At The Association of Corporate Treasurers’ Cash Management Conference 2020, panellists in a session devoted to payments demonstrated just how dynamic the evolution within this part of the treasurer’s world is.
In the consumer space, instantaneous payments are becoming the norm, while in the corporate world fintechs promoting payment capabilities are becoming increasingly visible. However, with much greater activity on the regulatory front for payments – and some way to go on core activities such as reconciliation – the benefits from innovation still seem some distance down the track.
Treasurers are not the only people in charge of payments within their organisations – they exist within an ecosystem that may include cards, treasury payments and routine accounts payable (AP) functions. It would be unusual to have a single point person or champion for payments. And yet, treasurers are increasingly seen as the accountable person within their organisations for payment fraud risk.
Even though in practice treasurers’ activities will be focused around CHAPS and treasury-related payments rather than AP, there appears to be a gap in terms of accountability and responsibility around payments.
Introducing a more coordinated approach across companies – through the creation of payment champions – would be a real benefit to corporates, delegates heard. A payments champion could take ownership of tasks such as creating a disaster recovery plan against a collapse of part of the payments system such as CHAPS, as well as coordinating a strategic perspective on payments, such as a roadmap towards a better payments infrastructure.
Open Banking in the UK can be deemed a success so far, delegates were told. However, most of the use cases of Open Banking are clustered in areas such as near-instantaneous payments to providers such as Uber and retail banking.
One of the challenges often levelled at Open Banking and the providers in this area, however, is that payment solutions on the corporate side are still very much in the development stage compared to the retail banking side, which is mature by comparison. It may take another two to three years before the market starts to see really detailed propositions, panellists suggested. The benefits for corporates will become clearer, however, and there is already growth in account access for SMEs. The biggest potential remains in the larger corporate sector, with payments likely to be the largest growth area.
One the biggest challenges for corporates remains making a business case for adoption of Open Banking application programming interfaces. If there is a clear strategic need to review how payments flow into their organisation, however, Open Banking might provide a route towards that goal.
According to some estimates, frictionless, real-time payments could bring benefits to economies globally in the region of $15–20 trillion. Payments undoubtedly need to become more granular and real time, panellists said. Moving towards that scenario will open up many more new use cases for Open Banking and new payment mechanisms. It would also improve security for payments and cut out a great deal of cost.
The real blockages, however, lie in an old-school mindset configured around batch processing, closed networks and the existing infrastructure of clearing and settlement systems. Cutting out unnecessary layers would involve removing vast swathes of providers – a whole industry with a vested interest in maintaining the status quo, the audience heard.