Paying it forward

From the August 2020 print edition

When it comes to corporate payment solutions like cards, companies have long viewed characteristics such as security, ease of payments and speed as important. At the same time, the coronavirus pandemic has both heightened the need and desire for these characteristics while accelerating the adoption of payment solutions.

And the market for these solutions shows few signs of slowing down. For example, the global payment processing market is set to rise to an estimated $78.24 billion by 2026, according to Data Bridge Market Research. Reasons for this increase include convenience and ease of transaction, and the surge in smartphone use in recent years, among other reasons.

The coronavirus pandemic has made certainty of payment more valuable to companies than ever, says Paul Cargnelli, head of commercial sales, Canada, at Visa Canada. Companies have experienced a great deal of difficulties recently with issuing cheques, with many physically signing their cheques before issuing them. However, more modern, electronic payables solutions alleviate such inconveniences, Cargnelli notes.

Going digital
There’s a big migration among companies towards digital payments, since there are significant business benefits around working capital they offer and, with commercial cards, rebate revenues, says Cameron McPhail, vice president and director, commercial card, at the Bank of Nova Scotia. He agrees that with the pandemic still ongoing, many companies that had been moving more slowly on digital payments have sped up the process since, for operational reasons, cheque payments are more difficult.

“The other thing we’re seeing is that people are then embracing digital just as another prudent measure to mitigate fraud,” McPhail says. “Moving to things like commercial card payments is much more secure for companies.”

The increasing need for such heightened security is backed up by research. Currently, the global economy loses US$4.1 trillion annually to fraud, according to the Switzerland-based International Security Ligue. Criminals may see increased opportunity as more people and organizations rely on technology for payments, the organization says.

The pandemic may also have accelerated the rise of the gig economy, something that has meant a greater need for effective payment solutions. Visa Canada has addressed this through Visa Direct, says Cargnelli, a service that pushes payments to constituents. For example, an insurance company looking to make a payment can avoid issuing a cheque by having that payment pushed to an individual’s account, with the receiver’s debit card used as the identifier. Companies such as Uber, Lyft and other gig-economy players can also use the technology to push payments to drivers.

“It’s just another technology that’s becoming more prominent in the marketplace from a business perspective,” Cargnelli says. “But not so much from a business-to-business perspective. It’s more from a business-to-consumer or business-to-small-business where there’s a lot of cheque issuance. This is displacing cheque issuance.”

Visa Canada is also using technology such as artificial intelligence (AI) to combat areas like application fraud. Due to the pandemic, more consumers are adopting cards as their preferred payment method, Cargnelli notes. As banks receive a large number of card requests, they must ensure that the applications are legitimate. So, AI can help to not only combat fraud in that process but also monitor the quality of data coming through on commercial cards.

Cargnelli recommends that companies challenge their banks as payment consultants to develop strategy and keep current on the market, which evolves constantly. The core business of most companies is not payments, and organizations must use their banks as consultants and leverage their expertise regarding the solutions that are available. “It’s all about having a payments strategy and executing on it,” he notes.
For his part, The Bank of Nova Scotia’s McPhail recommends that companies broaden their approach to payments by looking at a more complete overall payment strategy. A more comprehensive approach can provide benefits to the company while also offering multiple payment options for their suppliers, rather than relying on making all payments through electronic funds transfer (ETF).

“That’s great, but why do you want to pay everyone by EFT?” McPhail says. “Why not pay some of them through other methodologies that benefit the company? There are groups of suppliers who will readily defer to accept card payments. And when you do that, you benefit from extended working capital as well as rebates that the banks typically provide back to the company.”

Moving away from cheques as a payment method has been a goal of many companies for years, McPhail adds. Some organizations have been more successful than others, a situation owing largely to how good a company’s strategy is and how well that strategy is executed. Such an approach needs to include traditional elements of any successful project, including strong senior endorsement from company leadership, along with partners that will help accomplish the strategy’s goals. Documented policies and procedures on how supplier invoices are received and how payments are made is also crucial.

“You need to have all these things written down and well-known throughout the company if you’re going to engage in these discussions with suppliers and hope to get beyond, ‘just send me a cheque,’” McPhail says.

While card-based payments won’t be the only way in which most companies execute payments, there remains a huge opportunity for businesses to refine their payment strategies and benefit from card-based payments, McPhail says. Overall, the industry is experiencing relatively slow adoption of technologies such as e-payables, which he attributes in part to a lack of knowledge on the topic.

“But the message out there from us, anyway, is that there are huge opportunities, there are benefits to be had, there are wins for both the supplier and the company – this isn’t all about beating up your suppliers,” McPhail says. “People in procurement and finance, let’s cast the net wider and have a look at all the ways our company can benefit in paying suppliers.”

More carriers
Payment trends have evolved in the supply chain and logistics world as much as anywhere else. Increasingly, shippers are looking to offload writing cheques to carriers, says Tyler Buskard, director, sales in Canada, for BluJay Solutions. The company provides supply chain technology that automates all of the payment processes associated with transportation across a company’s critical modes. This trend is driven by a few factors, Buskard says, including that many of the organization’s customers are using more carriers due to capacity constraints or changes in certain areas. As well, outsourcing payments in this way typically regulates cash flow and payables certainty, making the business more regular.

The pandemic has also reinforced the business case for automated process with a ‘no-touch’ culture, Buskard says. The speed at which business takes place has increased and, more important, the acceptance of electronic communication and visibility is also increasing in many who were late adopters of technology and digital processes. “They went from critical adoption barriers to must-have accepted requirements in a matter of weeks,” he says.

Buskard advises to look for partners that not only take care of payments but support the entire process. For example, BluJay has partnered with TriumphPay to perform actual payments. “The assurance of paying the right thing is as important as making the payment,” he says. “Getting it right helps ensure your suppliers are partners in the process and not adversaries at war with your AP department.”

The appearance of COVID-19 has accelerated trends across business, including within the payments sphere. Ease of use, security and speed of payments have become even more important as the pandemic continues. Rethinking cheques, diversifying payment options and formulating a strategy can all help to enable a more robust payments plan.