’s ready. I have been seeing more surcharging as a direct result of buyer-initiated payment.”

Providing Options

According to Passifione, suppliers and merchants have many ways to control their costs and their acceptance policy without turning to a surcharge program. “A lot of folks are very happy to pay 250 basis points if it means they will get paid within 5 or 10 business days,” he said. “It’s a bit more of an equal playing field. There are things you can do around negotiating terms, as well. A Custom Rate program could get you even more card spend and grow your network.”

Many players in this space are eager to grow card spending, and more collaboration is taking place. “But they need to do it somewhere in between the traditional cost of a very expensive downgraded credit card and the much cheaper ACH,” Passifione said. “A perfect touchless payment that they can apply cleanly, somewhere in between that cost, starts to make a lot of sense for suppliers. I think that’s ultimately where we’re going to see a lot of B2B spend grow in the future.”

Bodine added that with dynamic discounting, it comes down to choice. “I find that suppliers are sometimes willing to pay for different choices,” he said. “The net 5 might be a lot more expensive than the net 15, but they might have the remittance data that goes along with the suit. That’s how you get to a more balanced relationship between suppliers and buyers.”

Differences Across Businesses

Across the buyer spectrum, you may work with enterprise buyers who engage with enterprise customers, often utilizing EDI, ACH, or wire transfers. Midsize customers typically access an online portal for invoice selection and payment processing, while some—particularly those from larger enterprises—opt for virtual credit cards.

Then there are smaller businesses. “In the building material space, as an example, a lot of small to medium-sized construction businesses need the float, and they want to use their credit card to make payments,” Passifione said. “They’re relying on that card issuer and the float and the rewards they get. As you get into the enterprise world, they may prefer to pay with a virtual credit card, but they don’t have to run their business and can quickly pivot to ACH.”

Despite advancements, more than 40% of B2B payments still occur with checks. However, checks pose significant fraud risks due to the exposure of bank account information.

“We should be encouraging buyers to move to an electronic fashion,” Passifione said. “We’re creatures of habit. We’ve been sitting in that 40% range on check usage for what seems like for 20 years. I’m hopeful that changes dramatically over the next 10 years.”

This issue is crucial not only because of fraud concerns but also because of inefficiencies. “Something we talk about constantly is the fact that we can figure out ways to reallocate your employees so that they are doing things that are beneficial for the business,” Passifione said. “They should not be stuck in a room trying to reconcile a $1 million ACH payment that came in the bank because you can’t find any remittance. There are tools to solve for that. These individuals should be doing more thought leadership, higher-impact opportunities, and dealing with higher-impact items that can help you grow the business.”

The post Beyond the Check: Smart Strategies for Managing Payment Acceptance appeared first on PaymentsJournal.

The Federal Reserve Bank of New York, along with six other central banks, will team up with the Bank for International Settlements (BIS) to test using tokenization as a way of increasing the speed and integrity of cross-border payments.

Under the name Project Agora, the goal is to ease international payments in the face of different legal, regulatory, and technical requirements, as well as different operating hours and time zones. According to the BIS, This initiative holds the potential to bolster the monetary system’s functionality while introducing innovative solutions through smart contracts and programmability, all while upholding its two-tier structure. 

Tokenization is the process of creating digital tokens, such as cryptocurrencies, on a blockchain to represent assets, including financial instruments. The technology offers several benefits, including greater simplicity within the financial system, faster settlement, and a potential reduction in fraud. It’s essentially a more efficient and transparent way of approaching value movement than banks do now.

A Continuing Process

BIS, the central bank for central banks, has been exploring tokenizing deposits through its Innovation Hub. Over the past few years, it has been focused on creating a wholesale stablecoin for central and international banks to settle with each other. Through Project Agora, the BIS will also be partnering with a group of private financial companies to explore combining tokenized central bank money with commercial bank deposits on a unified, programmable platform.

Project Agora follows on the heels of an initiative called “Tokenise Europe 2025,” which the European Commission and the German Banking Association launched in February 2023. Its objective is to leverage the potential of asset tokenization and distributed ledger technology to increase competitiveness and build economic resilience in Europe. More than 20 banking trade groups and fintechs throughout Europe joined to support the initiative.

“Project Agora is a continuation of testing and experimentation the BIS has been doing for quite some time regarding tokenization,” said James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research. “It’s a further indication that the tokenization of assets, and the efficiencies that tokenization encourages, are evolving quickly.”

Long-term, the BIS’ tokenization efforts for cross-border payments show that central banks are eager to take advantage of the benefits of digital currencies. “In effect, it’s a continuing validation of the idea of ‘digital assets,’ meaning digital tokens attached to currencies, equities, and contracts,” Wester said.

The post Next Step for Cross-Border Payments: Tokenization appeared first on PaymentsJournal.

Cognizant of the rise of credit-push fraud, Nacha has approved a new set of rules aimed at addressing it. Credit-push fraud uses social engineering and email phishing attacks to deceive someone into sending funds to a criminal-controlled account, whether through a compromised business email, vendor impersonation or payroll fraud.

In a recent PaymentsJournal Podcast, Michael Herd, Executive Vice President of ACH Network Administration at Nacha, and Brian Riley, Director of Credit & Co-Head of Payments at Javelin Strategy & Research, spoke about how the new rules establish a base level of payment monitoring on all parties in the ACH Network. They discussed how the changing payments landscape has made these rules necessary and the next steps for organizations to take.

Changes to the System

The Nacha membership began this journey late in 2022 with the publication of a new risk management framework that identified frauds resulting from attacks such as business email compromise or vendor impersonation. These resulted in payments being pushed out from the account of the victim to the account of the criminal. That propelled the desire for stronger action against credit-push fraud.

At their core, the new rules raise the bar for fraud monitoring and transaction monitoring across all ACH participants except consumers.

“This was an expansion of focus for us from the perspective of ACH risk management,” Herd said. “Our objectives were to not only reduce the successful incidents of those types of frauds but to improve the ability for recovery after those types of frauds and payments have occurred. Everyone has a role to play in fraud mitigation and detection and recovery. All parties have a basic-level requirement to monitor transactions. It would no longer be acceptable to do nothing.”

One of Nacha’s key targets is payroll impersonation fraud. This involves an ordinary worker being spoofed into providing payroll portal credentials to a scammer. As a result, the worker’s Direct Deposit  gets rerouted to a fraudster’s account.

The rules are broad-based, and to some extent all financial institutions and ACH processes will be affected. But many of the participating organizations already conduct robust fraud monitoring. Although the impact to those groups might be minimal, others that are not doing much in this area today will have a bigger lift to become compliant.

For the first time, this rule set defines a role for the receiving financial institutions with respect to transaction monitoring. Under the current Nacha Operating Rules and Guidelines, receiving financial institutions do not have an explicit role in monitoring this type of fraud. Their obligations are simply to post transactions on a timely basis and make the funds available to accountholders. Although these rules don’t shift any liabilities for transactions, receiving institutions will have requirements for transaction monitoring, which means many of them will have additional work to do.

The system is designed to look for red flags such as payroll transactions going into an account that looks like a mule account, or someone no longer receiving their regular payroll deposit. One of the rules creates a standard description for payroll transactions to make that kind of monitoring easier for the receiving institution.

“We’re following the flow of a payment from origination through the sending institution and then through to the receiving institution at the point of the receipt at the account,” Herd said. “It is intended to follow the flow of the transaction and have all the parties to it performing some level of transaction monitoring.”

Once a credit-push payment gets to a receiving account and the funds are available, the fraudulent actors are going to try to move that money elsewhere as quickly as they can. Time truly is of the essence in detection and recovery.

Fraud Happens Before the Payments

It’s important to remember that the payments are not the fraud. The fraud happens when an organization is phished or spoofed. The payments are typically authorized; the treasury or the payroll function has approved them and wants them to be issued. From the perspective of the payment network, they look like any other type of authorized payment.

With consumers changing their transaction processes more often than ever, heightened scrutiny has become increasingly necessary. 

“When I look at myself versus my millennial children as an example, I haven’t seen a physical paycheck in 35 years,” Riley said. “They’ve all been Direct Deposit. And I’ve used the same bank for 30 years. But then I look at my millennial kids, and they go from fintech to fintech to bank to fintech and can move their destination bank account more times in a year than I have in my life.”

Nacha sees an opportunity to raise the bar to try to help identify these instances and aid in recovery. “Let’s say you’re the payroll office,” Herd said. “You have obligations to be able to validate changes within a payroll system. Should you just take anybody’s word that payroll should now go somewhere different? There should be some type of validation of that change order for the payroll. The same is true with vendor payments or the classic instance of the CEO saying, ‘Issue an emergency wire transfer somewhere.’”

Those transactions require validation and verification through different channels. The financial institution that processes them might be able to detect the change, or when a payment comes into an account, it might be able to detect when a mule account is suddenly receiving these new payments or a very large payment.

Next Steps

Information about the rules is already available on Nacha’s website. Anyone can sign up at no cost to receive Nacha rules information, regardless of membership. The organization will have additional resources available at its annual payments conference in May, and it will be hosting webinars on these rules changes and providing fact sheets.

The post A Step Forward in the Fight Against Credit-Push Fraud appeared first on PaymentsJournal.

As businesses strive for innovation, efficiency, and scalability, the path to digitization is fraught with challenges. It’s a journey that requires addressing outdated processes, adopting new technologies, and most important, gaining buy-in from leadership and colleagues.

In a recent PaymentsJournal podcast, Reetika Grewal, Executive Vice President and Head of Digital Transformation at Wells Fargo, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, delved into how Wells Fargo is helping its clients with digitization and optimizing digital experiences for customers, as well as what makes fintech partnerships successful.

Key Focuses for 2024

Businesses face many challenges in running their operations smoothly. Prioritizing efficiency and productivity is crucial, and can be achieved through the automation of manual tasks, streamlined workflows, and enhanced accuracy in record-keeping. Leveraging advanced software for data analytics empowers businesses to make informed decisions and gain valuable insights.

“At a very simplistic level, companies need great software to help run their business,” Grewal said. “That is one of our core missions, and that’s what we rolled out last year with Wells Fargo Vantage.

“It’s a singular place where a company can go and find that dashboard of the activity on their accounts, determining what things need their attention.” It also gives them opportunities to  manage their users, tailor their online experience, and manage anything new with their company.

Access to data is a significant competitive advantage, enabling businesses to tailor solutions to customers’ needs effectively. Without proper integration, however, this valuable data remains inaccessible, undermining competitiveness and impeding growth prospects.

“Something that midsize companies struggle with is not having partners that have the comprehensive set of tools to integrate those other systems as the business grows,” Bodine said.

Exploring the Digitalization Journey

Wells Fargo has adopted a client-first mindset, creating resources that help the company tailor the company’s experience—and address client pain points.

“We have built a library of personas that covers a variety of company sizes and company industries,” Grewal said. “We also talk about archetypes because in this space you have a variety of user types that come in. In a smaller company, it may be just a couple of people in the company that are interacting with the Vantage software. But at the higher end, it could be 200 people logging in.”

“So how do we make sure we’ve got that right Rubik’s Cube of who you are, what are you trying to do, what problems are you trying to solve, and how do we get the right information in front of you?”  

When selecting a partner, companies feel it is crucial to assess their ability to scale with a growing business. While it may be tempting to focus solely on immediate needs, considering future scalability is essential. Overreliance on multiple vendors can introduce unnecessary inefficiencies and complexities down the line.

“One of the big areas I see with organizations that are growing is that they might start as a garage business,” Bodine said. “Then fast-forward five to 10 years, and all of a sudden they have 20 vendors that they work with because the original vendor was not intended to scale in a bunch of different areas. The ability to be with a partner that has that scalability element is very important.”

Key Elements for Effective Digitization

Transforming processes from an analog version to a more digital version is not just a matter of plug-and-play. Digitization is never a streamlined process, and therefore, the more leadership provides support, the easier it will be. It will be easier not only to educate corporate culture but also to make decisions and allocate the necessary resources to make digitization happen.

“When we think about the strategic elements, it’s about making sure that the change management goes along with it,” Grewal said. “If you’re implementing a new process to drive some automation, how do you make sure that the tools that people are using are the right tools and then all the processes change along with it?

“If you’re moving from paper to electronic payments,” Grewal elaborated. “How do you make sure that you understand the timing differences and the information needs and things like that? That is also part of the digitization process—making sure that all the things that go around driving a change are also there to support the change holistically.”

Success hinges not only on technology but also on getting people on board. Effective communication of benefits is essential to ensure buy-in from all stakeholders.

“Change management is critical, and I like to call the antithesis of that ‘digitization for the sake of digitization,’” Bodine said.

Optimizing Digital Payment Experiences for Customers

Consumers expect digital payment experiences to be fast, convenient, and secure. Failing to meet these expectations could drive them to seek alternative solutions. Therefore, companies must prioritize offering the preferred payment methods for customers, with mobile being a basic requirement given the prevalence of mobile banking and shopping.

“It’s knowing your customer, knowing how to motivate them, knowing what the right size solution is for them. That is how I would encourage others to approach it,” Grewal said.

To foster customer loyalty, digital payment experiences must be convenient. Seamless transactions not only enhance customer satisfaction but also encourage repeat business. Cumbersome checkout processes are a turn-off for customers.

“I would add ease of use and minimal friction in everything we do. I’m a proud Wells Fargo banking customer, and I use my Wells Fargo app every day. One of the reasons I use it is because it’s easy to use and I use it over using my laptop or desktop to pay bills,” Bodine said. “We’re starting to see a lot of that coming to the stodgy old commercial world. Wells is taking a page from the consumer side. So it’s nice to see.”

Working with Fintechs

Financial institutions can leverage the forward-thinking ideas and agility of fintechs to respond to evolving customer needs. These collaborations enable the introduction of innovative products and services—something Wells Fargo has been exploring.

“We look to partner with companies that will supplement and enhance what we’re doing, either to help us deliver a really unique product or service to market or help us accelerate our client experience,” Grewal said.

“Bringing new opportunities to our clients that maybe we don’t offer ourselves and finding that partner that is willing to spend the time with us, work with us, understand the integration options, understand the partnership options. That’s important.”

The Opportunities and Challenges of Fintech Partnerships

When it comes to partnerships between FIs and fintechs, aligning with a partner that shares the same visions and goals is crucial. Being open about challenges, expectations, and wins only solidifies trust and collaboration.

“We’re going to be really deliberate in terms of how we go about it,” Grewal said. “We’re going to make sure that we leverage the collective expertise at Wells Fargo to do this well.”

“Partnering with technology, partnering with risk, partnering across the organization, we bring our experts to the table to make sure that we do this well. In terms of challenges, it’s just making sure that we’re all operating on that same rhythm. It is important that we all have that shared goal of ‘this is the problem we’re trying to solve, this is how we’re anticipating solving it.’ And then, as we learn more, we can put more structure around any kind of partnership.”

The post Navigating Digitization Through Strategic Fintech Partnerships appeared first on PaymentsJournal.

Virtual commercial cards are revolutionizing the way businesses manage their expenses and handle transactions. As digital equivalents of traditional physical credit cards, these innovative financial tools offer enhanced security, flexibility, and control over company spending. Tailored specifically for the digital age, virtual commercial cards generate unique card numbers for each transaction, greatly reducing the risk of fraud and unauthorized use. This technology not only streamlines the procurement and payment processes but also provides businesses with real-time visibility into their financial operations.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: North America Commercial Card Market Review and Forecast, 2022-2027

Virtual Commercial Card Outgoing Payment Usage by Company Size (2022)

• 24% – less than $1 billion
• 54% – $1 billion to $4.9 billion
• 38% – greater than $5 billion

Source: Javelin Strategy & Research

About Report

This annual Javelin Strategy & Research report examines the North American commercial card market. It covers the United States and Canada but excludes Mexico, which is covered in the International Commercial Card Report. This regional perspective is developed based on available data from industry experts, third-party sources, and our own estimations. Javelin excludes fleet/fuel cards and small-business cards from the analysis, focusing solely on mid-size to large-market corporates, including governments.

Inflationary concerns and tighter money policies continue to affect business spending in the United States and Canada. As business-related travel and spending continue their rebound from the effects of the COVID-19 pandemic, other factors have emerged, including the increased use of virtual cards (for reasons of greater spending control and better guards against fraud).

The post What Company Size Most Use Virtual Commercial Cards? appeared first on PaymentsJournal.

In 2023, the ACH Network added more than a billion and a half new payments, a year-over-year growth rate of 4.8%. With the economy doing reasonably well, employment levels being high, and payments continuing to migrate away from paper checks and cash, ACH is not just growing robustly but also poised to continue that growth well into the future. 

We asked Mike Herd, Executive Vice President of ACH Network Administration at Nacha, about what’s fueling that growth and where he expects ACH to be headed. Herd discussed these issues with Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, in a recent PaymentsJournal podcast.

ACH by the Numbers

The ACH Network handled 31.5 billion payments last year and moved more than $80 trillion. Of that growth, Same Day ACH volume increased by more than 22% in 2023. Notable drivers of overall ACH expansion included:  

• The number of consumer internet-initiated payments rose by 5.7% to 9.9 billion, primarily supporting bill payment and account transfer use cases.  
• The number of healthcare claim payments to medical and dental providers rose by 7.7% to 488 million.   
• Direct Deposit volume increased by 3.3%, with 8.3 billion payments to workers.    

The dollar limit of a Same Day ACH payment increased in 2022 to $1 million, which has had an effect in the marketplace. “We have been seeing results from it continue through the present with increases in transactions and increases in dollar flows,” Herd said. “Since Same Day ACH started in 2016, we’ve now surpassed 3 billion payments, moving more than $6 trillion. Among the leaders in that growth are things like business-to-business payments and consumer-initiated debt—transferring funds, paying bills [and] loading wallets.”  

Herd said that the increase in Same Day ACH usage has been largely through payroll and other types of disbursements to workers and consumers. That might be a missed payroll, or paying shift or gig workers, for whom speed of payment is an important consideration. Or it might be something like an insurance payout, another instance where speed is an important factor.  

The pandemic was another factor that led to more ACH payments. “During the COVID era, we saw a pretty dramatic shift, impacting businesses that didn’t have staff present in person to issue or process checks,” Herd said. “That was a catalyzing event from a behavioral perspective, for businesses to not process checks at all, and to move to ACH in particular rather than other electronic payments.” 

The Growth in B2B Payments

Business-to-business payments have been one of the true success stories for the ACH Network. Over the past decade, there has been a documented decline in the use of checks for B2B payments. Nacha’s data shows where the action has moved, with ACH use for B2B payments growing by double digits over the past seven or eight years.  

In 2023, the growth was by almost 11% to 6.6 billion B2B payments, primarily oriented around B2B vendor payments. In the Same Day B2B payments, volume grew by more than 50% in 2023, up to 261 million B2B payments made. From a dollar perspective, that’s growth of nearly 60%, with about $1.4 trillion moved via same-day transfers. 

“From the Javelin side, we have survey data that shows, for example, that small businesses often face challenges with cash flow, and they think faster payments would help improve their cash flow,” Tavilla said.  

Herd added to “keep in mind that better cash flow for one side of the payment might mean worse cash flow for the other side of the payment. A payer that holds on to money longer to accumulate more interest is going to pay at the last minute, and that will have an impact on the receipt side.” 

Looking to the Future

What’s certain is that ACH will continue to evolve to meet users’ needs. “I like the analogy of how everyone used to have a landline,” Tavilla said. “Then we had the giant cellphones, then flip phones, and now we all have smartphones. It’s similar with payments. With the technology and the evolution and the different iterations of the products, I imagine the trend will be toward faster, greater efficiency and more precision and control for all who are making payments.” 

Nacha has several priorities on tap. It is looking to define additional expansions for Same Day ACH, including to encompass the full business day in the Pacific time zone. Most of the systems operate from an Eastern time zone perspective, and the current processing day closes in midafternoon Pacific time.  

Nacha will also propose changes and enhancements to the International ACH transaction to try to improve understanding and adoption. It is evaluating expanding its Account Validation services offered through Nacha’s Phixius and for the Payment Information Exchange Network. Finally, it is looking roll out new rules around ACH Network risk management, particularly around fraud monitoring and reporting, to try to raise the bar on monitoring the ACH Network for anomalies and fraudulent transactions. 

The post Same Day, B2B Payments Fuel Growth of ACH Network appeared first on PaymentsJournal.

Jack Henry introduced Banno Business, a cloud-native business banking solution aimed at enhancing the offerings for small and medium-sized business customers of credit unions and community banks. It merges business functionalities such as cash management with embedded payment solutions, cash flow tools, and reporting.

Financial institutions are seeing the benefits of supporting SMBs, as they’re the backbone of the U.S. economy. With 33.2 million small businesses in America, 63% were attributed to job creation from 1995 to 2021. What Jack Henry hopes to achieve is give SMBs the tools they need to scale their operations, in addition to expanding and monetizing their market share.

With Banno Business, SMBs can also link any external accounts to their banks through an integration with Finicity, a Mastercard company.

SMB Pain Points

SMBs grapple with unique challenges, primarily limited access to capital for growth and daily operations due to factors like high interest rates, lack of a solid credit history, and complex loan processes.

Erratic revenue streams and unforeseen expenses make cash flow management challenging, often resulting in late payments and the need to borrow money.

Economic downturns, increased fraud, and the need to adopt the latest cutting-edge technology to remain competitive adds further strain. As a result, many SMBs struggle to stay afloat.

Where FI Are Missing the Mark with SMBs

Some SMBs are not happy with their financial institution’s offerings and would consider leaving. This isn’t unexpected as SMBs already struggle with daily operations and lack the bandwidth to tackle other essential tasks such as managing payment inflows and outflows. Consequently, they resort to juggling multiple tools simultaneously to manage everything from customer payments to supplier transactions.

There are still businesses that are considered undigitized, where invoices increasingly pile up. In fact, according to a survey from Fiserv, 56% of small business owners said that cash flow and invoice payment management are an “ongoing pain point.”

The best solution integrates multiple tasks into an intuitive platform. For instance, automated invoice management and integrated payment processing streamline operations for SMBs. FIs provide these solutions to SMB clients, but it would be up to them to determine and understand the unique pain points and needs of SMBs first.

The post Jack Henry Enhances Community Bank Offerings for SMBs appeared first on PaymentsJournal.

As digital payments continue their rapid growth worldwide, an estimated 40% of all business-to-business (B2B) payments will be made in Latin America, Africa, and Asia by 2027. Capgemini Research Institute estimates show B2B digital payments rising by 11% annually, with a steeper growth of 14% in these regions.

Those conclusions come from the new report Beyond Borders, published by EBANX, a Brazil-based payments technology company. The study points out how thorough the transition will be in less-developed parts of the global economy, since an estimated 70% of B2B transactions are still conducted manually.

International purchases have been fueling digital commerce in the world’s rising economies. In Latin America, cross-border transactions account for roughly three quarters of all online purchases, according to Payments and Commerce Market Intelligence.

Digital payments are used by more than half of the population in rising markets. According to the World Bank Global Findex, Latin America, Africa, and Asia have raised their adoption of digital payments by as much as 25 percentage points over the past decade.

The Impact of UPI and Mobile Money

In the larger picture, Pix in Brazil, Unified Payment Interface (UPI) and RuPay in India, and PSE in Colombia are digital payments that have greatly expanded financial and digital inclusion. India’s UPI, which launched in 2016, now accounts for more than 70% of the country’s digital transactions. India has pledged to spend $318.4 million to promote UPI and RuPay.

In Africa, Mobile Money allows users to conduct transactions through a mobile device, without the need for a bank account. The service now has more than 600 million registered accounts and almost universal penetration in more advanced countries like Kenya.

A study from GSMA showed that Mobile Money was responsible for adding nearly $600 billion in GDP in the countries where it has been available over the last decade, a 1.5% increase. In sub-Saharan Africa, the contribution to the GDP reached 3.7%.

Javelin Strategy & Research’s new white paper, Commercial Instant Payments: Global Update Part I, examines these trends as well. Author Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, explores the growing demand for improved cross-border transactions and the ascent of digital commerce. Bodine examines how the widespread use of mobile banking and digital wallets has fueled momentum toward financial inclusion, prompting more countries and to embrace instant payment systems in a shift toward a more accessible financial ecosystem.

The post The Impact of Digital Payments in the World’s Rising Economies appeared first on PaymentsJournal.

The future of commercial payments doesn’t rely on a one-size-fits-all approach. Diversity in payment methods offers particular strengths and capabilities in the commercial payments landscape.

In his “Trends & Predictions: Commercial and Enterprise Payments” report, Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, delved into why no single payment type will dominate the commercial payment space and how instant cross-border payments are poised to disrupt the traditional banking system.

No Single Commercial Payment Type Will Dominate

There’s a place for all key commercial payment types, including ACH and the UK’s Bankers’ Automated Clearing System (BACS). Although Bodine contends that checks should not be included in the lineup, they are still being used by businesses.

The chatter among the industry within the past 12 months has been that there will be one payment type that will take over all other payment types. One suggestion floating around was that credit cards would become the primary way of payment, 100% of the time.

Bodine begs to differ.

“I just don’t think that’s a very pragmatic, realistic approach,” Bodine said. “What is happening as payment instruments become more mature or continue to evolve in the commercial payments world, we’re seeing ACH very well positioned for certain types of commercial payments. Wire for other things. Commercial cards or virtual cards for other things.

“I think the intelligent approach is that we have some very good payment types. They offer a lot of variety, and therefore we need to position them accordingly and alongside each other to have a well-thought-out commercial payments program.”

ESG and its Impact on Paper Checks

Companies are increasingly facing scrutiny from investors about their environmental, social, and governance (ESG) initiatives. This ties to a variety of factors, including growing awareness of climate change and its ensuing impact on resources, environmental pollution, and transparent decision-making processes.

For some organizations, deploying such initiatives requires a significant investment of resources that they may not have. However, Bodine said, a simple three- to five-year initiative to “get the ball rolling” in that direction would be to abandon the use of paper checks.

As a demonstration that ESG initiatives are not just another trend, Bodine recounted that a certain organization was recognized by the American Business Awards for its ESG efforts by reducing the use of paper checks. Clearly, the recognition for these initiatives exists and could become table stakes for most organizations.

Instant Cross-Border Payments Will Disrupt Banks

One of the most exciting trends coming down the pike this year is the launch of truly instant cross-border payments. A pilot program is underway between the United States and the EU. These transactions are set to take place in the first quarter of 2024.

“Once that happens, I think you’re going to see the floodgates open, and then we’re going to start to see connectivity between the U.S. and India, between India and Brazil, between the Asia-Pac countries in the EU,” Bodine said.

“The reason this is important is that this will greatly disrupt the traditional correspondent banking infrastructure that has caused individuals in enterprises to be entirely reliant on large banks and a wire system to be making large payments or even not large payments.”

The post 2024 Commercial Payment Trends: Instant Cross-Border Payments, ESG Growth, and Payment Co-Existence appeared first on PaymentsJournal.

Through a new partnership, Mastercard and Booking.com are simplifying business-to-business payments in the travel industry, leveraging Mastercard’s virtual cards for more transparent and secure transactions.

The goal is to end the time-consuming manual processes in B2B payments. Virtual cards offer enhanced security, with a 30x lower fraud risk compared to traditional payment cards.

More Businesses Are Adopting Virtual Cards

A virtual credit card is a digital payment method that is specifically designed for businesses—it’s a digital version of a traditional physical corporate credit card.

Virtual cards are increasingly popular among businesses for many reasons. For one, they’re efficient. Many virtual cards are integrated into a company’s accounting system, which means that all expenditures made using the card are automatically updated with the payment settlement, giving a company a real-time view of its cash flow data.

They’re also more secure. Unlike physical corporate cards, virtual corporate cards can’t be stolen. They don’t store personal information, reducing susceptibility to fraud. In the event of authorized access, the company is protected by predetermined spending limits, similar to prepaid corporate cards, preventing overcharges.

As more B2B payments become digital, businesses are looking to make payment methods faster and secure. That is not to say that physical traditional credit cards will be a thing of the past. In fact, according to Javelin Strategy & Research’s Senior Analyst of Credit and Commercial, Ben Danner, travel and expense corporate cards are poised to see a general growth. He noted that in his report, International Commercial Credit Cards: Market Review and Forecast, 2022-2027.

There’s a lot of opportunity and growth within this space, and we expect adoption of corporate virtual cards will continue to grow and transform the B2B payments landscape.

The post Mastercard and Booking.com Streamline B2B Payments for the Travel Industry appeared first on PaymentsJournal.

As any seasoned treasury or finance practitioner knows from experience, organizations dealing with numerous banking partners must account for a broad and constantly shifting range of protocols when it comes to processing payments. For instance, if a business has relationships with six or seven banks spread across the globe, it could easily be looking at 25-plus variants of payment formats. 

In a recent PaymentsJournal podcast, Jon Paquette, Executive Vice President of Solutions and Product Strategy at TIS (Treasury Intelligence Solutions), and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discuss the best practices for dealing with multi-bank connectivity and payment processes.

The Challenges of Automation

Given the variances that occur across different banks and regions for financial messaging formats, remittance data fields, regulatory reporting standards, etc., dealing with multiple banks can become very complex for organizations to manage. And it’s not just the bank connections themselves that need to be managed, but also the systems that leverage those connections. According to Paquette, operators of ATMs or payroll systems up to TMS and ERP users would all benefit from using an efficient model that allows those systems to tap into a unified connectivity structure that enables straight-through process automation.

Of course, it will never be feasible for an organization to use just a single bank relationship globally. One reason (out of many) is for insuring against bank failures. “Corporates that have relationships with non-globally systemic important banks are multiplying their number of bank relationships for fear that their deposits may not be insured beyond the $250,000 level,” Bodine said. But as the number of bank partners and underlying accounts rises, “the ability to manage all these different portals, protocols, and interfaces becomes a major obstacle.” 

Bank connectivity drives a great deal of process automation within finance. Payments are a critical piece of the puzzle, but organizations also use inbound bank reporting to automate financial records and accounting entries. Treasury, for one, relies substantially on bank data as fuel for its cash forecasting and cash positioning functions. And without a unified connectivity strategy, it can be difficult to maintain visibility across each regional finance center or shared service center, as well as across various entities, business units, and bank groups. 

Breaking Down the Silos

Paquette points out that it’s difficult to maintain consistent controls without straight-through processing in place, to make sure that all the subsidiaries are executing payments in the same way. A lack of standardization can introduce extra risk to the payment process, which becomes a significant issue for some organizations as data management strategies take on greater importance. Without a holistic bank connectivity solution, banks often end up operating in data silos.

“If you have a multi-ERP technology structure, for instance, you’re likely using different systems in different regions, and you’re connecting your banks to those localized systems,” Paquette said. “You end up with data trapped inside localized silos that are driven by the systems in use across those regions. Having a more comprehensive connectivity strategy (i.e. all banks or ERPs feeding into or connected by a central system) helps to break down those data silos.” 

As companies are growing, trying to implement automated processes can result in extra confusion, a lack of control, and a lack of visibility. It can also become chaotic for finance to manage rapid growth as things change within the business – such as what is caused by multiple acquisitions of companies each with their own preexisting set of bank relationships and back-office systems. And without a definitive strategy in place, many companies focus on the big targets – such as the main cash management banks – but tend to overlook the outliers because they add too much complexity. 

“As a result,” Paquette said, “these partial implementations don’t serve the organization the way that they were intended to.” The end result is even more siloes and continued inconsistency with reporting and visibility.

Weighing In-House Solutions

When it comes to solving the above issues, some organizations focus on developing strong in-house resources to unify their banking landscape. If a company has a large and experienced IT team with ample bandwidth, this can definitely be accomplished. But there’s always a bit of a balancing act: Is it really worth IT’s time and effort to manage a project of this magnitude in-house, or is it more cost-and-time effective to hire an external resource and focus on something else internally? Often, internal strategies appear to be the better solution early on, but end up incurring huge IT maintenance costs – not just for initial development, but also for ongoing upkeep. Accounting for those internal costs makes the business case stronger for adopting a specialized, externally managed solution. 

“If you’re working with five to seven banks, there’s already enough complexity to start thinking about hiring a specialized provider for your connectivity strategy,” Paquette said. “It allows you to put in place a centralized connectivity hub where the provider is connecting your different bank relationships in a multi-protocol fashion.” That way, as your company expands to encompass potentially dozens of banks and hundreds or thousands of accounts, a strategy and solution is already in place to accommodate the growth.

“If you have a mix of protocols like API and host connections, all those can connect into that centralized hub,” Paquette continues. “That gives your business just one point of entry into their bank relationships. If you’re connecting ERP systems, payroll systems, and a TMS, one connection to that hub can give you access to your entire bank portfolio within each system, versus thinking about each individual connection and managing those back and forth. We find this to be a really effective strategy.” 

With a decentralized finance structure and regional shared service centers that operate autonomously, getting visibility into those processes can also be a challenge.

“The example I like to use is with the ISO 20022 protocol,” Bodine said. “There are now 60 different implementations of this so-called standard. That’s just one example of why you would not want to manage this in-house. Organizations simply don’t have the bandwidth to do this, in my estimation. You would want to partner with an organization like TIS that really knows what they’re doing here.”

Once a company has a connectivity hub in place, major simplifications can ensue. With a single payment instruction format sent into that hub, the software can conduct the transformations into the ISO variants and pick up all the geographic nuances. It also alleviates any strain on internal IT teams to constantly maintain and update those variants in-house.

Key Questions

Treasury, finance, and IT teams aiming to take their organization through a global payments transformation or banking process overhaul should ask themselves a few questions: 

• Is there a global process owner for payments? Today, many organizations are seeing their treasury teams serve as the global business owner of the payments process, driving how the business will make payments and putting scalable models in place to fuel growth. If no “global owner” exists, aligning on who the owner should be will help establish responsibility for creating a standardized and unified strategy to orchestrate them over time.

• Do you understand all the ways that your business makes payments? “Map all the different ways your business is making payments across treasury, AP, expense reimbursements, payroll tax payments, etc.,” Paquette said. “It needs to be a full mapping of how those payments are made, what systems are involved, what geographies are encompassed, and what existing controls are in place.” 

• Do you have consistent payment guidelines? If not, using an approval process that’s dictated down from the treasury level that can then be adopted within the business is a great strategy. This pays dividends when the organization can bring in standardized approval processes via automated workflows through a payment hub.

• Are there gaps in your visibility? “We speak with many businesses where treasury wants to achieve a greater view of what’s happening for control purposes or even just for cash management purposes,” Paquette said, “just to know what’s happening on a day-to-day basis.” Often, one of the best places to start is by examining bank connections.

The post Managing Multiple Bank Connections: A Primer for Payment Processors appeared first on PaymentsJournal.

Intuit is transforming financial decision-making with its new Intuit Assist for QuickBooks solution, an AI-powered financial assistant that will offer small businesses personalized recommendations with minimal effort.

How AI is Revolutionizing Businesses

Small businesses are weathering the storm of increasing competition, evolving customer expectations, higher operating costs and interest rates, and more. Staying in the game has become increasingly difficult – it may feel daunting to know that only 50% of small businesses survive beyond their first five years. The good news, however, is that 69% of businesses that are connected to an accountant and use the Intuit QuickBooks platform succeed beyond five years.

Why? Because small businesses that leverage emerging technologies coupled with the expertise of their accountant are able to give themselves a competitive advantage to help navigate the complex environment we’re living in. Artificial intelligence is the latest technology changing the business landscape, giving business owners a powerful tool to ramp up productivity and save time. When complemented by accountants’ advisory services, small businesses are better positioned to prosper.

Benefits of Intuit Assist for QuickBooks

Intuit Assist, which will be available to QuickBooks Online customers in the coming months, is purpose built to support the needs of business owners in four key ways: automate tasks that will help small businesses save time, provide a comprehensive view of where a business stands, present recommendations based on insights to guide actions that avoid pitfalls or meet revenue goals, and connect the owner to QuickBooks product experts if help is needed. The vision is to have Intuit Assist and access to product experts work alongside the independent accounting, bookkeeping, and tax experts who may also be connected to a small business, helping them serve more clients with greater efficiency.

Small businesses must stay on top of a massive amount of data to remain competitive. This includes web traffic, costs for customer acquisition, sales figures, conversion rates, and profitability, among others. Without the ability to properly understand what this mass amount of data is saying, the owner can find themselves missing key insights, costing them wasted time, money, and resources.

With Intuit Assist for QuickBooks, small-business owners will have access to important insights that are gathered directly from their business performance and customer behaviors. When small businesses have easy access to such vital insights, they’re able to make well-informed decisions about where they can improve, where there are opportunities for growth, how to allocate their resources, and which marketing strategies to employ.

For most businesses, analyzing all the available data is difficult, and there are still insights that remain hidden to the untrained eye. Intuit Assist will unearth valuable data and provide personalized insights such as cash flow hot spots, helping businesses to narrow their focus on activities that generate the highest income. The solution also can offer a holistic view of where the business stands, such as by showing the profit and loss from the prior month and even the top-selling offerings from the previous month. Owners can then have more fruitful conversations with their accountant on how to leverage the insights in day-to-day operations.

Equipping Accountants to Help Business Clients Reach the Next Level

Accountants aspire to support their small business clients in succeeding, and many are realizing how technology can play a key part in this. In fact, of those surveyed by QuickBook, 86% agreed that technology plays a key role in the growth and expansion of their accounting practices. Moreover, almost half (48%) expected to invest in AI technology in 2023.

At Intuit’s QuickBooks Connect event last year, accountants came together to see the latest innovations that QuickBooks is rolling out to support their practices, including Intuit Assist. Jeremy Sulzmann, vice president of the QuickBooks Accountant Partner Segment said: “Our 2023 event doubled down on how AI-driven innovations can help accountants and the small businesses they serve gain insights to make more informed business decisions. Together, we’re unlocking new ways to power prosperity.”

AI stands to be a powerhouse for accountants now and in the future. With the automation of data entry and analysis, accountants can free themselves from repetitive and tedious tasks and focus their energies on a higher level of analysis, leading to more strategic decision-making.

With AI, data can be processed faster than it can be by humans, helping to reduce errors, improve financial reporting, and create more quality time spent with clients. More efficiency in operations means that accountants can manage a higher workload, enhance turnaround times, and serve even more clients.

Small Businesses Paired with Accountants Are More Likely to Succeed

Small business owners, who are limited in resources compared with larger enterprises, are expected to wear many hats. However, many small-business owners lack the expertise to make sound financial decisions. Partnering with an accountant helps small businesses navigate the tricky and often treacherous financial waters, avoid costly mistakes, and maximize their profitability. As mentioned, more than two-thirds of businesses that are paired with an accountant and use QuickBooks survive beyond five years, demonstrating the deep impact that both have on SMBs.

Accounting firms are strategic partners that can help small businesses succeed by letting their clients stay focused on their financial goals, enhance their overall financial health, and make informed decisions on their investments and spending. In partnership with the power of QuickBooks and Intuit Assist, the mission of decreasing the small business failure rate is possible.

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As companies increasingly globalize, the need for efficient and strategic business travel becomes more pronounced. The role of corporate cards in this domain is not just a matter of convenience but a vital tool for managing expenses, leveraging analytics for smarter decision-making, and ensuring compliance with corporate policies.

The integration of commercial cards and business travel has become an indispensable tool for companies seeking efficient and streamlined financial management. As we delve into the multifaceted world of business travel, it’s crucial to understand the different types that modern enterprises engage in. From domestic jaunts to international sojourns, and from individual business trips to large-scale corporate retreats, how are commercial cards employed to meet diverse corporate travel needs?

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: International Commercial Credit Cards: Market Review and Forecast, 2022-2027

Likelihood of Global Business Travel by Type

• 28% – sales/account management meetings with current or prospective customers
• 20% – internal company meetings with colleagues
• 18% – conferences, trade shows, or industry events
• 14% – service trips
• 9% – employee training or development

Source: Global Business Travel Association, 2023

About Report

As business travel globally continues to recover from the COVID-19 pandemic, resulting in some shifts in emphasis by companies, the corporate card remains the workhorse from a global perspective, with a range of use cases, including travel and expense and procurement. Meanwhile, virtual cards are emerging as a strong product for growth, and the rise of instant payments could cut into card volumes.

This annual Javelin Strategy & Research report examines the international commercial card market from a regional perspective. This report covers Western Europe, Asia Pacific, Latin America and the Caribbean, and Central and Eastern Europe. This regional perspective is developed based on available data and is not exhaustive of all countries globally. We exclude fleet/fuel cards and small-business cards from our analysis, focusing solely on mid-size to large-market corporates.

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In the past decade, the payments industry has experienced more change than in the previous 40 years. The number of payment options for consumers is multiplying, and the adoption of real-time payments is soaring.  

While this is an exciting time for the payments industry, financial services companies are facing tough challenges as payment processing requirements become increasingly complex—especially in the back office. In a recent PaymentsJournal podcast, BHMI’s Chief Technology Officer, Michael Meeks, and Director of Software Engineering, Jon Protaskey, along with Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, spoke about these challenges.

The Historic Role of the Back Office

Backoffice transactions are largely hidden. After a payment has gone through a front-end system for authorization, the back office takes over and performs several key functions. It settles the transactions among the financial entities involved and reconciles them with various sources, such as front ends and network clearing files. The back office also charges the appropriate fees, handles transaction disputes, supports transaction research, and allows real-time financial positions to be viewed. 

Thirty years ago, when banks were first moving from cash to digital payments and cards, the ecosystem was different. The legacy systems that were built decades ago are just not capable of meeting today’s payment demands. Those systems were written with an isolated perspective and minimal requirements, then added to and pieced together over the years. The gaps in the operation still often require manual processes to be in place. 

At that time, nobody could have projected the transaction volumes seen today. As a result, there was no expectation for real-time processing or real-time data access for decision-making. Everything was handled in batches, and the need to support non-card-based transactions wasn’t even an issue. These historical card-based systems were written to support ISO 8583, not the new standard of ISO 20022—which makes it hard for back office environments to adapt and put the new requirements into their systems. 

“We have seen many organizations quickly upgrade their front-end client interfaces, but they have been a bit slower to upgrade outdated back office systems,” Bodine said. “Modernizing these systems is all about the elimination of friction, which means improvements in efficiency, accuracy, cost savings, and a variety of other things. As we started to get into the pandemic, we saw more folks working on back office processes. Now we’re really seeing efficiencies throughout the ecosystem by eliminating friction.”

Another challenge is the workforce that was in place more than 30 years ago and initially used those legacy systems is aging and retiring.  Those who built the systems are taking most of the historical knowledge with them. 

“It’s not a surprise to come into a new client and see them have many different systems that are siloed,” Protaskey said. “They’re all doing different functions of the back office and trying to get those systems consolidated is always a challenge.” 

New Solutions for Instant Payments

With instant payments settling in 20 or fewer seconds, the potential for instant fraud is more prominent. Because those funds are irrevocable, fraudsters have the opportunity to increase the amount of money that they’re able to take from organizations. Automation and modernization are imperative to cut into what the fraudsters are doing. 

“A modern back office can play a big role in helping to mitigate the risk and reduce the cost,” Meeks said. “The solutions we’re implementing continuously load payment data within seconds of the transaction being processed. When that data arrives in the back office, our software performs the back office processing immediately, including fee generation, reconciliation, and settlement. All this happens immediately after we’ve loaded the transaction rather than doing large batch processing at the end of the day. This provides you a real-time view of all the transactions that have been processed and real-time settlement positions throughout the day.”

Real-time data visibility allows banks to make decisions based on that data.  Every business has proprietary data to capture and make decisions on. A system needs to be able to adapt to a given business’ data needs, not just what every other company has out there. 

The Cost of Disputes

Another key consideration is the high cost of handling disputes. A modern back office enables companies to manage disputes more efficiently, with a greater degree of automation and accuracy.  These systems need to provide quicker ways to research a transaction, audit faster, and offer more automated ways to handle chargebacks. 

“I can give an example of one of our current customers, a company that we work with in Australia,” Meeks said. “In 2018, Australia launched the New Payments Platform (NPP), and one of the country’s leading payments services providers faced a lot of challenges in allowing their back office to handle disputes of real-time transactions. We implemented a system that accepts real-time dispute requests, enabling them to meet the requirements of the platform and respond in near real-time.” 

The Path to Modernization

Simply having a consolidated system can result in operational efficiency and reduced costs. With one consolidated rules-based back office system, banks can have the flexibility to adapt to industry changes with simple configuration alterations rather than expensive and time-consuming software code revisions. 

“The biggest competitive advantage we see right now is scalability and the ability to handle the increased transaction volumes,” Protaskey said. “And there’s always the regulatory compliance and enhanced security that comes with a modern system.”

“We conducted a survey a few months ago, and 80% of the respondents said that modernization of their payment operations was very important, and 46% said it’s currently a top priority for the organization,” Meeks said. “For someone who wants to sell modern back office software, that sounds great, but they also identified a number of hurdles. Most important was the perceived cost­­—not just the cost of the software to bring in, but the cost of its integration into the organization.”

Another hurdle was limited internal resources. People in these organizations already have day-to-day job responsibilities that keep them busy.  They are concerned they won’t have time to take on a significant new project. “We view our job as helping customers overcome these hurdles to implement a modern back office platform to meet these challenges and provide a nice return on their investment,” Meeks said.

The post Today’s Challenges for Back Office Operations appeared first on PaymentsJournal.

When it comes to business-to-business (B2B) payments, those funneled through automated clearing house (ACH) rails are increasingly popular.  Although many businesses are still mailing checks as payment, more businesses are seeing the risks and looking toward ACH payments as a cost-efficient and convenient alternative.

During a recent PaymentsJournal podcast, Brian Holbrook, Director of Product Strategy and Integrated Services, LSEG Risk Intelligence, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, delved into the current landscape of ACH payments in B2B use cases, the potential impact of Nacha’s proposed amendments on originators, and the challenges and opportunities for originators that are arising from these amendments.

The Current Landscape

ACH payments have been growing in popularity among businesses making B2B payments. Funds are transferred seamlessly between bank accounts, and settlement times range from one to three days. ACH payments are also fast and more cost-effective than paper checks. As waiting for payment becomes less sustainable in the maintenance of cash flow, B2B use cases will continue to expand.

“So when we look at data coming out of Nacha, we can see that the B2B volume increases across ACH are up nearly 10%,” Holbrook said.

“We’re seeing a significant growth across the originator landscape, seeing multiple increases in different verticals, different industries. And, of course, with those increases come additional risk.

“We see some new rules coming out that are going to have an impact on the whole ecosystem, but particularly on the originator side.”

With the ACH network processing tens of billions of transactions, with thousands of banks in participation, and numerous regulations, the network can be difficult to navigate.

“I think that sometimes it’s a bit of a surprise—just how the infrastructure for ACH transactions, the use of the ACH network, and the need across multiple use cases is growing so very, quickly and so expertise in this space is sometimes hard to come by,” Wester said.

According to Holbrook, Nacha reported that Same Day ACH payments were up 20% in Q3 of 2023 over the same quarter a year ago, a significant jump indeed.

“When you look at that Same Day (ACH), as we began to see that demand for faster and faster settlement times, faster and faster throughput, the other side of that coin is, OK, less and less time to address issues, less and less time to figure things out like fraud, suspicious transactions,” Wester said.

“I think that surprised everybody in terms of how quickly we are beginning to move to this need for faster and faster settlement across multiple networks, but especially across ACH.”

Getting Familiar with Key Proposed Amendments

Nacha is proposing a new risk management framework that could affect the entire network, including a third party, the Receiving Depository Financial Institutions (RDFI), the Originating Depository Financial Institutions (ODFI), or a new regulator. The proposals will require more from industry participants.

“These proposals are going to require everybody in the value chain to have more diligence on the accounts, on the account ownership, particularly with higher-dollar value transactions,” Holbrook said.

“It’s going to be critically important that they understand where those funds are coming from, where they’re going to. When something suspicious is happening, that the receiving institution has an opportunity to reject that, that inbound money, or for the originator to call it back.

“It’s going to be paramount that they have the tools to validate accounts, validate identities, and to be able to do it. And as close to real time as possible.”

Risk, Wester said, was not an important topic for a long time. The original focus among fintech players within the industry was growth. However, the tides have changed and more FIs, their partners, and technology vendors have shifted their focus to mitigating risk.

“Risk, compliance, governance, fraud, security, all of those things are now becoming more and more important in coming to the forefront,” he said. “And we’re hearing a lot more about the need for risk, and risk tools, and the things that financial institutions and the financial system have done very, very well.

“So I think that’s a very interesting switch in the last 12 to 18 months, that prominence in terms of risk and compliance being a talking point or something that we’re discussing more.”

Said Holbrook: “It’s really about monitoring across all parties in the value chain funds, recovery tools and standardizing of information so that individual names, descriptions are standard across the network, that there is an ability to recover funds, and that there is monitoring across that. I think that’s really what it comes down to across the value chain.”

Potential Challenges for Originators in Proposed Amendments

Although regulations are put in place to protect participants from fraud, there will always be the challenge of establishing a happy medium between mitigating risk and delivering a seamless customer experience.

“People want these funds moved in as close to real time as possible. So striking the balance between good customer service, good throughput speed, and risk and fraud mitigation is going to be a needle they’re going to have to thread very carefully,” Holbrook said. “They’re going to have to strike a balance there, and they’re going to need processes, procedures, and tools to be able to do this.

“And those tools are going to have to work in as near real time as possible so that you’re not applying excessive friction to your customer base or to the movement of funds.”

Wester elaborated on the required balancing act.

“And that’s almost as much art as it is science,” he said. “That’s one of the things that we’ve said about security for a really long time. You can make something absolutely secure, but it’s completely useless (if it repels legitimate users with friction), or you can make something very open, but unfortunately, it’s not very secure.

“That balance that you were talking about between customer service and protecting things, making sure that risk is taken care of on one side, but also making sure that customer service and access and all the stuff that we want in terms of payments are available on the other side. It is a balance.”

And it doesn’t end there. Wester said achieving it will require constant monitoring and fine-tuning, ensuring that organizations are doing everything in compliance in terms of fraud, risk, governance, and security. This has to be done in tandem with customer retention efforts.

Opportunities and Benefits from Proposed Amendments

Although these newly proposed amendments are likely to create some headaches, there is a silver lining, and that is the many potential benefits for the ACH Network and the consumers and businesses using it.

“There’s an opportunity for them to not only improve what they’re doing today, but it’s an opportunity to help them reduce risk and loss further within their systems,” Holbrook said.

“There are opportunities here where these tools that they would apply to these types of transactions can be used in other parts of their business that will also, whether it’s at account opening or account closure and throughout a customer lifecycle. Those tools that are available in the market can absolutely help them in other parts of the business.

“And I think that’s a huge opportunity for them to reevaluate many of the systems and processes they have in place today and look for ways to enhance them, make them better, make them faster.”

Said Wester: “A lot of times we think we’re going to take a tool and we’re going to apply it to the problem. Especially a digital solution is going to come in and it’s going to fix things.

“You do have to look at those processes, those things that are internal that may have nothing to do with the technology or the tool, but you still have to address those.

“It is better to have those tools that are easier to integrate, the partners that are easier to work with because you are going to have a lot of stuff internally that you have to work on.”

Top Recommendations for Originators to Prepare for Proposed Amendments

Before originators can tackle and implement the directives under the proposed amendments, they must get educated. Reading up on these amendments on the Nacha website and attending conferences and webinars can be valuable ways to stay current. Once armed with information, originators can look at their current toolbox and see what they have and what they need to add.

“This is an opportunity for compliance departments to really go back and evaluate what they’re doing today, where they may have gaps,” Holbrook said. “What tools do they have in place today that are going to help address these new rules? Or do they need to be looking for something new?

“In some of the other workshops that we have done, many of our clients tell us that they feel good about where their risk and compliance mitigation is at. But there’s more to do. This is where these areas need to be out looking at new solutions and looking at different providers, and seeing what’s going to best fit their needs, what fits into their technical ecosystem, and what’s going to give them the best performance when they’re looking to strike that balance between speed and risk.”

Wester and Holbrook agreed that preparation and proactivity are keys. Organizations need to grant themselves ample time to research, invest, and implement new solutions to remain compliant.

“I think one of the things we’re also seeing a recommendation for is (to) be proactive on this,” Wester said. “A lot of times, when you look at deadlines, when you look at compliance issues, you do an, ‘OK, I must be done by this date,’ and you do a workback. This is one of those where you start sooner rather than later.

“There are issues, there are areas where there may be problems, there may be costs, there may be concerns that need to be worked through that you didn’t know, the things you know that the unknown unknowns.”

Preparation is essential, Holbrook said.

“If you’re going to engage with a new solution, you know you’ve got to get it into a road map, you’ve got to develop, you’ve got to have resources that can work on it, and then you’ve got to have time to test it and do proof of concept,” Holbrook said.

The post ACH Proposed Amendments: Originators Must Prepare appeared first on PaymentsJournal.

Embedded payments have been a mainstay for consumers for several years due to the rise of digital payments via smartphones and mobile apps. As consumers continue to enjoy the speed, convenience, and security of such payments, the business-to-business (B2B) space has been lagging behind.

That is not to say that many businesses are content with this; on the contrary, more businesses would like to see embedded payments featured highly within the B2B payments space so they, too, can benefit from the speed, convenience, and cost efficiency.

During a recent PaymentsJournal podcast, Daniel Artin, VP of Strategic Partnerships at Boost Payment Solutions, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed what embedded payments look like within the B2B ecosystem, why they are growing, the market opportunities available, and how to select the right payments partner to begin incorporating embedded B2B payments.

Defining Embedded B2B Payments

Embedded payments originally centered on such use cases as consumers hailing a ride using the Uber app or ordering groceries via the Instacart app. Both platforms offer fast and convenient ways to pay for products and services with a simple tap on an iPhone, with no need for entering credit card information.

Within the B2B payments arena, businesses are demanding the same perks that come from embedded payments, including enhancing the customer payment experience, automating the processing of payments, and providing protection against fraud.

“When you talk about embedded B2B payments, it’s always within the context of embedded finance, which as we know has become sort of the buzzword, the flavor of the month within the payments and finance sphere,” Artin said.

“So for those nascent audience members listening, we define embedded finance as the integration of financial services and tools primarily to non-financial software platforms. Think of this as incorporating banking, lending, sometimes even insurance into various (software-as-a-service) providers and platforms.

“I’ll be focusing on embedded payments, particularly in the context of B2B payments, which I believe is the edge case of embedded finance.”

Said Bodine: “I see in my research that embedded finance, open banking, it’s really going to be the major disruptor to the legacy banking system. Certainly, things like correspondent banking and getting away from the notion that you have to go through your bank in order to make a payment.

“These are very important, interesting times for the world of B2B payments.”

Embedded B2B Payments on the Rise

As businesses continue their expansion across the world, large multinationals as well as small and mid-market companies are taking their enterprises to a global level. As they move toward a more digital ecosystem, the complexities amplify, especially for back-office processes.

“And of course, we can’t forget to mention the impact of COVID,” Artin said. “I really believe consumer (tendencies) begets B2B. What we saw during those three years was almost a fast forward in the mind of the retail and the regular consumer of wanting simplicity, wanting digitization, wanting a seamless experience and businesses also caught that wildfire.

“What we’re seeing is businesses starting to have a desire and almost demand to move away from an analog swivel chair process into more of a seamless digital experience from a holistic level.”

Even with businesses ready to digitize B2B payments, there are still some businesses that happily embrace the old ways of operating. Bodine recounted a conversation he had with a wholesale restaurant provider.

“We got into the subject of payments, and I said, ‘What does your daily payments file look like? Are you sending a batch file?’” Bodine said. “He went into his drawer and took out a stack of checks about that thick, and I said, ‘Do you mean to tell me that you’re still receiving checks as a primary mode of payments?’

“He said, ‘Absolutely. It’s 90% of how we are paid.’

“It might be that particular industry, but it reminds me of a statistic that still 33% of payments made globally are made by paper check, which every time it comes out of my mouth, it just boggles my mind.”

Artin attributes business’ use of legacy processes to inertia. Businesses that have been writing checks, fulfilling procurement orders, and paying invoices in the same manner for decades seem to have embraced the status quo and feel no urgency to make changes.

The Market Opportunity for Embedded B2B Payments

As B2B payments become more digitized, the opportunities for embedded payments will grow significantly as companies seek a more seamless payments experience.

“In the U.S., depending on which report you’re reading, it’s anywhere between 25 to 27 trillion (dollars) in total addressable market for B2B payments,” Artin said. “What we’re seeing right now is that embedded payments make up roughly 5% of that, so about 2.6 trillion.

“And over the course of the next five to six years, we see that growing considerably upward of $7 trillion, a 170% increase.”

For those SaaS companies debating on whether to incorporate payments into their platform, Artin contends there’s a “first-mover advantage to be gained.”

Companies that adopt payments stand to boost customer lifetime value. Plus, it’s an effective strategy to diversify revenue streams, not only from subscription-based models but also from a basis-points viewpoint. Through the integration of payments, the transaction volume alone will give valuable insights to the sales team, equipping it with a valuable toolkit to help land more clients.

Where Adoption Is Happening

As much as businesses would love to have embedded B2B payments mirror the consumer side, a long road looms ahead. For one thing, B2B transactions are significantly more complex. There are so many moving parts within the B2B space, including invoicing, reconciliation, handling multiple parties, and risk management. Moreover, the amount of money being processed is also considerably higher within the B2B realm.

“While the demand is high, it’s a slow-moving train,” Artin said. “I think one of the narratives that’s being pushed out there is that you’re going to see in the B2B world, at least in the near term, exactly what we saw in the consumer world, which is almost invisible payments.

“If you think about getting into and out of an Uber or booking a payment on an Airbnb, or buying groceries on an Instacart, it’s going to be a long time for us to mirror that type of engagement and automation in B2B.”  

Adoption of embedded payments is happening within the accounts receivable space, where previously the focus was on collections and deductions. Businesses are now implementing a “mosaic” of accounts receivable modules. Artin explained that the order to a cash system can now be featured on the tech stack.

He also mentioned adoption within the freight and logistics space, as well as in healthcare. Manufacturing and health insurance claims are also seeing an increase in adoption.

Selecting The Right Payments Partner

Naturally, the B2B space has its own nuances and complexities. Therefore, partnering with a solutions provider that has expertise in the B2B space is a must. Solutions that have served the business-to-consumer (B2C) space will simply be the wrong fit.

“Incorporating a payment facilitator model is a best suggested route here—partnering with an established B2B payment facilitator,” Artin said.

“Here’s a few selection criteria that I would consider. The first: Do they have a track record of playing in this playground, playing in the B2B space? Do they have a developer software layer? Do they have a streamlined onboarding process?

“Once you get customers bought in, are they going to be waiting 2 1/2 weeks to get a congratulations letter that they’re now part participating in the program? Do they have a reliable and accessible customer support?

“Are you going to be resorted to a 1-800 number or a generic listserv or are you going to have real folks in there that can handle issues that are inevitable about coming up? Is there a robust compliance management system?”

Artin said working with a flexible and nimble partner is paramount. Businesses must ask whether their partner can conform to any shifting conditions.

In addition, partners must be able to take into account that all businesses have their own accounting systems and their preferred methods of settling funds into their accounts, whether it be gross settling or net settling. Are they able to offer seamless reporting?

“The good news is that the fintechs that are still out there are really healthy,” Bodine said. “Most of them, because they’ve had to apply austerity measures, they are profitable. They’re actually really good acquisition targets for that reason.”

“Right now, more than ever, I think it’s an ideal opportunity for any forward-thinking SaaS platforms that are out there to consider embedding payments into their platform,” Artin said.

“It’s not an encouragement. It’s a must, and if you’re looking for that sort of expertise, there are folks out there that can help guide and coach you to make sure you’re making the most educated decision.”

The post Embedded B2B Payments: A Forward-Thinking Strategy for Long-Term Growth appeared first on PaymentsJournal.

Today’s labor market has become increasingly tight, with nearly half (44%) of business owners reporting they had job openings they couldn’t fill earlier this year – which means businesses need to be as competitive as possible to attract the best and brightest talent. This is also true of the tools that business owners use to manage their employees – since complicated, disparate, outdated solutions can lead to employee frustration.

In a move aimed at making HR tasks and team management more streamlined and hassle-free, Intuit QuickBooks is enhancing and expanding features inside QuickBooks Payroll that can transform how businesses manage and compensate their employees. These new updates were announced at this year’s QuickBooks Connect, Intuit’s premier event exclusively for accounting professionals, where a range of innovations designed to improve the lives of accountants and their small business clients were highlighted.

With QuickBooks Payroll, businesses are now equipped with a solution that will incorporate human capital management (HCM) features to help meet the needs of a growing workforce by streamlining time-consuming and complex administrative tasks.

A Hub to Manage Employee Data

From enhancing the onboarding experience, consolidating employee data, improving employee engagement, and reducing manual workflows, QuickBooks will be a hub that includes integrated HR Information System (HRIS) functionalities in one place.

Small businesses using QuickBooks Payroll will be able to upload and share documents with their employees through QuickBooks Workforce, a hub for employees to access their pay stubs, manage their time, and more. Document sharing allows employers to share a variety of documents with an employee, including critical HR-related documents. In addition, eligible QuickBooks Payroll employers and employees will soon be able to leverage a new I-9 feature that enables employees and employers to complete Form I-9 during employee onboarding and verify employment eligibility. Upcoming new employee profile, team directory and organizational chart functionalities will further enhance the ability for QuickBooks Payroll to act as a single source of truth for up-to-date, complete employee records.

QuickBooks + Allstate Health Solutions Partnership = Enhanced Benefits

Also during QuickBooks Connect, a new partnership was announced with Allstate Health Solutions, which enables QuickBooks Online Payroll customers to provide their employees with enhanced insurance options. This includes greater access to a wider range of health insurance options, making it easier to purchase and manage health benefits through a single platform.

“Choosing the right employee health care plan is an important decision,” said Laurent Sellier, senior vice president, Intuit QuickBooks Payroll Solutions. “With our Allstate Health Solutions partnership, we’re helping employers access tools and expertise to find the right plans and then set up and run those plans with little to no work on their part, fully integrated with their QuickBooks account and payroll service.”

Businesses will be able to search and pay for insurance plans that best fit their needs, regardless of whether they have hundreds of employees or just a few. They’ll be able to choose tailored high-deductible plans, including options for health savings accounts and health reimbursement accounts.

Beyond basic health, dental, and vision plans, Allstate Health Solutions will offer QuickBooks Online Payroll customers access to supplemental and optional benefits such as short-term and long-term disability, long-term care, accident, hospital, and critical illness. With this new partnership, QuickBooks Online Payroll customers can connect with an Allstate Health Solutions benefits advisor to assist in creating the right plan for their business and employees.

Customers can also contact an Allstate Health Solutions call center where a team of more than 300 agents will be ready to offer guidance, recommendations, or additional insights they’ll need to help them best navigate the complexities of the different health insurance coverage options to find the best fit.

Finding Success with Smart Tools

Businesses want to get the most tailored and personalized experience that will help them simplify their day-to-day operations. In an ever-evolving business landscape, the need for efficient payroll and team management solutions is paramount.

QuickBooks has recognized the challenges and has responded with a suite of features that cater to businesses with a growing workforce. These new enhancements empower businesses with the tools they need to better manage their teams, demonstrating QuickBooks’ commitment to simplifying the challenges small businesses face when managing employees.

The post Intuit QuickBooks Online Payroll Simplifies Human Capital Management with the Introduction of New Capabilities appeared first on PaymentsJournal.

Effective financial management is a critical factor for small businesses seeking growth. Tailored and automated tools, data insights, and guidance from accounting firms have become keys to scaling operations as businesses expand their footprint.

Intuit QuickBooks is at the foundation of small business growth. From accounting to payroll and payments, access to capital and acquiring customers, the QuickBooks platform helps owners better manage their business finances while also enabling accounting firms to deliver actionable advice that spurs client growth. To that end, the QuickBooks Connect conference, held this month in Las Vegas, presented several advancements to the QuickBooks platform that help accounting firms manage their client roster more efficiently.

A New QuickBooks Online Solution for Accountants

One significant announcement was the introduction of QuickBooks Ledger, a new low-cost, subscription product designed exclusively for accounting professionals to help them serve all their clients on one standardized platform, including those with basic accounting needs, such as year-end tax filing. 

For clients who don’t need frequent, ongoing support from an accountant, QuickBooks Ledger offers automated bank feeds, bank reconciliation, financial statements, 1099 tracking, and a seamless transition to tax preparation.

The sweet spot for QuickBooks Ledger is small businesses looking for an accounting solution that will grow along with them. The product is fully integrated and accessible through QuickBooks Online Accountant, allowing accountants to manage end-to-end workflows for their clients from a single place.

The days of manual data entry and reconciliation are also long gone. QuickBooks Ledger allows for financial transactions to be seamlessly synced. With a connection to the client’s bank account, business bank transactions can be flowed into the solution automatically, saving time and greatly reducing the chance of entry errors. And because automation is leveraged, and the tedious act of manually inputting the data is no longer necessary, accountants can now work on higher-end value services.

QuickBooks is looking to ensure that businesses are equipped with the right tools, regardless of whether they’re just starting out or scaling up. In fact, if a business’s growth requires an upgrade in accounting software and services, an accounting firm can easily transition their QuickBooks Ledger client to a more robust QuickBooks Online solution to meet their more complex, ongoing needs. 

Scaling Up

QuickBooks also announced several additional enhancements that support accounting firms who serve larger, more complex businesses. 

As businesses scale their operations, they need features that address their more complex needs. QuickBooks is rolling out new advanced roles and permissions for small businesses and the accountants who serve them to provide more granular and customizable access to sensitive financial data. For accounting firms, they will be able to manage what their teams can see and do within their own firm’s books and on behalf of clients, choosing a role that limits access or views to banking, sales, or expense data.

As a business grows and hires more employees, they also need to have more control over who has permission to perform sensitive tasks and have access to confidential data and information. QuickBooks Online Advanced, designed to serve more complex, growing businesses, will include controls for who can view, create, edit, or delete transactions and access accounting features like reconciliation, registers, and journal entries. Soon access controls will also apply to reports, managing who can view or customize different financial reports, sales reports, receivable reports, payroll reports, helping to avoid unnecessary mistakes and exposure.

Accountants serve businesses at various stages of maturity, and the tools they leverage should meet the unique needs of each of their clients. Having a robust solution that addresses the evolving needs of day-to-day business tasks and operations helps save time and drive greater efficiency for accountants. QuickBooks works alongside accountants to ensure its ongoing innovations continue to provide a solution that scales with the needs of their clients.

The post How Intuit QuickBooks is Providing Tools for More Effective Financial Management at Every Stage of Small Business Growth appeared first on PaymentsJournal.

Business-to-business (B2B) buyers get just as frustrated about the purchasing experience as consumer-to-business buyers do. In the end, everyone just wants a seamless journey before, during, and after the payment has been made.

A new study by TreviPay, a global B2B payments and invoicing network, revealed that B2B buyers seek the trifecta when it comes to the perfect customer experience: choice, convenience, and customization.

Key Payment Preferences

In its findings, 72% of B2B buyers said they’re loyal to businesses that offer their preferred payment method.

When it comes to making larger purchases, trade credit or invoice terms is their preferred payment method. Interestingly, 85% of respondents said they would buy more if given this option, and that’s because of the transaction limits associated with using credit cards.

B2B buyers also want merchants to move beyond manual processes and instead integrate with an enterprise resource planning. Some 80% of respondents said that it was at least “very important” that merchants offer this.

Finally, 78% of B2B buyers expressed their desire to customize the purchasing experience, including setting up spending limits, limiting purchases to preapproved SKUs, or including required PO numbers.

“As is often the case, consumer experiences set the tone for what happens in the B2B world,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “Enterprises are starting to demand consumer-like payments experiences that are frictionless, expeditious and error-free. And they want to be able to execute payments without the intervention of the legacy banking system.”

“More and more we will see open banking strategies that embed financial tools into platforms more focused on user interface and user experience than they are on ledgers and accounting,” he said. “Stay tuned as well as instant payments start to gain momentum and payments, even very large payments, start to be transacted from the palms of people’s hands.”

On the Road to B2B Payments Modernization

As consumer payment modernization continues to mature and adoption of faster payments increases, B2B payments modernization is still in its infancy. Many businesses within the B2B space are still using paper checks and invoices, making the transition out of these legacy systems more difficult.

But the tides are changing, an RPMG survey reported last year that more than 90% of suppliers preferred digital payments and invoice information instead of traditional paper checks.

By adopting a more digital B2B payments ecosystem, businesses have a more comprehensive view on their funds movement. And within this new framework, businesses will be better equipped to mitigate payment fraud.

The demand for faster payments and the increased costs of manual processing will inevitably drive more businesses to modernize their current B2B payments infrastructure in time.

The post B2B Payments Should Emulate the Customer Payments Experience appeared first on PaymentsJournal.

As business travel continues its long road back to pre-pandemic spending volume, businesses are increasingly pivoting from corporate credit cards to virtual credit cards. With the ongoing digitalization of business-to-business (B2B) payments, virtual card products can be embedded within an organization’s travel software, enterprise resource planning software, and B2B payment platforms.

That said, physical cards are not obsolete. In fact, travel-and-expense (T&E) corporate cards are expected to see general growth. Procurement cards will see the weakest area of growth among corporate cards.

In the report, International Commercial Credit Cards: Market Review and Forecast, 2022-2027, Ben Danner, Senior Analyst of Credit & Commercial at Javelin Strategy & Research, delves into the latest trends in commercial credit card spending on an international level, why virtual cards are growing in popularity, and the latest innovations affecting the commercial credit card industry.

Latest International Trends on Commercial Credit Card Spending

Several factors informed Danner’s findings, such as business travel spending, the gross domestic product of the various regions covered, and conversations with industry stakeholders.

The Western Europe (including the EU and the UK) and Asia-Pacific regions have seen corporate cards drive much of the spending. Due to increased digitalization, the highest growth will be seen in virtual card use, beginning with Western Europe, followed by the Asia-Pacific region.

Instant payments could pose a threat to commercial cards in the future, Danner believes, particularly when instant payments systems become connected in a true cross border payments scenario.

Corporate cards have been a steady fixture in the Latin American and Caribbean (LATAC) region and that continues to make up the majority of spending, followed by purchase cards. Virtual cards make up the smallest portion, with a lack of supplier acceptance remaining a problem.

Danner noted that for last year’s report, the estimated overall commercial card spending growth rate for Central and Eastern Europe, the Middle East, and Africa was 15.3%. However, that was lowered to 10.1% overall from 2022 to 2027. This can be tied to the ongoing conflicts: between Russia and Ukraine, in Sudan, and in the Middle East between Israel and Hamas. These conflicts will directly affect business travel to those areas of the world and subsequently card spending.

Although overall virtual card growth rates are high in Eastern Europe and the Middle East, the volume is still lower than in other regions. This was also the case with the LATAC region.

In contrast, virtual card growth rates in Asia Pacific and Western Europe were estimated to be lower than other regions, however, these regions hold most of the virtual card volume.

The growth in virtual cards, Danner explains, can be attributed to growth in online B2B marketplaces, trends in digitalization, and fraud prevention capabilities.

Why Virtual Cards?

Why are more businesses adopting the use of virtual cards? Virtual cards offer businesses more security, more control over spending, and a seamless integration within their accounting and expense management systems.

“Virtual cards are not a copy of a physical card. They create their own unique virtual number, and so the card is something that only exists for whatever parameters you set it for,” Danner said.

“If I’m a program administrator, sending out five employees to the UK, I can set their virtual cards to have a certain spend limit, and the card itself will just turn off in a day. I could even set it to only function with certain merchants.”

This, Danner says, can also mitigate against internal fraud.

Although virtual cards provide the ultimate in spending management card controls, the reality is that many suppliers are not equipped to accept this form of payment. The cost and complication of setting up virtual cards for suppliers can be extensive.

With virtual cards allowing businesses to control and manage business spending, coupled with an increasingly digitalized B2B payment ecosystem, we should expect the adoption of virtual cards to grow.

The Latest Innovations Affecting the Commercial Credit Card Industry

Convenience and security continue to be the driving forces behind the adoption of the latest in B2B innovations. One of the most prevalent trends is the uploading of corporate travel cards into employees’ mobile wallets. Without having to worry about losing a physical credit card, employees can travel with ease and simply tap their phones at checkout, saving time and without a hassle.

Finally, with card tokenization embedded in mobile wallets, employees can rest assured that fraudsters will not steal their credit card information through traditional card skimmers.

Given these and other perks of usage, Danner believes that this trend will only continue to grow internationally.

The post Virtual Cards Are Gaining Ground in B2B Payments appeared first on PaymentsJournal.

As cross-border payments become a crucial part of global business operations, compliance measures are in focus for companies and governments alike. However, as compliance frameworks vary greatly across countries, it’s highly difficult for financial institutions to navigate multiple sets of rules.

Central banks and regulators worldwide acknowledge the necessity of addressing this challenge and increasingly turn to blockchain technology in search of answers. The Bank for International Settlements (BIS), in particular, has recently launched Project Mandala in collaboration with central banks and regulators of ASEAN countries. The project is meant to streamline and automate compliance processes to turn cross-border payments into a smoother experience.

This is not the first initiative that BIS has introduced to address existing issues with international settlements. But here’s the big question: can projects like these really make a tangible difference for businesses? Let’s take a look.

Using CBDCs to Cross the Gap Between Economies: Project mBridge

Project mBridge is the initiative by BIS that received arguably the biggest amount of attention. Launched in 2021, the project seeks to use central bank digital currencies (CBDC) to support cross-border transactions in real time. The arrangement is meant to directly connect digital currencies of different jurisdictions within a unified technical infrastructure to allow international payments to be immediate, low-cost, safer and universally accessible.

This idea does offer several advantages in cross-border payments for the B2B sector compared to centralized payment systems. If central banks across different countries can successfully establish a jointly operated payment system, it would allow different CBDCs to be freely traded between banks and financial institutions. In other words, cross-border payments could be settled while bypassing the bureaucracy involved in moving funds across multiple banking systems.

It’s understandable why the promise can seem alluring to many, but, personally, I can’t help but feel like the progress made by BIS in this matter is on the slow side. The greatest tangible measure of success that mBridge has demonstrated to back itself up so far is a trial run that was conducted a year ago. In August through September 2022, $22 million worth of transactions were conducted between participating banks via the mBridge blockchain.

Since then, the project has once again become relatively silent on its progress, only occasionally making statements about onboarding new participants. It is still up in the air when full-scale deployment can take place.

Streamlining Regulatory Compliance: Project Mandala

Project Mandala is the most recent Proof-of-Concept launched by BIS to ease the process of regulatory compliance. The goal is to create a common protocol to streamline cross-border use cases, automate compliance procedures, as well as provide real-time transaction monitoring and greater transparency between different jurisdictions.

Considering that it only just launched, there’s not much known for certain about how Mandala is going to operate or what kind of impact it’s going to have on fintech companies specializing in cross-border payments. In the long run, developing and adopting standardized compliance protocols could foster collaboration and interoperability between fintech companies and traditional financial institutions.

In the nearest perspective, however, it will not change much for how businesses conduct their cross-border payments.

Alternative Solution: Employing Services of Fintech Companies to Facilitate Global Money Movement

To reiterate, the inconsistency in compliance methodologies across jurisdictions results in a complex patchwork of rules that increases the cost, time, and effort it takes for businesses to open accounts and conduct cross-border payments. And while the BIS and other parties across the world are working towards the development of better infrastructure and tools that can be used to address this challenge, it will be some time yet before any significant progress on this front can take place.

Meanwhile, the cross-border payments market continues to be dominated by correspondent banks connected via SWIFT, a system that often comes with high fees and sluggish settlement times of at least 5-10 days. Businesses across the world are in sore need of payment solutions that can improve B2B liquidity management and enable them to keep pace with the increasing transactional demands.

The way I see it, right now, they are better off relying on other options, such as fintech companies that can facilitate cross-border transactions on their behalf while employing alternative interfaces and rails. A more direct interaction between companies that sidesteps the involvement of third parties would allow for reduced transfer times and immediate availability of funds.

And if the chosen payment provider company has a robust KYC/KYB and compliance framework, conducting transactions through it would also serve the additional purpose of enhancing trust, which is a fundamental factor in international trade. Companies would no longer have to worry so much about inadvertently becoming part of illicit activities, such as fraud or money laundering schemes.

Following this path ensures that B2B operations can take place quickly as companies do not have to directly engage in lengthy and confusing bureaucratic processes centered around banks and crossing different jurisdictions. The fintech company is the one that shoulders handling these aspects in this case, which allows businesses to focus on conducting their operations in a seamless manner and without taking on greater risks.

The post Central Banks and Fintechs Compete to Shape Cross-Border Payments Mobility appeared first on PaymentsJournal.

Mastercard announced this week a new strategic partnership with Dubai Islamic Bank (DIB) to launch cross-border payment services for both peer-to-peer (P2P) and business-to-business (B2B) fund transfers. The collaboration highlights the United Arab Emirates’ determination to transform its payments ecosystems, both domestically and internationally.

The new collaboration with DIB leverages Mastercard Cross-Border Services to enable the bank to provide real-time remittances through its digital channels across more than 40 countries worldwide. All told, Mastercard Cross-Border Services facilitate the movement of funds to any end point across over 140 countries.

The announcement comes when the UAE has been more focused lately on domestic payment ecosystems. The UAE Central Bank has put forth a National Payments Systems Strategy that would enhance the existing payments architecture in the country, and ensure infrastructure is future-proof as the payments evolution continues. 

But the growing fintech environment in Dubai has led to many international payment service providers elbowing their way into this market as well. In addition, there has been an increased focus from the UAE government around regulations for cross-border payments.

A Growing Presence in the UAE

It is within this landscape that Mastercard has also been growing its presence in the UAE. Just last week, First Abu Dhabi Bank announced it was working with Mastercard to launch its SlicePay card, powered by Mastercard’s Installments Program.

And in August, Mastercard established a global center for advanced AI and cyber technology in Dubai. Mastercard signed a memorandum of understanding with the UAE’s Artificial Intelligence, Digital Economy & Remote Work Applications Office to work together on increasing AI capabilities and readiness in the region. Mastercard described the focus of the effort as battling financial crime, securing the digital ecosystem, and driving inclusive growth in the UAE and beyond.

The memorandum of understanding also looked to establish a co-branded innovation hub in Dubai along with the Dubai Chamber of Digital Economy, intended to serve as a platform for cooperation in digital innovation and artificial intelligence technologies. The goal is to attract international technology companies, startups, and digital talent to Dubai, in partnership with government entities like the Dubai Digital Authority, Dubai Future Foundation, and Dubai Chamber of Commerce. Today’s announcement signals that we should expect Mastercard’s connections to such entities to continue to grow.

The post Mastercard Collaborates with Dubai Bank on Cross-Border Payments appeared first on PaymentsJournal.

Time is money, and more consumers and businesses want instant payments.

Worldwide, the transaction value of real-time payments is predicted to soar 289% by the end of the decade, from $97 billion this year to $376 billion in 2030.

Responding to that demand, in July the Federal Reserve launched FedNow, a new instant payment infrastructure. FedNow allows banks, credit unions, and other providers to offer services that enable individuals and organizations to send and receive payments in mere seconds, 24/7.

The new capability has the potential to roil the market as industry players jockey for position with new bill pay, account-to-account transfer, and other products. It will also likely scramble technology budgets as firms take a hard look at their systems to make sure they have the capabilities and capacity to meet customer requirements.

But FedNow is just the latest in an avalanche of industry changes that has disrupted the market and raised the bar on technology. All of these developments point to one conclusion: that financial services companies must finally fully commit to a cloud-native payments system. Only a modern cloud platform will give firms the cost-efficiency, scalability, portability, and flexibility they need to serve today’s customers and compete in today’s market.

The Cherry on Top of Constant Change

The payments market has endured ongoing upheaval over the past six to seven years. Much of the turmoil has come from fintechs and Big Tech vendors such as Apple, Google, and Samsung, disintermediating traditional financial services companies with new payments products. These startups and technology-first behemoths have ushered in new ways of interacting with customers and have raised expectations for speed and ease of use.

At the same time, new regulatory and cybersecurity requirements have sounded a continual drumbeat. These range from rules like the European Union’s Payments Services Directive 2 (PSD2) and forthcoming PSD3, designed to give consumers more control and make payment providers more accountable. They’re also meant to cyber safeguards like two-factor authentication (2FA), a validation mechanism to reduce the risk of fraud.

FedNow will accelerate funds transfer from the three to five days required for Automated Clearing House (ACH) transactions to near real time. It will also provide the digital plumbing to permit older banks and credit unions to participate in the payments market.

But FedNow-enabled real-time payments won’t just allow firms to offer new customer-facing services. They’ll also require changes that ripple throughout the organization. For instance, per-transaction costs and fees will change. So will the way liquidity is managed. Because risk of fraudulent transactions will increase, organizations will have to invest in stronger validation and security. And because transactions will occur faster and more frequently, many firms will need to boost the performance and capabilities of their core systems.

This last requirement could be a stumbling block, because many organizations still run their core processes on decades-old legacy systems. Those systems weren’t designed to accommodate the flexibility and rapid change required in today’s market. It’s time for those systems to go.

The Case for the Modern Cloud

How should organizations respond? Not by thinking about technology first, but instead, by starting with customer demands—for speed, convenience, and flexible new services. This customer-first mindset will point to the right technology platform that positions you to rapidly bring new products to market and deliver superior customer experiences, while still maintaining strong security and resilience.

Your firm might already have migrated some services to the cloud, but if you’re like many, you’ve resisted modernizing core systems because of concerns around cost, business disruption, security, and data sovereignty. It’s possible to take a progressive approach to cloud adoption that allows you to modernize components of your payments platform and run them where it makes the most sense—and these capabilities are enabled by a modern cloud platform.

A modern cloud platform is built around microservices, which organize software applications as a collection of small, independent, and loosely connected services. Each service handles a specific task, but together they provide complete functionality. This approach makes it simpler to continually enhance and scale applications. It also makes applications more resilient, because if one service goes down, it can be remediated while the other services remain functional.

A microservices architecture is enabled by capabilities such as:

Container management. Containers are standalone software packages that include everything needed to run an application, such as “libraries” of prewritten code and other “dependencies” required to make an application functional. Containers make it easier to build, deploy, and move applications from one environment to another. You can automate the deployment, scaling, and management of containers with a container orchestration platform. That enables you to balance loads across containers and scale containers up and down based on demand. It also permits you to run applications on-premises, in a public cloud, or in a hybrid of the two. The most common open-source orchestration platform is Kubernetes, which is maintained by the Cloud Native Computing Foundation (CNCF).

Event-driven architecture. This approach uses system events—such as a transfer of funds—to trigger and communicate among microservices. Event streaming lets you capture such events as they happen in real time, store them in an organized way, and share them across services and applications so they can respond immediately.

Open source. Open-source software is developed collaboratively by individuals and organizations and made freely available to the public. This approach fosters innovation, stability, and security. Open-source solutions are also more portable across cloud environments than proprietary offerings.

Advantages for Today’s Payments Marketplace

Some financial services providers might be concerned about the perceived cost and complexity of moving to a new platform. But open-source solutions are available from established, proven providers, with security and support. And the long-term benefits of open source can deliver a higher return on investment than proprietary solutions. Those benefits include:

Flexibility. With a cloud architecture built on open-source solutions, you can develop, deploy, and consume payments and other core banking applications across on-prem, public cloud, and edge infrastructure. This agile, modular approach can help you more quickly and easily respond to shifting customer preferences, tightening regulatory requirements, and disruptive new competition.

Portability. An open-source, microservices approach means you aren’t locked into a single cloud environment. You can run in a cloud environment that’s on-prem, public cloud, or both. You can also migrate quickly from one environment to another as your needs dictate.

Security. Popular public cloud offerings include security controls, but payments providers typically require customized configurations to comply with strict industry regulations. Mature, proven open-source solutions deliver the robust security required for core banking systems. And on-prem private clouds ensure data sovereignty, reducing your cyber risk. You can also benefit from open-source products that automate security functions across hybrid cloud environments.

Resilience. The cloud can offer enterprise-grade resilience and business continuity. But relying on a single cloud provider can increase the operational risk to your business. Building on an open, modern cloud foundation can help prepare you for the unexpected. You can consistently and repeatedly adapt and scale so that your operations and your business remain resilient in the face of market changes—like the advent of the FedNow instant payments infrastructure.

As you pursue a modern cloud strategy, keep in mind that your major decisions should be less about technology and more about your business. Identify your business needs and define the business outcomes you’d like to achieve. That will enable you to measure progress toward your goals.

Then you can define the technology principles and approaches that will serve as a cloud road map across your organization. With a modern cloud architecture based on microservices, container management, an event-driven architecture, and open-source software, you’ll have the foundation to deliver new real-time payments solutions, maintain security and resilience, and achieve value for both your customers and your business.

The post Why the Rise of Real-Time Payments Requires Firms to Embrace a Modern Cloud Platform Now appeared first on PaymentsJournal.

Africa’s instant payment systems (IPSs) processed 32 billion transactions last year, totaling $1.2 trillion U.S. dollars. The volume of payments and the total value of payments processed has grown since 2018 by 47% and 39%, respectively.

These figures are derived from a new report issued by AfricaNenda, an African-led organization dedicated to accelerating the growth of IPSs. In addition to the growing payment numbers, three new IPSs in Ethiopia, Morocco, and South Africa have launched in the last 12 months. That brings the total number of live domestic and regional IPSs on the continent to 32. 

But even that $1.2 trillion figure understates the value of these transactions across Africa. According to Sabine Mensah, Deputy Chief Executive of AfricaNenda, the figures were based on data from only 22 out of the 32 countries that have active IPSs on the continent to date.

Currency Effects Downplay the Impact

As of June 2023, when the report was finalized, there had been an average of about 30% depreciation of currencies in Africa against the U.S. dollar, according to Mensah. If the value of the transactions had been based on the exchange rates prior to June 2023, she said, the value would have far exceeded $1.2 trillion.

Mensah said retrieving this data from central banks and payment switches in Africa is still a challenge. Out of the 22 countries that made data available, only five were obtained directly from the respective central banks. For the remaining 17 countries, AfricaNenda gathered their information from the internet.

The report also noted that 27 African countries have yet to set up a domestic IPS, although 17 have plans on the way and three regional payment systems are also in development. In addition, according to Mensah, only three of the 32 active African IPSs that her organization tracks facilitate cross-border payments at this time. So despite the rapid growth over the past year, there is plenty of room for further development.

The post Instant Payment Systems in Africa Topped $1 Trillion in 2022 appeared first on PaymentsJournal.

The global remittance market is expected to top $800 billion for the first time ever in 2023, according to Mastercard’s newly released Borderless Payments Report 2023.

The study projects global remittances to reach $810 billion by the end of the year, up from $794 billion in 2022, with the cash inflows accounting for more than 15% of the GDP in 25 low- and middle-income countries. The growth is primarily the result of an increasingly mobile world population, although some serious concerns remain for users of cross-border payments.

Half of the consumers surveyed said they are likely to consider working and living abroad in the next three years, with the percentage highest for those living in India, South Africa, Colombia, and the Philippines. Two in five consumers are now sending more money to another country in order to support their financially struggling families. Mastercard expects this trend to grow, as 41% of senders and 48% of receivers expect the frequency of their cross-border transactions to increase over the next 12 months. Nearly half also plan to increase the value of their transactions.

The research confirms that consumers have become more comfortable with digital cross-border payments, as opposed to in-person transactions. Consumers cited their desire for quick and secure remittance capabilities and built-in confirmation that the funds were received as prime reasons for using digital payments.

Concerns Around Speed and Fraud

Although there’s been an acceleration over the years, serious concerns around cross-border payments remain. Consumers still see them as slower and harder to use than domestic payment methods. Specifically, 52% of consumers said their cross-border payments tend to be slower as compared to a domestic payment, and 43% were less confident making a cross-border payment.

Fraud is also a concern. Although consumers are more likely to say they have been victims of domestic payment fraud, four in ten of those surveyed consider cross-border payment fraud to be the bigger risk.

The most important considerations for these consumers when choosing an online payment provider include:

• Delivers funds in 24 hours or less (cited by 43% of respondents)
• Keeps the transaction, and my personal and financial information, secure (40%)
• Provides confirmation that funds were received (39%)
• Enables me to send funds via mobile app (35%)
• Enables me to track the status of the transfer and when it will arrive (33%)

The Mastercard survey also included small and medium-sized enterprises (SMEs) who pay suppliers or service providers in other countries. Of the SMEs surveyed, 61% said they are relying on more international suppliers than they were 12 months ago. But one-third report having to deal with failed or late cross-border payments, damaging their relationships with critical suppliers.

The post Despite Concerns, Cross-Border Payments to Top $800 Billion in 2023 appeared first on PaymentsJournal.

The launch of FedNow was the most highly anticipated payment system news in the United States this year. The system enables users to send and receive money, 24 hours a day, seven days a week, 365 days a year.  

However, a recent study by Fenergo reveals potential fraud risks that were not anticipated since the launch of FedNow. Although the immediacy of these payments is valuable, it can create hurdles regarding security protocols, regulatory compliance, and fraud prevention. Moreover, because faster payments reduce transaction clearing times, the potential for fraud is magnified. This requires more adept and advanced security and fraud protection solutions.

After a survey of high-level risk and compliance officers in various fintech companies, it was discovered that 42% considered it a challenge to ensure a seamless user experience while undergoing compliance operations for FedNow adoption. Furthermore, 78% of risk and compliance officers voiced concerns about inadequate staff training.

“In the rapidly evolving landscape of financial technology, compliance and risk officers at fintech payment companies are navigating uncharted waters with the launch of FedNow,” said Stella Clarke, Chief Strategy and Marketing Officer at Fenergo. “Our research highlights the significant hurdles in financial crime prevention and compliance efforts, painting a vivid picture of the challenges faced in this new era.”  

A New Frontier for Faster Payments

The buildup to the launch of FedNow was abuzz with optimism. As the first government-developed instant payment system in the United States, FedNow was set to democratize access to instant payments for larger banks, smaller banks, and credit unions.

PaymentsJournal recently cited a study by Cornerstone Research that suggested 30% of FIs will launch real-time payments in 2023 and that 25% were waiting until FedNow was officially launched.

FedNow launched only in July, so it’s still early to determine how it will balance the sheer volume of payments that come through the system and customer privacy and security. Compliance processes associated with anti-money-laundering, know your customer (KYC), and fraud move at a much slower pace than the speed of payments.

The post Fenergo Study Sheds Light on Fraud Prevention Challenges After FedNow Launch appeared first on PaymentsJournal.

As the holiday season approaches, retailers have a lot to glean from the many trends that have shaped 2023, including mobile and social commerce.

Royal Mail further explores these trends and delves into why retailers should be leveraging them to help drive up revenue during one of the busiest shopping seasons of the year.

Key Findings

Social media continues to impact how consumers shop. Although Facebook and Instagram have long reigned as the social media platforms of choice for shopping, TikTok is coming in strong. In fact, Royal Mail cited research from Adobe’s Digital Economy Index 2023, which found that from January 2022 to May 2023, e-commerce traffic generated by TikTok content increased by 378%.

Those findings echo similar sentiments from other recent studies, including one from ESW, which found that more consumers will be leveraging TikTok this year for their holiday shopping needs and gift inspirations.

Sustainability was another trend that’s top-of-mind for many retailers this year—and it’s one of the key factors consumers are looking for when shopping. Indeed, 55% of consumers polled in Royal Mail’s “Online Retail Consumer Report” said they were more likely to shop and purchase from businesses who were committed to sustainability. What’s more, 76% of respondents said they would support fully recyclable packaging.

Consumers Want Choice

At the end of the day, as Royal Mail points out, consumers want choice—choice in how they shop, choice in when they shop, and choice in how they pay.

In fact, the last-mile plays a critical role, driving many consumers to decide if they want to purchase from that retailer or not. Roughly 68% of shoppers said that they wouldn’t purchase from a retailer if they used a delivery partner they didn’t trust.  

The post Exploring the E-Commerce Trends Retailers Are Relying on This Holiday Season appeared first on PaymentsJournal.

Alipay+ is continuing to expand its cross-border efforts, this time teaming up with LankaPay to improve cross-border digital payments for travelers.

Starting next year, digital wallet users in select Asian countries—including the Philippines, Singapore, South Korea, Thailand, and Hong Kong SAR—will be able to use cashless payments when traveling to Sri Lanka. Consumers will have the ability to make payments at more than 400,000 LankaQR merchants throughout the region.

Similarly, Sri Lankan travelers will be able to use their LankaQR-enabled apps to scan and purchase goods at Alipay+ merchants worldwide.

“Alipay+ continues to accelerate the shift towards digital travel in more regions through our integrations with national standardized QR codes, this time in Sri Lanka with LankaPay,” Dr. Cherry Huang, General Manager of Alipay+ Offline Merchant Services, Ant Group, said in a prepared statement.

She added: “As global travel recovers, we’ve noticed a shift in travel preferences, including travelers’ heightened expectations of how digital solutions should enhance their travel experience and greater interest in visiting previously less-explored destinations. That’s why we’re really excited at how our partnership with LankaPay will allow tourists to explore the wonders of Sri Lanka more easily, while also helping them discover and pay more conveniently at local merchants, which drives growth opportunities for local businesses.”

“The partnership between AliPay+ and LankaPay will help drive digital payment adoption among consumers and businesses in Sri Lanka and other Asian markets,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “National standardized QR codes like LankaQR, help facilitate interoperability, especially with cross-border digital payments. These types of collaboration make it easier for consumers to use the same mobile wallet apps at home and abroad, and for retailers to accept digital payments for local and visiting customers.”   

Alipay Continues to Leverage Uptick in Travel

Alipay has been on a mission to expand its global presence, taking advantage of the surge in travel. Today, travelers want the same seamless payment experience they enjoy at home—and because digital wallet adoption is higher than ever—more fintech solution providers have been working to meet consumer needs and ensure they’re able to transact regardless of where they are.

Last month, Alipay partnered with PayNet to boost cross-border payment acceptance throughout Malaysia’s 1.8 million merchants. By 2024, all Malaysian e-wallets under PayNet will be accepted by Alipay+ merchants’ global network.

And similar to its partnership with LankaPay, Alipay+ joined forces with South Korea’s ZeroPay in September, to facilitate cross-border payments for tourists from China and Southeast Asia.

The post Alipay+ and LankaPay Enable Cross-Border Payments in Sri Lanka appeared first on PaymentsJournal.

More businesses are seeking commercial strategies that can help them strategically engage with fintechs. The key to success lies in understanding their own risk profiles, leveraging available resources, and staying attuned to the evolving capital markets.

Last week, Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, spoke at the CPI Global Summit about the strategies businesses should explore. PaymentsJournal recently sat down with Bodine to discuss the current state of the space and get a glimpse into an upcoming report.

What was the impetus for the presentation at CPI Global and the upcoming research paper, “Commercial Payments Growth and Fintechs: Partner, Buy, or Go Organic?”

Well, the impetus is the $120 trillion of payments and transfers that occurred between businesses globally in 2022. On each one of those transactions, somebody is collecting fees. So organizations are trying to figure out—as it continues to grow beyond that point—how to get more in that game.

It’s the most asked question by my corporate clients, and that’s how we got to the subject matter. We’re also on the cusp of getting to cross-continent instant payments, which could make the upward trajectory even steeper.

Do you find yourself recommending more partnering, purchasing, or building something internally?

My answer is always either “it depends” or “I don’t know,” and so that brings up the next set of questions for me, which relate to risk profile, operational resources, and capital sources.

First, are you a risk-averse organization or do you operate more like a private equity or venture capital firm? They’re two vastly different things. I typically find that banks are more risk-averse and not necessarily because they want to be risk-averse—it’s because they’re in the most extreme regulatory environment.

With operational resources, what kind of resources do you have internally? Do you have a skeleton staff that is really focused on maintaining existing systems and infrastructure, or do you have capacity that allows you to pursue additional things?

And then, finally, as we all know, capital markets have been pretty tight lately. So it depends on whether you’re having to do some type of borrowing.

There has been a slowdown in funding for startups over the past year. How has that affected commercial payments fintechs?

It has affected it in a very good way, and the reason being is that money is not free anymore like it was during COVID-19, when the base rates were almost at zero. People were easily able to access capital. VCs and private equity were practically throwing capital at fintechs.

The fintechs that don’t have financial acumen have either been flushed out of the market or are about to be flushed out of the market.

I would also say that valuations have become far more accurate, and that’s not great for investors that were in seed rounds during COVID times; the cap tables may have been adjusted. The value of what they hold may not be as great as it was, but I think overall it’s a very good thing. Certainly, if you’re shopping for a fintech, now is a really good time to look if you have the capital because the valuations are far more accurate.

What have you been suggesting to corporate clients relative to acquisitions?

It’s really easy to buy something, and it’s really hard to integrate it. I had some very eye-opening experiences being on the integration side of M&A. And that can be very difficult if sharp due diligence is not done on the front end. We’ve all experienced the scenario where somebody goes to one of the bigger conferences and they come back and I say, “We have to partner with this fintech or  we have to look into buying this fintech.”

I got to the point of saying, “Well, that’s fantastic. Here’s some homework for you, including a list of questions or some due diligence.” My suggestion would be that you have very tight plans around how you assess either partnering or acquiring or whatever approach you’re going to take, and don’t stray from it because the ad-hoc scenarios are rarely successful.

You’ve covered a lot thus far. Any final thoughts?

Whether you’re looking to partner, buy, or go organic, understand why you’re doing it on the front end. There is a vast difference between doing something to remain relevant and doing something because it’s a nice shiny toy.

An example is, you go and pursue a fintech in a new market because your competitor is doing it. Well, the fact that your competitor is doing it doesn’t mean maybe operationally that you’re suited to doing it or perhaps or even culturally suited to doing it. That’s different than, for example, if you are a bank that does not have at least receive capability for either FedNow or RTP right now. In that case, I would say you’re at risk of not being relevant pretty soon. So that’s the difference. It’s a very big difference between shiny toys and relevance.

At the end of the day, well-documented plans. Don’t stray from those plans. Ad-hoc scenarios rarely work, and if you don’t have the resources internally to do this type of thing, then surround yourself with experts that do this kind of thing for a living.

The post Tailoring Commercial Strategies in Evolving Capital Markets appeared first on PaymentsJournal.

With the rollout of the FedNow instant payment service, the realm of real-time payments and immediate reconciliation has opened up new possibilities for independent software vendors (ISVs) and their clientele. This transformative service not only accelerates payment processing to unprecedented speeds but also dismantles the layers—and in some cases—the fees that traditionally stood between ISVs and their customers.

While adoption of FedNow may be gaining momentum at a measured pace, it is essential for ISVs to recognize that it will soon become a prerequisite for staying competitive. Consequently, early adopters who swiftly integrate FedNow as an embedded payments solution can wield it as a potent differentiator, influencing purchasing decisions significantly. ISVs can leverage FedNow to their advantage in the following ways:

Elevating the User Experience

FedNow has the capacity to streamline the entire payment process, delivering a seamless, instant embedded payment experience to customers. In a world where buyers increasingly demand speed and convenience, FedNow becomes a value-added feature that can not only attract but also retain customers through heightened satisfaction and loyalty. It signals that your organization is at the forefront of technological innovation, underlining a commitment to forward-thinking.

Accelerated Settlement

For ISVs, real-time payment systems not only expedite the receipt of funds, but also eliminate the delays associated with traditional methods like checks and ACH transfers. This elimination of pending transactions grants both vendors and customers real-time control over their accounts and financial transactions, enhancing efficiency and reducing uncertainties.

Unleashing Growth Opportunities

FedNow can be seamlessly integrated into various software applications and platforms, spanning e-commerce, invoicing, and financial management tools. This integration empowers ISVs to offer more comprehensive services and facilitates the adoption of digital business models such as subscriptions and one-time purchases. This versatility is especially valuable for SaaS providers, e-commerce platforms and digital marketplaces. Moreover, it paves the way for global expansion and partnership opportunities by enabling faster cross-border transactions and collaboration with financial institutions and payment processors, expanding capabilities and access to a broader customer base.

Harnessing Data Insights

Data stands as a strategic asset driving business growth. Implementing FedNow as an embedded payments solution provides access to valuable real-time transaction data, offering insights into customer behavior, preferences, and trends. This wealth of information can inform critical business decisions, including the development of new offerings, the refinement of customer engagement strategies, and the enhancement of the overall customer experience through well-timed outreach and support interactions.

Mitigating Fraud Risk

FedNow offers a safer transaction environment for both ISVs and customers, backed by robust security measures that reduce the risk of transaction fraud, identity theft and payment card breaches. This heightened security provides peace of mind for customers and effectively consigns chargebacks to history for merchants, reducing risks on the seller’s end.

The implementation of FedNow as an embedded payment solution offers ISVs a myriad of advantages, ranging from an enriched user experience and faster settlement to expanded growth opportunities, data-driven decision-making, and reduced fraud risk. However, with this formidable real-time payment capability comes the responsibility of fiscal prudence. ISVs must judiciously manage their cash flow and make informed decisions regarding expenditures and investments.

Additionally, the selection of a knowledgeable and reliable partner is crucial. A partner well-versed in the technical intricacies of FedNow implementation, as well as its integration with existing solutions, can ensure a seamless transition.

By avoiding cumbersome processes, such a partner can preserve the speed and convenience benefits offered by FedNow, ultimately contributing to a positive customer experience that is paramount for long-term success.

The post Leveraging FedNow for Competitive Advantage: 5 Strategies Software Vendors Should Consider appeared first on PaymentsJournal.

Fintechs are celebrated for offering sleek payments solutions, yet they often cling to outdated manual processes for back-office tasks. The primary offender: Excel spreadsheets.

Because of the manual nature of data entry, relying on spreadsheets can have serious negative consequences, including costly mistakes. Manual processes also don’t scale up well to take advantage of the new wealth of data available.

Automation is the key to addressing these issues and ushering in an era of efficient reconciliations and reporting within the payments industry. Automated systems can process vast amounts of data and generate reports and dashboards in real time, thus reducing operational risk. By shifting the focus away from manual data manipulation, teams can dedicate more time to understanding and analyzing data and inspiring more informed business decisions.

In a recent PaymentsJournal podcast, Marc McCarthy, Chief Commercial Officer at Kani Payments, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the benefits of automating back-office processes and how automation not only ensures data accuracy and compliance but also unlocks valuable insights and cost-saving opportunities.

The State of Reconciliations and Reporting

Payments reconciliation is a complex task in the payments industry, with the need to match countless transactions across various platforms and networks. The process is essential to ensuring the accuracy of financial records, complying with regulatory requirements, and detecting discrepancies or fraud.

Traditionally, companies have relied heavily on spreadsheets and internal systems to handle these tasks. However, the sheer volume and diversity of data—often coming from multiple sources—make manual reconciliation error-prone.

“Approximately 25% of spreadsheets globally contain errors,” McCarthy said. “From a management perspective, the accuracy of the data I receive as a C-suite member is crucial for making decisions that shape the company’s direction. My daily choices heavily rely on the reports I receive, so if I lack confidence in their accuracy, it distorts my understanding of the company’s path forward.”

Spreadsheets are the original backbone for many companies, and as a result, some organizations are reluctant to move away from them.

“It kind of works, so why fix it? We come across that sort of that sort of approach a lot,” McCarthy said. “My rebuttal to that would be: ‘Why do you think a process that you set up 30 years ago is fit for purpose today?’”

There’s also a perennial problem with legacy technologies: When they break, there’s no one left who knows how to fix them. “Trying to find the programmer who put this Excel sheet together is the same kind of challenge as finding a COBOL programmer to fix my legacy code,” Riley said. “It’s like speaking Latin or Greek. It’s archaic language, undocumented, and not a way to run a business, that’s for sure.

“A major U.S. network is being fined by the CFPB for inaccuracies in interchange processing over a seven-year period. When things go wrong, do you want to present outdated, untraceable Excel code to the lead regulator of the jurisdiction? Using an industrial-strength, proven system is a much better way to face off with a regulator in any region.”

Today, organizations are no longer equipped to fully lean on manual reconciliations, especially when they are handling a plethora of data.

“Digital payments are expected to reach nearly $15 trillion by 2027,” McCarthy said. “With the volume of payments that we’re going to see over the next decade or so, it’s just impossible to assume that a spreadsheet is the right way to go.”

Automating the Back Office

Many third-party companies, including Kani, help organizations automate their reconciliation and reporting. Although current systems are primarily rules-based, artificial intelligence and machine learning capabilities will soon become standard, drastically improving accuracy and efficiency in reconciliation.

For midsized financial institutions, the conversion process can take as little as a few weeks.

Reconciliation may sound like a one-time process, but according to McCarthy, it’s more than that. It takes data, validates it, and places it into a common data model, making information from various sources consistent.

“This allows us to view data from different sources like Visa, Mastercard, FIS, and others in the same way, making it easy to create reports and perform analytics,” McCarthy said.

Kani offers 35 different reports for different teams, including accounting, management, and compliance—all tailored to the teams’ needs. “The real value of Kani lies in its user-friendly interface, making it easy for users to find whatever information they need. We can send reports automatically by email, all within one platform,” McCarthy said. “If you were to replicate all these functionalities yourself, it would take a long time.”

Savings from Automation

For many business owners, the return on investment for automating back-office processes may not be clear. But that’s because the resources spent on maintaining and repurposing are greater than most think.

“In the UK, our surveys found that around 700,000 hours per week are spent on reconciliations. A medium-sized business typically spends about 3.6 hours on this task, which I think is very conservative,” McCarthy said.

“I recently spoke to a large bank about their QMR reports, and they initially mentioned that only two or three people were involved. However, when we had our first meeting to discuss their requirements, a staggering 20 people showed up. This illustrates the hidden cost of these processes and the fact that there are far more people involved than we initially realize.”

Many companies feel that they should automate internal processes in-house. But according to McCarthy, this is a tedious and needlessly expensive process.

“If you attempt to build an in-house solution, it would take at least six months and require a minimum of three skilled engineers,” McCarthy said. “They would be developing something already available off the shelf from Kani that costs less than developing it in-house.”

Conclusion

The payments industry is undergoing a transformative shift toward automation and efficiency in reconciliation and reporting. Manual methods are increasingly obsolete, unable to keep up with the rapid growth in digital payments.

Working with a fintech reporting and reconciliation firm like Kani Payments can help businesses not only streamline their operations but also harness the power of data for better decision-making and forecasting.

The Kani team will be at Money20/20 in Vegas from Oct. 22-25!

Come and chat with the Kani team at Money20/20 in Vegas—they’ll be at booth 13520. If you’d like a demo of the platform, you can book one here:

The post Modernizing Reconciliations and Payments: The Urgent Need for Automation appeared first on PaymentsJournal.

With the launch of FedNow, instant payments have become ubiquitous, and their adoption will only grow. But there are complexities to consider, particularly for banks and payment service providers (PSPs) that are figuring out how to best integrate this new service without incurring significant operational costs.

In a recent PaymentsJournal podcast, Nicholas Botha, Global Payments Sales Manager at AutoRek, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discuss how banks and PSPs can overcome these obstacles and how automation can help.

Providing FedNow Payments at Competitive Rates

Instant payments, by their nature, result in a significantly higher volume of payments at a faster speed. As such, it is essential that companies are equipped with some form of automation to ensure operational efficiencies. Many are still working with legacy systems that, unfortunately, are not capable of handling instant payments.

Implementing operational efficiencies downstream will not only drive down operational costs but also ensure wider profit margins. These lower costs can eventually be passed down to customers or can bolster the financial health of the companies.

“With this new payment rail, you can expect more competition to enter the market,” Botha said. “Typically, when we see more competition, you should expect there to be pressure on those costs, which essentially means that there’s more requirement for creating those operational efficiencies to try and expand those margins as wide as possible.”

Reducing the manual components of the operation is also important. Tavilla noted that automation helps create greater efficiencies and can reduce the errors that result from paperwork or other non-digital methods.

“This is a great opportunity with FedNow for businesses and operations to improve automation,” Tavilla said. “It’s the first time in 40 years we have this new rail and this new technology, especially in the payments industry.”

Mitigating the Challenges of 24/7 Settlements  

Automation can be considered the golden ticket to ensuring that FedNow payments are leveraged to their highest potential. The use of automation ensures that payments are processed instantly, securely, and cost-efficiently—something that’s difficult to get from traditional payment flows designed for more traditional payment rails.

“Companies onboarding FedNow payment rails will need their operational flows to match the nature of what the payments are to ensure a couple of things,” Botha said. “One of the main things is to ensure customer adoption. You need to create that confidence in what has been adopted more widely and help create that fast adoption across the market by creating trust in what the process is.

“The second thing is to match your customers’ expectations. If customers are making payments in real time, and there are any issues or discrepancies, they want to know the results of those in the same nature as the payments taking place.”

How Liquidity Risk Can Be Managed Effectively

With the launch of FedNow, treasury teams now have the task of ensuring that liquidity is accessible to settle payments 24/7. Again, this is an area where the use of automation could significantly mitigate risk.

If treasury teams are reliant on legacy platforms or processes for their reporting requirements, they may be exposing themselves to more operational risk with instant payments’ 24/7 settlements.

“An effective way of looking at this would be to deploy automated reconciliation and automated reporting solutions with real-time reporting capabilities,” Botha said.

Botha emphasized that it is vital for treasury teams to have continuous access to the real-time liquidity status to manage their risk more effectively.

With Peak Times Approaching, Should Banks and PSPs Look to Cloud Hosting?

As we approach the holiday season, particularly Black Friday and Christmas, payment volumes are expected to spike. It’s important for businesses to leverage the necessary tech platforms to ensure they’re set up for success.

“Modern technology platforms that have the option to be hosted via a cloud are an effective way to reduce any risk around shortfalls or any errors within your infrastructure setup,” Botha said.

“It’s a more cost-effective way for businesses to host their infrastructure with these multi-tenanted environments that these large cloud providers have to offer. So you actually pay for the space that you’re requiring without having to provision for these huge spikes well in advance,” he said.

Where Instant Payments Are Heading

Instant payments will keep growing, and as the space evolves, banks and PSPs will need to evolve with it. Implementing and leveraging the latest technology to guarantee their customers a fast, cost-effective, and safe way to send payments will be key.

“With a new system like FedNow and instant payments, there’s a lot of potential for businesses to improve efficiency—whether it’s through automation, digitization, reduction of manual processes and also from a data capacity perspective by using cloud technology that increases capacity for businesses as well as other players,” Tavilla said.

Said Botha: “I would suggest having conversations with all different actors within the payment space, within these geographies, to really build that trust within the U.S. market with regards to FedNow payments.”

The post As Banks and PSPs Look to Offer Instant Payments, Automation Will Be a Game-Changer appeared first on PaymentsJournal.

FedNow is continuing to gain traction after its launch in July, with roughly 108 organizations now sending and receiving on the network.

Earlier this month, Michael S. Barr, Vice Chair for Supervision at the Fed, revealed that FedNow will see steady growth stating:

“While current volumes on FedNow are small, I expect that participation will grow over time and be a significant addition to, and advance on, the existing payments infrastructure,” he said. “But decisions on how widely available the service will be rest with financial institutions. We have provided the rails. Innovation by private depository institutions will determine whether these services reach a broad range of households and businesses.”

Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, agrees and also expects to see more developing in the coming months.

“We anticipate widespread adoption and ubiquity will build over time, bringing the benefits of instant payments to communities nationwide and improving the way households, businesses and governments send and receive payments,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive in a press release.

“RTP has currently has over 370 FI participants, which might seem like a small fraction of the nearly 10,000 U.S. banks and credit unions,” she said. “However, RTP’s network currently reaches 65% of U.S. DDAs.”

FedNow Is Here … What’s Next?

There’s no time like the present for financial institutions to leverage FedNow to help modernize their current payment systems. But before FIs jump on board, they need to consider a few factors.  

FedNow offers a plethora of advantages that any company would like to have, but it’s certainly not a one-size-fits-all solution. Financial institutions, especially, should begin by looking to their customers—are they a small bank or a large bank, for example.

“Some of the smaller financial institutions feel more comfortable working with a payment system that’s offered by the central bank because they think it’s more objective,” Tavilla said. “They don’t want to work with or offer products on a solution that’s offered by their large competitors.”

Smaller financial institutions also rely heavily on the partnerships they have with service providers. Therefore, looking to implement a new service would greatly depend on the availability and timelines of their service provider partners.

Overall, Tavilla recommends that financial institutions first determine which solutions make the most sense for their own operations.

“The key is to look internally at your organization and what you need and what makes sense,” Tavilla said. “Overall real-time payments are important and here to stay. For the first time in 40 years, you have technology that can move money in real-time, which is a critical fundamental component. It’s just a start.”

“You need to find solutions, or you can develop products that you know leverages or takes advantage of this capability,” she said.

The post More than 100 Financial Institutions Are Participating in FedNow appeared first on PaymentsJournal.

The FedNow instant payments rail has the potential to be a boon for smaller financial institutions, including credit unions and community banks. By leveraging FedNow, these smaller institutions can expand into business services such as on-demand payroll services and vendor payment tools, offering faster and more convenient payment options.

During a PaymentsJournal podcast, Jon Budd, CEO of Juniper Payments, a PSCU company, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, spoke about the future of real-time payments and what they mean for small financial institutions. They explained that although participation is optional for banks and credit unions, the move toward instant payments offers new opportunities for credit unions and community banks to attract new customers and increase revenue.

FedNow Could Open New Angles for Credit Unions

The process of setting up faster payments takes time because it involves significant changes to the banking system, moving from batch processing to real-time payments, available 24/7.

“It’s a slow-rolling snowball that will build momentum over time,” Budd said. “FedNow is a top-down initiative. Now that it has been deployed, it’s up to 10,000 financial institutions to upgrade their systems to offer this technology to consumers and businesses.”

And among the financial institutions participating are many smaller institutions that have stayed on the sideline up to this point.

“Many credit unions, as well as regional and community banks, have more trust and prefer to participate in FedNow because it is operated by the Federal Reserve, as opposed to RTP, which is a private system operated by their larger bank competitors,” Tavilla said. “Overall, it is definitely a positive development because it gives financial institutions options, and it also offers resiliency for instant payments overall.”

According to Budd and Tavilla, credit unions have an opportunity to leverage FedNow as they work to get into the small-business space—whether it’s offering on-demand payroll services or tools for small businesses to pay vendors and receive money from vendors.

“According to several studies, over 70% of consumers and businesses look to their primary financial institution—which certainly includes credit unions—to offer faster payments, including real-time and instant payments,” Tavilla said. “This is a great opportunity for credit unions to participate and innovate upon real-time payments.”

Real-World Instant Payments Scenarios

Instant payments can be a real game-changer, helping consumers and businesses in various scenarios. Budd relayed a recent experience he had while buying a car.

“I purchased a vehicle online from a private seller located about 1,500 miles away from me in Kansas,” Budd said. “I flew to Reno, Nevada, to inspect the vehicle and confirm its condition matched the online pictures. We agreed on a predetermined price, and the seller opted for a cashier’s check. I provided the check, and he called the issuing bank, a small community bank in Kansas that I’ve had an account with since I was 8 years old. I’ve never waited more than about three rings for someone  to pick up a call, but this time it took 20 minutes to reach someone because the bank was going through a phone system transition.”

The experience might have gone differently, Budd explains, with instant payments.

“I could go to my app and initiate the transaction, and as soon as the seller refreshes his account information on his mobile app, he would see that the funds have been deposited. The whole process would take roughly 60 seconds,” Budd said. “That’s a game-changer. Anytime you would be using a wire or a cashier’s check is a perfect time for an instant payment.”

Budd’s example is just one of many use cases involving instant payments. Funding digital wallets, paying gig workers, and sending disbursements for car loans and mortgages are just a few scenarios we expect to see more of.

In fact, according to Tavilla, the quick disbursement of loans could be one that small financial institutions specialize in. “Many consumers prefer credit unions and smaller financial institutions due to the personal relationships and better rates they offer,” she said. “These financial institutions often serve businesses in their communities, making it possible to streamline billing, enhance transparency, and improve cash management.”

Misconceptions About Instant Payments

According to Budd and Tavilla, there are many misconceptions related to FedNow, including that the government will get rid of paper currency and track consumers’ transactions. But these concerns are off the mark.

“We’ve been operating ondigital currencies for decades,” Budd said. “FedNow is simply just another avenue, a kind of ‘toll road’ to do things quicker than some of the alternatives out there. There’s not necessarily more data that the Federal Reserve could look at as compared to what they’ve been looking at before, but that’s certainly not the intention.”

Another misconception, Tavilla said, is using FedNow as a verb. “People saying, ‘I’m going to FedNow you,’ like ‘I’m going to Venmo you,’ which you wouldn’t be able to do because the Federal Reserve doesn’t provide services to consumers. FedNow is a behind-the-scenes rail similar to ACH.”

It’s important to remember that FedNow is a product upgrade, which will be standard in the future.

“We moved from dial-up internet to high-speed internet, and now that is standard,” Tavilla said. “Similarly, one day, we’ll receive our payments instantly without having to wait for days to receive our paychecks and other payments.”

Conclusion

The FedNow instant payments rail has the potential to usher in a renaissance for smaller financial institutions, such as credit unions and community banks. These institutions, with their strong customer relationships and local presence, can leverage FedNow to expand their services into the realm of real-time payments. This shift offers a range of exciting opportunities, including on-demand payroll services and efficient vendor payment tools, providing faster and more convenient payment options for businesses and consumers.

To remain competitive and attract customers, smaller financial institutions will need to offer services that match or exceed what larger banks can provide. Failing to adopt modern payment solutions like real-time payments could lead to a loss of market share and a decline in competitiveness.

Overall, the introduction of FedNow represents a significant step forward in the world of payments. Smaller financial institutions can seize this opportunity to expand their services, cater to evolving customer demands, and solidify their positions as trusted and innovative players in the financial services industry.

The post FedNow Could Mean a Renaissance for Smaller Financial Institutions appeared first on PaymentsJournal.

BankID BankAxept AS is working with Tata Consulting Services (TCS) to solidify the security of Norway’s financial ecosystem.

Through the partnership, TCS will be working on a 24/7 command center, which it will build from the ground up. The command center will ensure that responses to security issues, client requests, and service disruptions for all BankID users and clients is supported.

“BankID is currently used by 4.4 million users across Norway, and BankAxept handles approximately 8 out of 10 in-store payments,” said Øyvind Westby Brekke, CEO of BankID BankAxept in a prepared statement. “Any downtime of these systems will have a severe impact on the country’s public institutions, businesses and citizens.”

An Increasingly Digitized World

Norway is one of many countries whose society is becoming increasingly more digitized, and any compromise of its digital infrastructure would be devastating. That’s because any interruption would mean a disruption to access of critical services such as transportation, energy, healthcare, and their funds.

With the mobilization towards a more digital society, fraudsters are always around the corner, ready to identify any potential weak links and launch cyberattacks.

To curve this ever-growing threat, digital identity infrastructures that are robust and secure are becoming increasingly important and more countries are looking to implement these structures. Digital identity infrastructures are used to authenticate users as well as manage sensitive personal information.

In India, for example, the Aadhaar solution has already been implemented, collecting biometric as well as demographic information and entered into a national database.

Within Europe, the European Commission’s digital ID initiative is on track to providing to becoming available to 80% of EU citizens by the year 2030.

With the growing adoption of digital identification platforms comes the need to utilize the latest technology to ensure all sensitive information is secure. Expect to see more structure and development for years to come.

The post BankID BankAxept and TCS Aim to Strengthen Norway’s Financial Infrastructure appeared first on PaymentsJournal.

Oversea-Chinese Banking Corporation (OCBC) is letting consumers in Singapore conduct cross-border transactions through an Alipay+ integration.

An Influx in Cross-Border Transactions

Via the OCBC app, consumers in Singapore are now able to scan and pay at Alipay+ merchants in Malaysia and South Korea. And as of Sept. 22, the service will be available to consumers in Mainland China.

According to OCBC, the timing of its expansion “coincides with the start of the 19th Asian Games in Hangzhou, and when travel to and from Mainland China is expected to ramp up, especially given the recent resumption of the 15-day visa-free entry for Singaporeans and the Chinese government’s elimination of the need for a pre-departure Covid-19 antigen test.”

As more consumers travel the globe, the ability to pay for goods and services via their preferred method is becoming ever more important. OCBC is seeing this shift and acting accordingly.

One notable feature of its integration with Alipay+ is that payments are made directly from the customer’s OCBC Singapore bank account versus having to deal with any third-party apps.

Rapid Payment Transformation

AsiaPac continues to lead the way in instant payments, and while these networks represent regional schemes, they offer an excellent model for how other regions of the world should look to expand, says Albert Bodine, Head of Commercial and Enterprise Payments at Javelin Strategy & Research. 

“These regional schemes also are establishing a framework to follow for what will eventually become a global instant payments rail,” he said.

In the last year alone, OCBC has established cross-border payment linkages with Malaysia’s DuitNow QR and Thailand’s PromptPay QR, facilitating peer-to-merchant transactions. This demonstrates OCBC’s commitment to embracing fintech innovations and extending its reach across Asia. Future markets include Japan, Hong Kong, and Macao.

OCBC’s partnership with Alipay+ underscores the evolving landscape of fintech and cryptocurrency adoption in the region, where traditional banks are collaborating with digital innovators to offer customers a more efficient and convenient way to transact globally.

The post OCBC’s Unlocks Seamless Cross-Border Payments Via Alipay+ appeared first on PaymentsJournal.

China’s UnionPay International (UPI) is ramping up its cross-border efforts by enabling merchants in the country to now accept 170 international wallets.

UPI’s recent announcement is in line with its goal to facilitate network interconnection and interoperability. This move aims to provide more convenience to consumers traveling to China by allowing them to use the payment options they’re familiar with. For example, residents of Hong Kong and Macao SAR can use wallets including BoC Pay, Octopus card, and the UnionPay App.

Meanwhile, users of Thailand’s K PLUS and South Korea’s NaverPay can pay for goods by scanning the UnionPay QR codes at the point-of-sale.

Global Partnerships Are Driving Rapid Transformation

Cross-border payments are gaining traction worldwide. There have been several partnerships this year where organizations have expanded their cross-border initiatives, particularly targeting travelers.

Earlier this month, Alipay + and Payment Networks Malaysia (PayNet) announced that travelers to Malaysia can now make digital payments through major e-wallets, including TrueMoney, Kakao Pay, and AlipayHK. The partnership will have a significant impact across the region, with cross-border payment acceptance expanding to Malaysia’s 1.8 million merchants.

Similarly, Ant Group recently teamed up with an electronic wallet provider, Korea Easy Payment Foundation, in South Korea to offer cross-border payments to tourists from China and Southeast Asia. Visitors just need to use any of the six digital payment apps within the Alipay+ network to pay at shops and restaurants and scan the ZeroPay QR codes when they’re at check out.

By and large, these ongoing endeavors are addressing pain points that many travelers face when entering a new country—not being able to pay for goods via their preferred payment. Previously in China, it was impossible for tourists to make payments without a Chinese bank account. And it was only until this summer that foreign travelers were able to link their foreign credit cards to WeChat or AliPay.

The post UPI Facilitates Cross-Border Payments for Travelers appeared first on PaymentsJournal.

Swift and Wise are teaming up to offer financial institutions and their customers more cross-border payment options.

Via the partnership, financial institutions can transmit Swift payment messages to the Wise Platform via its new Correspondent Services solution.

According to Swift, banks and other major enterprises that leverage its platform won’t need to worry about dealing with a new interface, but rather, will see the existing infrastructure that they’re familiar with.

The Wise Platform will also leverage several of Swift’s tools, including cloud and API connectivity, as well as Payment Pre-Validation.

“This is a very interesting play amidst the major card schemes starting to offer cross-border options that circumvent traditional wire rails and correspondent banking,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “2024 is going to be a year to watch as new payments rails have entered the market and traditional ones are having to adapt and evolve to stay relevant.”

Banks Must Not Drop the Ball with Cross-Border Payments

When it comes to modernizing their legacy systems, many banks are still lagging behind. With emerging technologies entering the market at a rapid pace—and more customers demanding instant, secure, and low-cost payments—banks are feeling the pressure to innovate. Cross-border payments can help them do so. Last year, global remittances were projected to reach $974 billion, and we expect growth to continue to rise.

It’s important to note, however, the movement of funds internationally is not so straightforward. Organizations must contend with both regulatory and compliance requirements when it comes to sending and receiving money, depending on the region.

When it comes to getting ahead of the innovation curve, partnerships with industry specialists will be a game changer. That’s why the collaboration between Swift and Wise is a beneficial one, as this solution brings faster, seamless, and secure payments, without having to build a major technological solution from scratch.

The post Swift and Wise Partner on Global Cross-Border Payment Efforts appeared first on PaymentsJournal.

In a recent podcast, PaymentsJournal talked with experts from different parts of the payments world to discuss how real-time payments are proceeding throughout the world, and particularly in the United States and Australia. It featured Elisa Tavilla, Director of Debit Payments, Javelin Strategy; Adrian Lovney, Chief Payments & Schemes Officer, Australian Payments Plus; Nathan Churchward, Payments Domain Lead, Cuscal; and Kate Knudsen, Senior Program Director, BHMI.

With the launch of FedNow, the United States has fully embarked on its journey toward real-time payments. Across the globe, real-time payments are creating not only competition among payment methods but also new use cases, making previously unattainable services accessible to businesses and consumers.

Yet the road to global ubiquity in real-time payments has challenges. Technical hurdles, legacy systems, and the imperative of interoperability need to be overcome. In a world with seventy-nine countries operating real-time payment systems, achieving cross-border real-time payments requires diplomacy and meticulous planning. Furthermore, the modernization of outdated back-office systems is imperative to keep pace with the exponential growth in real-time transactions. The good news is that businesses recognize this urgency and are upgrading technology infrastructures and streamlining processes.

Real-Time Payments in U.S. and Australia

Real-time payments are quickly becoming more widely available throughout the world. In the United States, FedNow’s launch in July is starting to increase traffic and demand for real-time payments.

“In the U.S., the FedNow service recently launched with 35 financial institutions,16 service providers, the Department of the Treasury, and more set to join,” Tavilla said. “The RTP network, run by The Clearing House, hit 500 million transactions with over 370 participating institutions. With two real-time gross settlement systems live in the U.S. now, I’m optimistic that it will help accelerate the growth and adoption of instant payments here [in the U.S.].”

In many cases, real-time payments are much more developed abroad. For example, Australia in 2018 launched its New Payments Platform (NPP) for real-time payments, and it has taken off ever since.

“Around 30% of the volume that was previously processed through the bulk Electronic Clearing System in Australia has now transitioned to NPP in the past six years,” Lovney said.

Initially, purchases on the platform were mostly P2P, but now, it is increasingly used by businesses and corporations. Some examples include paying taxi or Uber drivers at the end of their shifts and making insurance or emergency payments.

According to Lovney, the next phase of use cases will involve recurring (bulk) debit payments, such as subscriptions or utility payments.

“We expect to see bulk payments coming from businesses, corporations, and government entities, such as salary or dividend payments,” Lovney said. “Australia has set a goal to potentially phase out the ACH system by around 2030, approximately 12 years after the launch of NPP.”

As Churchward hinted, all of this is slowly creating significant competition among payment methods.

“During the pandemic, as cash usage declined and electronic payment methods increased, including ACH, we saw significant growth in account-to-account payments, especially person-to-person credits, accounting for 38% of the total payment volume growth,” Churchward said. “However, NPP’s growth has outpaced that of ACH. Currently, real-time payments represent 37% of all account-to-account credit transfers among our clients, which include banks and payment service providers.”

But real-time payments are creating new use cases, not just the substitution of existing ones.

“Payment service providers, in particular, are offering receivables management services to businesses using account-to-account payments that weren’t available before NPP,” Churchward said. “Customers love using Pay ID, a feature that links their mobile number or email address to their bank account—80% of payments received by our payment service providers from business customers use this feature.”

Challenges in Implementing Real-Time Payments

The United States has over 11,000 financial institutions, and many of them, especially the smaller ones, rely on legacy systems.

“Transitioning to a payment system that operates 24/7, 365 days a year will take time, and ensuring everything works seamlessly together (interoperability) is another task at hand,” Tavilla said.

Adding to the overall complication is the fact that the United States has two operational systems in place, FedNow and RTP. As they were designed independently, interoperability is a concern.

“Both FedNow and RTP are using ISO 20022 messages, which should facilitate interoperability not only within the U.S. but also with international real-time payment systems,” Tavilla said. “Both systems are continually introducing new features, with FedNow exploring cross-border capabilities and directory services.”

And that is just in the United States.

Seventy-nine countries have at least one real-time payment system in operation, and integrating them all for real-time cross-border payments will be a real challenge. This will take diplomacy and careful planning by individual countries.

For example, the NPP in Australia is in the final stages of launching a dedicated real-time international payments business service to process cross-border transactions. The service clearly differentiates international payments from domestic ones and attaches information about the sender, including name and date of birth.

“This international payments business service is designed to accommodate various types of international payments, be it through SWIFT, TransferWise, Western Union, or others, and ensures that the domestic leg of these payments is instantly available,” Lovney said.

Dusty Back Offices Are an Impediment

Amid the technical and diplomatic challenges in implementing real-time payments, other challenges are much more mundane.

“The most significant challenge we’ve observed for companies aiming to support real-time payments is their outdated back-office systems,” Knudsen said. “While they invest in modernizing their payment front ends, the back office often lags behind. This is a big issue because the back office is where payment processing happens after authorization by the front end.”

“Many of these back-office systems were created decades ago and weren’t designed for real-time payments, making it difficult for them to keep up with the speed and increasing volume of real-time transactions,” Knudsen added.

Another problem: Because legacy systems were initially designed exclusively for card-based transactions (ISO 8583), they lack the flexibility to handle new kinds of transactions, such as person-to-person (P2P) payments.

“The good news is that many companies are recognizing the urgency of modernizing both their front-end and back-end systems to keep pace with the rapid growth of real-time payments,” Knudsen said. “We’re seeing progress in terms of upgrading technology infrastructure and implementing APIs to enable real-time processing. Additionally, companies are streamlining back-office processes, simplifying workflows, and automating manual tasks to align better with the speed of real-time payments.”

How Leading Countries are Driving Real-Time Payment Adoption

In 2022, India led the world with a total real-time transaction volume of 89.5 billion, representing 46% of global real-time transactions. In the same year, Australia processed 1.2 billion real-time payments, which is obviously far less in absolute terms but only 25% less than India on a per-capita basis. The United States recorded a real-time transaction volume of only 1.8 billion in 2022, way less per capita than India or Australia. But it seems more than likely that this will change with the advent of FedNow this year.

According to Churchward, making real-time capabilities open to non-banks and focusing on P2P payments to address customer needs is key. These steps can foster adoption and drive higher use of real-time payment systems in countries that are lagging. At least that has been Australia’s experience.

“One noteworthy feature in both the Indian and Australian markets is a focus on peer-to-peer payments and facilitating access for payment service providers that are non-bank entities,” Churchward said. “This approach has led to substantial transaction volumes.” 

“Enabling P2P payment platforms that address common pain points for consumers and businesses is a fundamental use case. These pain points include ensuring interoperability between P2P platforms and providing real-time notifications and reconciliations for businesses,” Churchward added.

As more real-time payment schemes come into play, focusing on interoperability will be key.

“Payment systems moving toward ISO 20022 is a strong foundation for cooperation,” Lovney said. “Additionally, frameworks like the Open Wallet Coalition can underpin efforts to create interoperability with other systems worldwide.”

Some companies still have skepticism about real-time payments. Churchward indicated that companies need to keep up with their clients’ demands.

“Real-time payments can be challenging but highly rewarding,” Churchward said. “They offer significant value to your clients and help them stay competitive in a rapidly evolving landscape.”

And a big part of getting real-time payments right is having the appropriate back-office software. “Software plays a crucial role in enabling real-time payments,” Knudsen said. “It needs to support any transaction type and provide connectivity for processing payments in real time, both domestically and internationally. Automation is key. Automating settlement and reconciliation processes streamlines real-time payments.”

Conclusion

Real-time payments have evolved from a budding concept to a transformative force. The industry’s focus on interoperability, adoption of standardized frameworks, and investments in modernization indicate that real-time payments are here to stay. As skepticism wanes and adoption grows, the future of payments has a real-time bent, offering immense value to clients and ensuring competitiveness in a rapidly evolving landscape.

With software playing a pivotal role in enabling such transactions, the stage is set for real-time payments to revolutionize the way we transact, offering not just speed but also efficiency and convenience.

The post In 2023, Real-Time Payments Expanding Across the Globe appeared first on PaymentsJournal.

Bank of America has introduced Global Digital Disbursements for commercial clients that have deposit accounts in the bank’s Canadian branches. This solution enables the processing of several business-to-consumer payments and consumer-to-business collections. It offers an affordable and seamless payment option for businesses that want to do away with check or cash payments.

With its Request for Pay solution, businesses can send invoices to their customers via texts and email messages. A link is included so customers can pay the amount owed, promoting faster payments.

Some use cases include insurance companies taking advantage of its faster payments feature to settle claims. Tech companies can also use the solution to pay their many freelance workers without having to manage financial information.

“Global Digital Disbursements offers our clients fast digital payments and request for payments to consumers in Canada,” Leslie Konecny, head of product for global transaction services, Canada at Bank of America, said in a prepared statement. “The payments are sent with enhanced ISO (International Standard Organisation) remittance data, and companies don’t have to store their payees’ sensitive banking information.”

Instant Payment Adoption is Expanding

The demand for faster and more convenient transactions is increasing among businesses and consumers. Faster payments can benefit businesses by accelerating their cash flow, shortening the time between invoicing and receipt of funds, and enhancing cash flow management.

For consumers, faster payments mean quicker settlement times, enhanced cash flow management, and an improved customer experience.

On a global scale, Brazil, China, and India are seeing the highest adoption of instant payments, according to a Javelin Strategy & Research report by Albert Bodine, Director of Commercial and Enterprise Payments. The report is titled “Commercial Instant Payments and the Need for Speed.”

India’s Unified Payment Interface (UPI) volume made up 40% of instant payments worldwide in 2022. By contrast, Germany, the United Kingdom, and the United States have been slower to adopt instant payments, with Germany coming in at less than 3% of total transaction volume on real-time rails.

The post Bank of America Launches Global Digital Disbursements in Canada appeared first on PaymentsJournal.

Ant Group, the Chinese fintech giant behind Alipay, has teamed up with an electronic wallet operator in South Korea to offer cross-border payments to tourists from China and Southeast Asia, according to the South China Morning Post. The move is part of Ant Group’s strategy to grow its overseas presence and tap into the recovery of travel and tourism amid the pandemic.

From Friday, visitors using any of the six digital payments apps in the Alipay+ network, which includes the mainland and Hong Kong versions of Alipay, can pay at shops and restaurants in South Korea by scanning ZeroPay QR codes at the checkout. ZeroPay is a QR-code-based payments service launched by the Seoul city government to help small businesses avoid settlement fees.

Alipay+, a suite of global cross-border digital payment and marketing services, is intended to work like a middleman, enabling local businesses to process a wide range of digital wallets from other countries. It is also a way for Ant Group to expand its footprint in Asia without obtaining local licenses or setting up joint ventures.

The Alipay-ZeroPay partnership comes as travel and tourism rebound globally, with China among the popular travel destinations that are likely to benefit from this trend.

China has become dominated by digital payments, and as was reported in PaymentsJournal, this made it challenging for tourists who did not have Chinese bank accounts. That’s because, until this summer, it was impossible to link foreign credit cards to WeChat or Alipay. Travel to China by foreigners was scant during the COVID-19 pandemic, so this was not a huge problem. But as China opens up to more tourists, it wants to make it easier for people to pay for things. This recent cross-border initiative fits neatly into that approach.

The cross-border payments market is becoming increasingly competitive, as fintech players and traditional financial institutions vie for shares of the growing demand for seamless and secure transactions across borders. Ant Group’s Alipay+ network is one of the leading players in this space, leveraging its huge user base and extensive merchant network in China and Southeast Asia.

The post Alipay+ Expands in South Korea to Tap Into Tourism Rebound appeared first on PaymentsJournal.

With more than 100 countries mandating some form of e-invoicing, the move to streamline tax collection and improve overall economic efficiency is well underway. Navigating the changing landscape, however, isn’t simple. The lack of standardization around e-invoicing makes it a challenge for international businesses.

In a recent PaymentsJournal podcast, Marco Eeman, Managing Director at Billtrust, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, explored how much e-invoicing has changed and how businesses can best adapt to mandates and new requirements.

The Rise of Government Mandates and Standardization Efforts

A turning point for e-invoicing occurred when governments began mandating it. Compliance with local legislation became non-negotiable for businesses seeking to operate in countries that imposed such standards. Governments found that e-invoicing regulations not only facilitated tax collection but also promoted greater economic transparency and growth.

In 2014, the European Union initiated a directive with the aim of establishing a unified pan-European standard for e-invoicing, known as the OpenPEPPOL (Pan-European Public Procurement Online) project. The directive set a deadline for all EU member states to implement the use of this technology by the end of 2018, affecting more than 100,000 public administrations and agencies throughout Europe.

However, the directive left each country to determine its own approach to building an e-invoicing solution. As a result, companies trading with government and public sector agencies in different countries had to implement their own solutions to comply with the new regulations and maintain efficient operations.

Collaborations between governments and e-invoicing service providers have resulted in some level of standardization, simplifying invoicing for businesses that operate within the EU. However, achieving a single global standard remains a challenge due to diverse tax laws and regulatory frameworks.

“Electronic invoicing and the regulations related to it are all about taxes,” Eeman said. “Different countries have different tax laws, and they may compete to attract businesses with lower or more favorable tax rates.”

Countries as varied as Singapore, Japan, Australia, and New Zealand have joined the global e-invoicing movement, adopting models akin to the European standard. As the number of mandates increases, so will the market for e-invoicing service providers. However, the growth of electronic invoicing is driven not only by government regulations but also by the relationships between suppliers and buyers.

“Large buyers in industries like retail, oil and gas, and utilities have significant purchasing power and influence,” Eeman said. “They often require their suppliers to follow specific invoicing methods, which may include using certain portals or digital formats.”

The Importance of Quality Data and Collaboration

To achieve a clear understanding of invoicing across different parties, the adoption of widely used standards such as Universal Business Language (UBL) is essential. UBL ensures that specific terms have consistent meanings, facilitating the importing and processing for businesses. The focus on sending and receiving high-quality data results in more efficient processes, especially the handling of accounts receivable on the suppliers’ side.

“In the world of business-to-business (B2B) transactions, the focus is on making the invoicing and payment process frictionless and data-driven,” Bodine said. “The goal is to reduce manual efforts, ensure quick payments for suppliers, and enhance overall efficiency. This approach is particularly crucial for B2B interactions.”

The complexity of achieving a universal standard underscores the need for collaboration with knowledgeable partners that can navigate the variations and provide valuable insights and solutions.

An invoicing service provider such as Billtrust can play a crucial role in enabling efficient data transmission between businesses. By complying with various standards set by governments and buyers, invoicing providers can facilitate smooth transactions, reduce manual efforts, and enhance overall efficiency in the B2B realm.

“Even with the idea of having a standard, the reality is that different industries and regions have various implementations of standards,” Bodine said. “For example, the ISO 20022 standard has 40 different implementations worldwide, making it challenging to establish a single universal standard. This complexity highlights the importance of partnering with experts in the field who can navigate these intricacies.”

E-invoicing Helps Reduce Tax Fraud

In some countries, tax avoidance is rampant—and e-invoicing can help. Certain countries have taken a proactive approach by implementing the “clearance model” or “continuous transaction controls” for e-invoicing. Suppliers submit invoices to the government, which then forwards them to the buyers after recording the applicable taxes. This approach grants governments greater control over tax collection and offers insights into buyer-supplier relationships.

E-invoicing leaves a digital “paper trail” for transactions, which can be used for tracking and making sure everyone is accountable. Those looking to avoid taxes commonly use cash for payment, but by mandating e-invoicing, governments can—in theory—put a damper on that.

“Italy was one of the early adopters of electronic invoicing in Europe,” Eeman said. “Italy realized that in some industries, collecting taxes could be challenging, especially when cash was commonly used. So they decided to implement electronic invoicing to close the VAT (value-added tax) gap and make their economy more efficient.”

Brazil and Mexico soon followed suit.

“These countries used electronic invoicing along with faster payment methods to make their business processes much more effective and streamlined,” Eeman said.

Conclusion

The global e-invoicing landscape is evolving rapidly, with an increasing number of countries mandating electronic invoicing. While a single global standard remains challenging, adopting best practices and collaborating with stakeholders is key. Rather than seeking separate solutions for each country, businesses should seek a unified global solution to effectively streamline their invoicing processes.

The post Lack of Standardization Proves a Challenge for E-invoicing appeared first on PaymentsJournal.

Mastercard and Nuvei have announced an integration of Mastercard Send into Nuvei’s payment technology platform, which will now enable faster payouts to its clients, settling funds quickly and securely. No additional development is required. Typically, the processing of withdrawals was time-consuming, often taking days to complete.

This will greatly benefit online trading platforms and investors in the Asian-Pacific (APAC) region. Later this year, this service will be expanded to Hong Kong and Australia.

“Trading platforms rely on fast, secure deposits and payouts to optimize user experience,” Nuvei Chair and CEO Philip Fayer said in a prepared statement. “Partnering with Mastercard Send enables us to offer our partners another trusted, instant payout method that will win new traders and generate revenue growth.”

Faster, Seamless Payments Should Be Table Stakes

More than ever, consumers and businesses are looking for a faster, safer, and more convenient payment experience. Traditional payment methods are not meeting this growing need, and payers are ready to look elsewhere for these solutions.

Having been adopted in the United States in the past five years, real-time payments are also seeing dramatic growth. The use cases are also growing, with consumers widely adopting P2P platforms. Businesses wanting to pay their suppliers faster and more inexpensively are also looking into B2B solutions to request payments and pay invoices.

By 2027, real-time payments in the APAC region are poised to reach 12% of all payments, whereas North America is projected to see just 5%.

Without question, customers and businesses will be on the lookout for payment providers that offer real-time payments. These providers should take note: If they want to remain competitive in this ever-changing payment landscape, this offer will be a key differentiation.

The post Nuvei and Mastercard Partner to Facilitate Payouts Throughout APAC Region appeared first on PaymentsJournal.

The signing of a connected regional payment system memorandum of understanding has enabled Vietnam to join a cross-border payment system service. It will join the Philippines, Singapore, Thailand, Malaysia, and Indonesia. The purpose of the initiative is to facilitate fast, affordable, and transparent cross-border payments for consumers and businesses across the ASEAN region.

The countries not only will work to connect their payment systems to boost trade and remittances but also will also develop a QR code system to perform retail transactions.

“I believe this cooperation provides equal benefits for all involved countries,” Deputy Governor of the State Bank of Vietnam Thanh Ha Pham said in a prepared statement.  “It creates an easy, affordable, and reliable payment system that can drive economic growth.”

ASEAN: The Path to a More Integrated Economy

The fostering of a more comprehensive financial ecosystem within Southeast Asia has been in the works for some time now.

A cross-border payment system was launched last month, allowing residents from Singapore, Thailand, Malaysia, and Indonesia to make payments for goods and services in each other’s countries by using this system.

This regional connectivity will also reduce the dependence on the U.S. dollar for all cross-border transactions, specifically between businesses. The strength of the U.S. dollar has contributed to the weakening of ASEAN currencies, adversely affecting the economies.

Earlier this year also saw the development of a cross-border QR payment linkage between Indonesia and Malaysia. This is in line with the Bank of Indonesia’s plan to develop open banking and a financial market infrastructure.

Another QR payment linkage was established, this time between Singapore and Malaysia, increasing cross-border commerce as well as helping small businesses widen their customer base.

By the end of 2023, and as part of the next phase, regulators in Singapore and Malaysia hope to facilitate real-time fund transfers through the recipient’s mobile phone number.

With so many still underbanked and unbanked in the region, these efforts will move the needle forward in establishing further financial inclusivity.

The post Vietnam Joins ASEAN Cross-Border Regional Payment Cooperation appeared first on PaymentsJournal.

Paysend is rolling out an ad campaign to solidify itself as a leading money transfer service among the Hispanic community.  

The campaign will include a mix of traditional and digital advertising, including commercials, radio advertising, as well as podcast opportunities—all in Spanish, according to Paysend’s press release.

In an effort to stand out among competitors, Paysend is not charging a transfer fee—at least not during the initial launch—which typically runs between $3 and $10. But as the press release pointed out, Paysend is hoping to capture a considerable slice of the remittance market.

Targeting the Hispanic market is a strategic move for the company. According to the Pew Research Center, the U.S. Hispanic population surpassed 60 million in 2021, making it a powerful demographic force with a strong commitment to sending money to family and loved ones.

“Paysend’s marketing campaign portrays sending remittances and cross-border payments as an easy, convenient, and positive experience,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “With ads in their native language, a Hispanic cast, and more Spanish speaking customer service staff, Hispanic customers can relate better and feel more comfortable sending money to their loved ones back home. I recently had to make an international P2P payment and realized it’s not as simple and inexpensive as sending money to a friend within the U.S.”

Remittances Are on the Rise

Cross-border payments are increasing worldwide and the need for solutions to make these payments faster and less costly is becoming more important. The first focus for cross-border payment providers was to improve the user experience for P2P (Person to Person) transactions, but over time, this has now expanded to cross-border payments for B2B (Business to Business) solutions.

This was the focal point of discussion in a Javelin report released last year, which explored the latest developments around cross-border B2B payments and delved into how various players— including central banks, fintechs, banks, processors, and networks—are working together to continuously improve on cross-border payment solutions, especially within the B2B market.

On that note, Singapore and India recently established a link between their respective real-time payment schemes which facilitate instant mobile phone transfers between the two countries. This was not Singapore’s first foray into cross-border transactions as the country previously developed a similar solution with Thailand and Malaysia.

The Monetary Authority of Singapore and Bank Negara of Malaysia also developed a cross-border QR code payment link which facilitates in-person payments by scanning the QR code on display by merchants.

The post Paysend Launches Advertising Campaign to Reach Hispanic Market appeared first on PaymentsJournal.

In preparation for the 2023 Asian Games, Ant Group is increasing cross-border payment options for international travelers.

With the support of the People’s Bank of China, and in collaboration with NetsUnion Clearing Corporation, consumers traveling to see the Asian Games will have the ability to use their own e-wallets by leveraging Alipay+. The first group of e-wallets will be accepted from Thailand, Malaysia, Macao, and Hong Kong, with additional overseas e-wallet acceptance to come soon.

International travelers will have the option to attach their international credit cards from major issuers into the Alipay app in order to make their purchases.

Alipay will also work closely with the Asian Games to facilitate travel and ticketing services, sustainability efforts, and digital payments.

“The Ant Group-Asian Games partnership makes it easier and more convenient for international sports fans and visitors to pay for purchases with the same mobile wallets and digital payments that they’re used to using back home,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “It’s exciting to see new cross-border payment options like Alipay+ and ASEAN’s digital payment system that allows residents in Indonesia, Malaysia, Singapore, and Thailand to pay for goods and services in local currencies using a QR code. These cross-border payment solutions are beneficial for tourism, international trade settlement, investment, and remittances.”

Cross-Border Transactions Are Gaining Ground

Cross-border payments are taking the financial ecosystem by storm, providing both businesses and consumers a way to send payments quickly, safely, and efficiently. With the rise of e-commerce, consumers and businesses are transacting internationally as well.

A new cross-border payment system was recently formed between members of the Association of Southeast Asian Nations (ASEAN), which includes the Philippines, Singapore, Indonesia, Thailand, and Malaysia. This initiative was formed to establish a more complete financial ecosystem in the Southeast Asian region. Businesses within these regions are hoping to rely less on the U.S. dollar for cross-border payments, particularly as it has affected them negatively due to its strength.

Facilitating and streamlining cross-border payments has been in the works for some time now. Singapore and Malaysia also developed a cross-border QR code payment linkage. Financial institutions will now be able to make payments by scanning NETS QR and Duit Now QR codes, enabling in-person payments. This can be done by scanning these QR codes displayed by merchants and for cross-border e-commerce transactions online.

The post Ant Group Expands Cross-Border Payments Efforts via Asian Games Collaboration appeared first on PaymentsJournal.

Real-time payments through the RTP^® network have gained significant traction, presenting valuable opportunities for businesses to optimize cash flow and improve their operational efficiency. As the the FedNow^® Service expands availability in 2023, the impact of instant payments is set to grow even more. Industries such as payroll and transportation have been early adopters, leveraging real-time payments to accelerate wage access and speed up payments for sales.  

In a recent PaymentsJournal podcast, Adam Carter, VP of Faster Payments, Global Treasury Management at U.S. Bank, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, explore the specific sectors and use cases driving the adoption of real-time payments and the transformative potential they hold for businesses in the coming years. They also address a surprising finding: Contrary to expectations, real-time payments have fueled transaction growth without displacing traditional payment methods like ACH and wire transfers.  

The Origins of Real-time payments 

When banks were getting ready to launch real-time payments through the RTP network, they believed it would mostly be used for business-to-business transactions. But after the network launched, they realized that assumption was wrong. “Instead, there was a significant amount of -business to consumer and even person to person activity,” Carter said. “They didn’t anticipate how innovative fintech partners would be in using the network to improve their clients’ experience with services like digital wallets.”  

In many cases, younger people are driving the adoption of RTP.  

“While we do believe that older generations will also catch up and start using these services, initially, it was mainly younger people who embraced them because they are used to this kind of instant interaction,” Carter said. “There definitely seems to be a demographic factor at play here.” 

With the rise of the gig economy, getting quick access to wages has become the norm. Even employees working in large retail stores can now access their daily wages through various earned-wage providers.  

“It’s not just about Uber; that’s just a good example,” Carter said. “After working a few hours as an Uber driver, you can access a portion of your earned wages with just a few clicks and have it in your account instantly. This allows you to use the money right away for things like buying groceries or filling up your car with gas, helping you on your financial journey.” 

Changes in RTP Over the Past 5 Years 

In recent years, the real-time payments space has grown enormously. Services like Zelle, Visa Direct, MasterCard Send, and the upcoming Fed Now Service have brought about shifts in customer habits when it comes to financial interactions.  

Previously, customers would keep money in separate accounts and wallets without frequent or fast transfers between them, as traditional methods like ACH transfers took several days. However, with the emergence of real-time rails, customers can now move funds much faster and in different ways from before. Digital wallets, once used occasionally for personal transactions, are now being utilized by small businesses that require immediate access to funds for operations and purchases.  

“The ability to move funds instantly has made these services more consumer-friendly,” Carter said. “Moreover, the introduction of real-time payment systems has led to overall transaction growth, with many transactions being entirely new and not cannibalizing existing methods like ACH and wire transfers.” 

According to Bodine, there was an initial belief that real-time payments would replace ACH and wire transfers. “The prevailing wisdom has now shifted to the coexistence of different payment methods,” Bodine said. “The original expectation of instant payments overtaking ACH and wire transfers has been proven wrong.” 

Early RTP Adopters 

Early adopters of real-time payments can be seen in three key industries. First, the fintech sector has leveraged real-time payments for various services, including digital wallets and similar platforms. These were among the initial adopters, and they have experienced significant growth.  

Second, industries related to payroll have embraced real-time payments for accelerated wage access, employee reimbursements, and travel expenses. The immediate availability of funds has proved a valuable benefit for consumers.  

Third, the transportation industry, particularly in freight movement and trucking, has seen a notable adoption of real-time payments. Timely disbursements play a crucial role in this sector, and real-time payments enable efficient and just-in-time delivery of funds upon the arrival of freight at its destination. 

Bodine relates a good example of how real-time payments have taken off in his home state of Indiana. 

“In my agricultural area in Indiana, where checks were commonly used, I’ve noticed that small businesses, such as agricultural suppliers and tractor maintenance providers, are now accepting real-time payments, via iPhones,” Bodine said. “Another example: Beverage companies delivering to stores, like 7-Eleven, are starting to receive real-time payments instead of issuing checks. 

“It’s fascinating to see how real-time payments are infiltrating the traditional check and cash systems in these areas.” 

Carter concurred and provided an additional example of how RTP is infiltrating markets with an example from a U.S. Bank client, Driveway.com. 

“Previously, when Driveway acquired or sold vehicles, they would give customers a check,” Carter said. “With real-time payments, customers can now process the payment request while the driver is present, and the funds instantly appear in their account.”  

The ability to see the money in their account immediately adds to the positive experience of the transaction. Furthermore, Bodine notes that there is also satisfaction in being able to send funds immediately.  

“Similar to the mentality behind using cash, people want the reassurance that the services they’ve received are paid for in real time,” Bodine said. “Instant payments provide a social and psychological aspect where individuals feel a sense of security and immediacy in completing transactions.” 

The Future of Instant Payments 

Different instant payment services, like the RTP network and FedNow Service, are expected to coexist to meet the growing demand for fast and convenient transactions. The Federal Reserve has developed the FedNow Service as its own instant payment solution. The FedNow Service began roll out in July 2023 and will expand availability over the next few years. Instant payment services will likely involve servicing both payment rails.  

Cross-border payments are also set to expand, with the key to success lying in collaboration between banks and networks.  

“Building a real-time network within a single region, such as North America, is relatively straightforward due to the integrated economy,” Carter said. “But expanding beyond that requires careful consideration and partnerships with networks in different countries.” 

The current interest rate environment is also a boon to the adoption of real-time payments. “Real-time transactions enable customers to retain their funds for longer, allowing them to leverage and earn interest on their cash longer before making payments,” Carter said. “This shift has led to businesses considering a transition from traditional ACH payments to real-time payments, as it allows them to maximize the value of their funds by extending their days payable outstanding.” 

In the next year or two, instant payments will have a transformative impact on businesses. Businesses need to understand how the movement of money in real time will affect their back-end operations and be prepared to adapt their processes accordingly. 

“A significant percentage of businesses (around 56%) are already planning to use instant payments by the end of 2024, and the remaining businesses should begin working on implementing it as well,” Carter said. “However, integrating instant payments into existing business processes and procedures will require careful consideration and potential adjustments.” 

From a banking perspective, it is crucial for institutions to be prepared to receive instant payments. Regardless of the size or type of bank, being on the instant payment rails in receive mode is essential.  

“Customers will seek out banks that can facilitate instant payments, and banks that fail to provide this service may risk losing customers,” Bodine said. “Therefore, banks should prioritize developing strategies to enable instant payment receipt and subsequently focus on implementing the capability to send instant payments as well.” 

As younger generations embrace the convenience and immediacy of real-time payments, businesses and banks must adapt to integrate these systems and meet customer demands. Collaboration between banks and networks, the expansion of cross-border payments, and the potential for longer fund retention for interest rate benefits further highlight the transformative potential of real-time payments. It is crucial for businesses and banks to understand and prepare for the impact on their operations and stay competitive in the evolving financial landscape. 

The post Instant Payments Set to Soar As The FedNow Service Comes Online appeared first on PaymentsJournal.

More businesses worldwide are looking to expand their international efforts as the surge in cross-border services grows. Recent findings from Stripe revealed that two-thirds of businesses plan to expand their operations in untapped markets within the next two years, in an effort to diversify their earnings against economic uncertainties.  

Roughly half of businesses surveyed also indicated that it’s much easier to operate an international business today than it was five years prior. 

According to Stripe, businesses are revving up to sell internationally for a variety of reasons. In addition to benefiting from digital trade in untapped markets, there’s also high interest among consumers. In fact, 68% of consumers surveyed said they were willing to purchase physical goods from a company that’s based elsewhere. And slightly fewer (59%) said the same about purchasing cross-border digital services. 

Technology has helped businesses streamline their cross-border operations, in addition to help them drive up sales.  

“There has been a proliferation of digital rails and messaging schemes for making payments, receiving payments, clearing and settling on a global basis,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research.  

“A small business that previously might have been limited to selling in her local geography is now a smartphone away from selling all over the world. It’s also important to note the potential for fiat-backed cryptocurrency, how those instruments extend even further the reach of global trade and how they provide reach to non-banked businesses. That is an enormous untapped market that digitization is going to allow us to target,” he said. 

Looking Ahead 

Digital has played a substantial role in enabling goods and services to be traded globally. It has also given birth to new business models such as subscription services, online marketplaces, and digital creators who sell their content online.  

The key to scaling these business models is to ensure that the online payment platforms are convenient and secure, as this solidifies trust and can build long-lasting customer relationships.  

The post A Rise in Digital Trade Prompts More Businesses to Expand Abroad  appeared first on PaymentsJournal.

As businesses continue to rely on large vehicles for transportation and distribution purposes, fueling costs have become a major concern. With the price of fuel constantly fluctuating, fleet managers must find ways to ensure efficient fuel consumption while maintaining optimal performance. This involves careful budget planning, regular maintenance checks, and utilizing technology such as GPS tracking systems to monitor fuel usage. In addition, alternative fuel options such as propane, electricity, and hydrogen fuel cells may offer long-term cost savings.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Fleet Cards in 2023: An Industry in the Fast Lane

Annual Cost of Fueling at Retail Diesel Pricing per Vehicle

• $58,853 – Transit bus
• $52,179 – Class 8 truck
• $44,545 – Refuse truck
• $18,353 – Paratransit shuttle
• $8,553 – School bus

About Report

This report analyzes the market trends and developments in the commercial fleet space, with an emphasis on closed-loop” and open-loop fleet card products as well as cardless solutions. The report examines the current market offerings and how fleet card companies are addressing the needs of the modern fleet customer. It examines trends in diesel fueling, the most common method used for fueling larger vehicles, and trends in alternative fueling, including payment acceptance. Fleet electrification trends as well as public and private charging stations are also explored, and the report details our expectations for the future of fleet operations.

The post Top 5 Fueling Costs for Large Vehicles appeared first on PaymentsJournal.

After recently surpassing the 500 million instant payment milestone at the end of July, The Clearing House’s RTP network announced expanded availability for its Request for Payment (RfP) capability. More participating RTP financial institutions now support the RfP feature, providing businesses and their customers a more streamlined and efficient way to request and make payments. Initial permitted RfP use cases include consumer bill pay, business to business payments, and account to account transfers.

The RfP functionality allows a business (biller) to request an instant payment from a customer. The customer (RfP recipient) can send an RTP payment in response to pay the bill precisely when they want (24/7) or schedule the payment for a future date. The payment occurs instantly over the RTP network with the biller receiving access to immediate and irrevocable funds, and the payer receiving immediate confirmation that the biller has received their payment. This setup provides customers with more control over their money and reduces the risk of insufficient funds when autopay is debited with ACH.   

BNY Mellon and Citi collaborated with Verizon to be the first company to send RfP messages to consumers who bank with Citi in 2021. Today, Bank of America, Fifth Third, PNC Bank, U.S. Bank, and Wells Fargo, which provide banking services to many high-volume corporate billers, are also among the RTP participants offering RfP capabilities. Additionally, technology providers FIS, Fiserv, Jack Henry, and Open Payment Network, are certified to provide RfP to their RTP participating financial institution customers.

Similarly, the newly launched FedNow Service also offers an RfP capability. Several service providers, including ACI, Alacriti, BNY Mellon, ESC Fin, Inc., Jack Henry, Open Payment Network, Pidgin, and Vertifi Software have received certification to send RfPs on the FedNow network. The Federal Reserve also launched an industry work group to establish best practices for consistent customer experience using RfP in December 2022.

As financial institutions and their customers broadly adopt instant payments and enable the RfP capability, more businesses and consumers will have better control and customer experience in making payments.

The post RTP Announces Broader Request for Payment Availability appeared first on PaymentsJournal.

Digital banking has emerged as a transformative force in the financial industry, reshaping the way individuals and businesses manage their finances. It encompasses a range of services that are accessible through online platforms, mobile applications, and other digital channels allowing customers to manage their accounts and conduct financial transactions like checking balances, transferring funds, and making payments to more complex activities such as applying for loans or investing, anytime and anywhere.

One of the primary advantages of digital banking is the simplicity and convenience it offers. Customers no longer need to visit physical branches during working hours to complete routine banking tasks. Instead, they can access their accounts 24/7, perform transactions, and access a wealth of financial information with ease. This convenience has significantly improved the customer experience and this improved customer satisfaction has driven the widespread adoption of digital banking solutions.

FedNow: Transforming Real-Time Payments

Last month, the FedNow initiative was launched by the Federal Reserve in the United States to modernize the country’s payment system and enable faster, more efficient, and secure transactions. It aims to provide individuals and businesses with access to instant payment services, enabling funds to be transferred and available for use within seconds.

The current payment infrastructure in the United States relies heavily on the Automated Clearing House (ACH) system and wire transfers, which often involve delays of several hours or even days for funds to be settled. The introduction of FedNow is expected to have a significant impact on the financial landscape. It will promote the development of new financial products and services that leverage real-time payments, contributing to a more dynamic and customer-centric ecosystem.

According to the “What‘s Going on in Banking 2023” study from Cornerstone Research, roughly three in 10 financial institutions said 2023 will be the year they deploy real-time payments on top of the 18% of banks and 12% of credit unions already offering them. Many have been waiting for FedNow, with Cornerstone revealing that roughly four in 10 institutions have yet to determine their real-time payments strategy—and a quarter said they will wait for FedNow to deploy.

How FedNow Will Impact the Payments Industry

FedNow is expected to bring about significant changes to the payments landscape. Here are some ways in which FedNow is likely to impact payments in the U.S.:

1. Real-time payments: FedNow enables instant, 24/7/365 payments, allowing individuals and businesses to send and receive funds instantly. This has numerous benefits for individuals and businesses, including faster payroll processing, more intuitive bill payments, improved cash flow improving reconciliation, cash forecasting and liquidity management, and enhanced overall transaction efficiency. This will also eliminate the delays associated with traditional payment methods, such as checks or ACH transfers.

• Enhanced accessibility: Small businesses, corporate and individual consumers will have access to instant payments regardless of the financial institution they use. This means that even smaller banks and credit unions will be able to provide FedNow real-time payment services to their customers, promoting financial inclusion and leveling the playing field for all participants in the payments ecosystem.

• Improved efficiency: Real-time payments, facilitated by FedNow, will enhance the efficiency of transactions, enabling faster and smoother cash flow. Businesses will have quicker access to funds, which can improve their working capital management and improve the predictability of capital via credit and loans. Additionally, consumers will experience faster settlement of bills and payments, leading to more accurate budgeting and reduced late payment fees.

• Support for innovation: The introduction of FedNow is expected to spur innovation in the payments industry. Financial institutions, fintech companies, and other stakeholders will have the opportunity to innovate and develop new products and services that leverage the real-time capabilities of FedNow. This could include innovative payment apps, integrated payment solutions, expanded data and directory offerings and an overall improved payment experience both for consumers and businesses.

• Reduced reliance on cash and checks: Consumers and businesses can adopt digital payment methods more readily, leading to a reduction in paper-based transactions. This shift could result in increased security, efficiency, and cost savings across the payment ecosystem. FedNow will also support innovative payment solutions, such as request-to-pay, which allows users to send payment requests to others, reducing the need for paper checks and streamlining the bill payment processes. The system will be interoperable with existing payment networks, enabling seamless integration with various digital banking platforms and financial service providers.

• Enhanced global competitiveness: The availability of real-time payments through FedNow will enable U.S. businesses to compete more effectively in the global marketplace, particularly with the adoption of ISO 20022 standards. Currently, more than 60 different countries possess a real-time payments infrastructure, with experts projecting that approximately 72% of the global population has or will soon have access to real-time payments. Real-time payments are forecast to facilitate additional economic output to the tune of $173 billion in formal GDP, as well as forecasted to drive $184 billion in aggregated net savings for consumers and businesses.

Implementing FedNow

Now that we’ve explored how FedNow will impact the industry, we need to highlight the key steps financial institutions need to implement to ensure they are prepared for this initiative:

• Understand the market trends. Survey customers to learn about their current banking systems and challenges.
• Educate and assess the needs of your specific customers. How many of your individual customers, small business and business customers will want to use instant payments?
• Fraud and risk. Review your fraud, security and data protection strategies and platforms, as well as operations, to assess the impact of FedNow and real-time payments. If necessary adapt your process, operations and platforms to address real-time payments.
• Evaluate technology, services, and software. To make FedNow work seamlessly in your organization, you may want to work with a vendor that can provide ready-made technology solutions for both digital banking access to and processing of FedNow transactions. This includes a digital platform that supports FedNow origination and receipt, as well as request-for-pay. This also implies leveraging, where possible, a digital provider that supports ISO 20022 along with an extensive API repository and event driven architectural framework; allowing you to be agile and take full advantage of the FedNow and real-time payments initiative. These items noted above will be key ingredients in executing your real time strategy.

It’s important to note that while FedNow promises significant advancements in the payments landscape, its full impact will depend on its successful implementation, adoption by financial institutions, and the development of complementary services and technologies by market participants.

The post 6 Ways FedNow Will Transform the Payments Industry appeared first on PaymentsJournal.

Whether paying for a taxi ride from the airport, optimizing your company’s working capital position or making that impulse purchase at the retail checkout, payments innovation has accelerated in every industry imaginable and has reshaped how businesses and individuals make payments. With the increased adoption of real-time payments in recent years, other innovations have come to the fore to accommodate the demands for faster payments. Enter ISO 20022.

What is ISO 20022?

ISO 20022 facilitates the exchange of financial transaction data by using standard messaging formats that present a richer, more powerful data structure.

A changing regulatory environment, complexity of new payment flows, and the need for improved data quality to support automation have created a growing need for corporations and financial institutions to adopt a new standard of financial messaging. The benefits derived from additional and more structured information in financial messages include a reduction in investigations, automation of reconciliation processes and a faster cash application cycle.  

The aim of ISO 20022 is to replace proprietary messaging formats with a standardized industry format that is based on well-defined data elements. Using a common payments language between banks and corporates will reduce translation requirements, eliminate costs associated with exceptions and reduce errors. In addition, preventing data loss, which causes payment delays and increases inquiries, will improve the speed of payments along the payment chain and facilitate payment reconciliation within end-user ERP systems.

Moving from MT (FIN message types) to MX (FIN+ message types) will further lay the foundation for innovations like the automation of inquiry and service processes and flexible payment routing across different payment rails like instant payments, ACH (Automated Clearing House) or CBDC (Central Bank Digital Currency).

MT and MX messaging

FIN message types (MT)

The industry has been using MT messages for over 40 years and they have evolved from replacing telex communications between banks to supporting more complex payment use cases in the inter-bank space as well as between banks and corporate customers. Created at a time when storage cost was a major consideration, MT messages use a limited set of fields and support about 10 kilobytes of data. To accommodate local practices, these messages have been customized, leading to variability and straight-though processing challenges. In many cases, data needs to map into free format fields and be parsed by the receiver. A change in sequence of data or a misplaced ‘/’ can lead to manual processing.

FIN+ message types (MX)

In comparison, MX messages have a richer and more granular data structure that supports more parties in the payment chain and accommodates structured remittance data. Supporting up to 100 kilobytes, the message has the capacity to support more complex payment use cases and sufficient structured data to support the automation needs of banks and corporates.

For example, instead of a single reference number field, the Customer Credit Transfer message supports six, including an end-to-end reference number that originators can populate and that is transported unaltered through the payment chain. Structured remittance data supports the inclusion of multiple invoices, down to the line-item level, including applicable invoice numbers, as well as line-item codes such as the Universal Product Number or the International Standard Book Number (ISBN).

Adoption of these new data elements will be an opportunity for faster, straight-through payment processing. For example, the greater specificity in data elements describing a payment party supports the segregation of name, structured address data and, if needed, account name data. This granularity supports the opportunity for greater automation in compliance screening processes and a reduction in false positives.

On the road to ISO 20022

Leading the way to a wider adoption of ISO 20022 are interbank payments and messaging platforms such as the U.S. Federal Reserve’s Fedwire Funds systems, CHIPS^[1], SWIFT^[2], and TARGET2^[3]. Their adoption of the standard will follow a specific timeline to grant other organizations enough time to adopt ISO 20022.

Larger corporations and financial institutions are preparing more targeted adoptions that will be in sync with industry guidelines. Other companies are taking a more cautious approach and are awaiting guidance from their banks and technology vendors. Smaller financial institutions will depend fully on the bank platform vendors and the testing schedule set by the Federal Reserve.

Although the transition to ISO 20022 may be a challenge, there are plenty of tools, FI support, and third-party solutions that can ease the transition. An organization’s approach to adoption should be well-defined and in line with its needs and goals.

The particular challenges of ISO 20022 adoption

Although ISO 20022 promises to provide many benefits, highlighted above, the reality is that its implementation may prove to be a challenge for most organizations. Here’s what they are up against:

• Boosting skill levels will be a concern with banks and businesses, as there doesn’t seem to be enough skilled personnel in the ISO 20022 field to educate and train, impeding wider adoption.
• Significant investment is required for modernizing legacy platforms and updating current systems, providing ISO 20022 education, and meeting the cost of translation of MT and MX message types.
• Scaling technology and testing to meet ISO 20022 will be complex.

Although these challenges may pose a real threat to ISO 20022 transition, individually to any one organization and collectively to the industry, they are not insurmountable. Much can be done to facilitate the transition.

Effective strategies for adoption

Here’s a look at what organizations can begin implementing today to start to prepare for full adoption of ISO 20022:

• Position education as a key to a smooth transition. This includes educating employees to gain a comprehensive understanding of ISO 20022. Banks can engage with their customers through educational campaigns.
• Reach out to bank partners and vendors to understand their timelines and experiences. Benefit from the experience of others and optimize your organization’s transition schedule.
• Fully exploit the rich data available. With ISO 20022, the increased data granularity should be conducive to data mining; the resulting insights may assist in enabling further automation and addressing transaction processing pain points, such as compliance screening false positives and manual reconciliations.
• Make ISO 20022 part of your payments’ modernization strategy. Gradually phasing out legacy systems and embracing new technology will position your organization to better mitigate risk and facilitate the migration and support of a digitalized payment ecosystem.

Migration to ISO 20022 affords opportunities

Adopting ISO 20022 is replete with benefits such as the potential for improved reconciliation, enhanced straight-through processing, and reduction of manual exception payment processes. These improvements are not automatic but will require an ongoing dialogue between banks, customers and vendors supporting the payment ecosystem. Banks can specifically look forward to the opportunity to provide an enhanced customer experience, lower costs due to reduced exceptions and better risk management.

With modernization of the messaging standards and data structures, along with collaboration among participants in the payments ecosystem, the adoption of ISO20022 offers the opportunity for a faster, more frictionless payment experience for all.

For more Treasury Management topics, visit Treasury Insights.  

Joanne Strobel, Head of Corporate & Investment Banking (CIB) Segments Solutions and Advisory for Wells Fargo Global Treasury Management (GTM), and Michael Knorr, CIB Industry & Advisory Lead for Wells Fargo GTM, co-authored the article. 

^[1] Clearing House Interbank Payments Systems
^[2] Society for Worldwide Interbank Financial Telecommunications
^[3] Trans-European Automated Real-time Gross Settlement Express Transfer System

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It’s a mistake for financial institutions to not offer commercial and small-business card programs. If businesses don’t obtain the desired card program from their current institution, they’ll seek it elsewhere—and this not only jeopardizes the immediate relationship but also opens the door for competitors to capitalize on the opportunity.

During a recent PaymentsJournal podcast, Bob Zeena, Head of U.S. Credit Solutions at FIS, and Albert Bodine, Head of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how offering commercial and small-business card programs as part of a financial institution’s comprehensive service offerings can lead to new business and increased profits.

Strategies for Offering Business Card Programs

When card programs are offered, it’s important to have a dedicated strategy that considers a company’s customers and how to best serve them.

“If your customers primarily consist of small businesses, you should consider a card program that is similar to consumer cards,” Zeena said. “This could include rewards-based features that allow smaller businesses to make transactions easily, whether it’s in-person (card present) at places like Home Depot or online (card not present) at platforms like Amazon.”

However, for larger or midsize businesses—such as commercial enterprises—the approach is different. According to Zeena, organizations will need to provide compelling reasons for their customers to choose their card program over alternatives.

“Consider the three R’s for commercial and small-business cards: rewards, rebates, and reporting,” Zeena said. “You may offer all three or a combination of them to make your program attractive.”

Business Cards Offer an Attractive, Longer Payment Cycle

Small businesses value having a longer period to pay their bills rather than instant payments that take money out of their accounts in just a few seconds. It’s important for financial institutions to remember this, especially as they develop strategies for the SME sector.

“Working capital is a key concern for small businesses,” Bodine said. “They want to manage their cash flow effectively, which means having the flexibility of extended payment terms.”

Although instant payments may be popular, working capital is a vital component for small and larger businesses.

“Card programs can be a great solution because they typically offer a pay-in-full option within a 30-day window,” Zeena said. “However, for smaller small businesses, a revolving credit product may be more suitable. It’s essential to consider working capital as a crucial factor in your offerings because that’s what your customers will be looking for.”

Measuring the Success of Card Programs

Once a card program is established, businesses will want to measure its success, and a few factors bear consideration.

Because financial institutions benefit from the revenue generated through interchange fees, they can measure success by focusing on purchase volume. However, as Zeena notes, it’s important to go beyond revenue.

“Implementing a card program opens up opportunities to expand the overall payments strategy of the institution,” Zeena said. “One option is to offer an integrated payables product, which combines various payment methods like ACH, checks, and wire transfers, all supported by a file feed system.”

By presenting these additional payment solutions to business clients, the institution increases its value proposition and customer retention. The more payment options available, the stronger the relationship with customers and the less likely they are to switch to a competitor.

“Customers today seek choices in payment methods, and the entire payables ecosystem is expanding,” Bodine said. “Offering ACH, wire transfers, and other payment options alongside a card program doesn’t necessarily mean cannibalizing the card business. Instead, we’re observing growth in all payment instruments as customer preferences diversify.”

When it comes to the payments spectrum, financial institutions earn the most revenue from card transactions. However, although card payments are prioritized due to their revenue potential, it’s crucial to acknowledge that not everything can be transitioned to cards, Zeena said.

“ACH and check payments still have their place and are widely used by many businesses,” he said.

A well-rounded strategy considers all payment methods and allows for smart supplier enablement efforts to drive spending in the desired direction. Ultimately, card payments take the lead in terms of revenue for financial institutions.

Looking Ahead

Many financial institutions haven’t fully embraced small-business or commercial card programs. Small businesses are a great entry point for financial institutions, and even consumer banks have many small-business customers. Commercial programs are more complex, but larger institutions are recognizing their importance and either considering or already implementing them.

“The key message is not to let another financial institution or third party take away your customers by not offering a simple yet effective tool for managing their business expenses,” Zeena said.

It’s surprising to see how little penetration there is in this area, but it’s a significant growth opportunity.

“There are partners, such as branding and processing partners, as well as consultants who can assist with credit underwriting and other aspects,” Bodine said. “Don’t be afraid of it, but instead, consider the potential revenue and the competitive advantage it brings to your institution.”

The post FIs Should Offer Business Card Programs or Risk Losing Business appeared first on PaymentsJournal.

Residents in Indonesia, Singapore, Thailand, and Malaysia can now make payments for goods and services in each other’s countries via a new cross-border payments system. According to CNBC, the recent launch comes months after a memorandum of understanding was signed by members from the ASEAN (Association of Southeast Asian Nations—which includes five Southeast Asian central banks: Malaysia, Thailand, Indonesia, Singapore, and the Philippines. 

The goal is to facilitate and support cross-border trade settlements, remittance, investment, and other economic processes, fostering a more comprehensive financial ecosystem with the Southeast Asian region. 

By establishing regional connectivity, ASEAN is working to reduce reliance on outside currencies—such as the U.S. dollar—to conduct cross-border transactions, especially between businesses. The U.S. dollar’s strength in the last few years has debilitated ASEAN currencies, which negatively impacts these economies, as most of these member countries are food and net energy importers.  

“The system will forgo the U.S. dollar or the Chinese renminbi as intermediary,” Nico Han, a Southeast Asia analyst at Diplomat Risk Intelligence, the consulting and analysis division of current affairs magazine The Diplomat told CNBC. 

At the Forefront of Cross-Border Payments 

The move to streamline cross-border payments between regions in Southeast Asian has been in the works for a while. In April, we covered how the Monetary Authority of Singapore and Bank Negara of Malaysia partnered to develop a new cross-border QR code payment linkage. This signaled a significant step forward to facilitating smoother payments between the countries.  

And this recent push by ASEAN is another clear step forward to a more financially inclusive environment.  

“While a regional play, ASEAN is arguably leading the way for modern-day cross border payments,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, who covered ASEAN in his upcoming impact note, Commercial Strategies and the Need for Speed.   

“Singapore, Indonesia, Malaysia and Thailand are tying together a very sophisticated, high velocity platform allowing individuals and businesses in those countries to pay and be paid by the same in any of those four countries,” he said. “Interestingly, the card schemes have fired one over the bow suggesting that their existing payments rail is already there and exceeds the capabilities of the ASEAN solution.” 

The post ASEAN Is an Emerging Leader in Cross-Border Payments  appeared first on PaymentsJournal.

JPMorgan Chase experienced an outage on Tuesday, which disrupted all Zelle transactions and prompted users to take to social media to air their complaints. Not longer after, Zelle sent a tweet indicating that all systems were normal on their end and said that Chase was having “an issue with payment processing.”  

Although Chase—one of the seven co-owners of Early Warning, Zelle’s parent company—took ownership of the issue, it declined to reveal what caused the glitch and instead announced that the issue had been resolved by midday Wednesday.  

Modernizing Bank’s Legacy Systems is a Must 

Many banks are still using outdated and inadequate legacy systems that are incompatible with emerging technology and customer demands. Unfortunately, this truth is what has played out in full view: real-time payment networks created for app-based payment systems have clashed with banking systems originally designed to process paper checks. This disconnect has far-reaching implications and consequences.  

“These kinds of issues are going to come up. And [they] won’t be fixed until the industry goes to a true real-time processing scheme for their core systems, which is not likely to come any day soon,” Richard Crone, CEO of Crone Consulting LLC told American Banker. “The unexplained outage at Chase and its implications for Zelle point to the challenges of integrating real-time payment systems like FedNow with legacy batch-based bank systems designed over 70 years ago, which have to be adapted to accommodate non-repudiation and real-time processing requirements.” 

Modernizing legacy systems are a significant sticking point for many banks. Not upgrading these systems stands in the way of enhancing the customer service experience and boosting their profit margins.  

“It’s absolutely critical that banks and service providers sync their legacy and newer, digital, real-time payment systems,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Customers expect a frictionless, fully-functional user experience, and when that falls short, even one time, you risk losing them forever.” 

The post Outage at Chase Bank Brings Zelle Payments to Abrupt Halt  appeared first on PaymentsJournal.

The demand for real-time payments is growing at breakneck speed. Yesterday, Nacha reported that Same Day ACH payments experienced a significant increase in the first half of 2023.  

According to ACH’s governing body Nacha, the value of Same Day ACH payments reached nearly $1.2 trillion, an increase of 51.7% from a year prior. The volume of 385.6 million Same Day ACH payments also showed an increase of 13.7% in the first half of 2023.  

What’s more, there were 199.4 million Same Day ACH payments in Q2 2023, which was an increase of 7.7% from a year prior. Those payments were valued at $612.6 billion, an increase of 26.1%. 

With ACH, consumers can easily access and manage their funds, as well as make online payments and easily transfer funds between accounts. Businesses are also benefitting by streamlining their payroll, accounts receivable, and accounts payable.  

The Clearing House’s RTP Network is also celebrating another historic landmark— exceeded the 500 million payment mark on July 22. Transactions on the RTP network in Q2 2023 reached 58 million for $29 billion. That’s an increase from 41 million transactions for $18 billion in Q2 2022. More than 350 financial institutions currently provide real-time payments on the RTP to both their customers and members.  

“The substantial increase in both RTP and Same Day ACH volume reiterates that consumers and businesses are using faster, real-time payments,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “We will undoubtedly continue to see faster payments grow as more financial institutions adopt FedNow, RTP, and Same Day ACH to satisfy growing customer demand.”   

Although we have discussed how many businesses remain cautious against fully adopting RTP, it is still set to become the standard in payments in the very near future. Before adopting an RTP strategy, it is recommended to first get a real understanding of what your customers are looking for and adopting the best use cases to meet this market demand.  

The post Real-Time Payments Are Gaining Ground  appeared first on PaymentsJournal.

Mastercard is aiming to make virtual card transactions more efficient, safe, and economical to process through its new Mastercard Receivables Manager solution.  

“We’re bridging the gap between buyers’ virtual card preferences and suppliers’ acceptance challenges by automating manual processes and transforming the way accounts receivable teams operate,” said Chad Wallace, Global Head of Commercial Solutions at Mastercard in a prepared statement.  

Mastercard Receivables Manager is powered by Billtrust, a B2B order-to-cash software and digital payments provider that helps suppliers receive virtual card payments more easily, with minimal implementation effort. Suppliers will also be able to accept virtual cards at scale, while businesses will also get to boost their card spend.  

Through Mastercard Receivables Manager, it’s no longer necessary for suppliers to manually capture and enter virtual card information to reconcile the substantial number of digital payments received. Instead, the new solution combines the card payments from all issuers so that the remittance information can be matched automatically to open invoices. Then they are formatted and delivered for their Enterprise Resource Planning (ERP) systems. This enables suppliers to reconcile invoices both accurately and efficiently. 

Currently, the solution is only available to U.S.-based customers, but Mastercard hopes to expand to more markets later this year. 

A More Digital Payment Future 

According to RPMG Research Corporation’s Virtual Card Benchmark Survey results for 2022, more than 90% of suppliers reported that they preferred to receive a digital payment and the invoice information associated with it, instead of checks.