The benefits of payments automation are wide-ranging and include the following, to name only a few:
Reducing overall payment costs: Electronic payments methods have reduced staff time and effort to execute payments while enabling end-to-end automation and reconciliation, leading to greater straight-through-processing (STP) and lower processing costs.
Removing paper from the accounts payable (A/P) department: Companies which implemented payment automation claim that formerly typical problems, such as late payments and operational risks now belong to the past. Staff members are less stressed and suppliers are paid on time, thanks to minimal paperwork.
Reducing the risk of payment fraud: The improvement of risk prevention – both internal and external – and detection is a very important benefit of payment automation.
Better cash management: Payment automation allows the enterprise to gain a rapid overview on A/Ps and receivables. The enterprise treasurer /management can be more aware of what the future holds and take better business decisions for transactions investments and others.
Access to benefits of new technologies: One last – but not the least – reason why enterprises implement payment automation is the access to benefits of new technologies and digital transformation. The setting up of the payment software is sometimes a first step on the journey to fully digitise back offices or to fully integrate the front and back offices. This is an opportunity to mobilise the organisation around a project that affects almost all departments and draw valuable lessons for the future.
Without a doubt, operations, technology and people can reap many advantages from payment automation. Despite the benefits outlined above, many companies are still reluctant to embrace it. Why? There are also several obstacles, which include some or all of the following:
Supplier resistance: Liquidity mismatch – triggered by limited synchronisation/timing of inflows and outflows – and concerns over sharing private financial information over an electronic channel are leading causes of resistance. Added to that, if an important supplier does not adopt e-payments the cost of parallel infrastructure maintenance can rise drastically.
Incomplete and inadequate e-payment solutions: Despite the many solutions available in the market, many companies struggle to find solutions suited to their goals and expectations. Some companies are forced to consider multiple solutions to cover their needs completely. As a result, the integration and maintenance costs rise. Payment services providers (PSPs) remain focused on specific areas in the enterprise, which can be problematic particularly for global companies. A good example which illustrate that PSPs are not always able to provide their solution globally, is an on-going project at International Co. They decide to implement several different PSP solutions in order to cover their diverse needs. Connecting to a new PSP for a large company is always a challenge, because all PSPs have their own interface, reporting and servicing methods. All of these should align with the standard processes of a company and should also be integrated with – primarily – their legacy systems. A handful of challenges in total.
Lack of integration between e-payments and other back office systems: Misalignment between corporate accounting and electronic payments systems is another obstacle for the adoption of payment automation. The existing accounting systems function in ways that do not allow or require costly integration efforts. Consequently, residual processing is performed manually. As a result many companies then decide, typically, to either postpone their investments or even not to implement a solution at all.
Inadequate IT resources: The combination of legacy back office systems and insufficient operational and technical skills is a major hurdle to the adoption of payment automation. To give an example: A manufacturing company wanted to manage a payment automation project relying on internal skills. Within a couple of months, the project fell behind schedule and drifted significantly from the desired goals. Fortunately, its team understood quickly that the skills were inadequate and looked for external help before it was too late.
No management buy-in: The lack of executive sponsorship leads to poorly managed projects without any clear vision on the outcomes and benefits for the organisation. In fact projects fail because critical decisions were not supported by top management.
What Payment Services Providers have done to Address the Issues
PSPs are aware of the challenges faced by their potential clients to implement payment automation systems and have undertaken some actions to better meet the needs of companies and organisations.
A holistic approach is necessary to address all the needs of the organisation: As discussed, PSP offerings do not support the needs of their clients in total. PSPs are working on solutions which will enable them to firstly cover the needs of almost all departments in the organisation (procurement, finance, payroll, etc; secondly to use flexible technologies such as service-oriented architecture (SOA) to extend the functionalities of their solutions to meet requirements of specific users in a company; and thirdly to focus on value-added services such as reporting, payment security and control and compliance. Such functionalities enable platform rationalisation, which supports the business case. While there might still be a long way to go, PSPs that have taken this path to differentiate.
Complete payment solutions suited for particular sectors: PSPs that focus on a particular sector with the aim of providing complete solutions can better cover their clients’ needs, build successful relationships and outperform their peers. Consider, for example, a firm that specialises in solutions for the health care sector. ‘The company is transforming the industry with a 360 degree approach to revenue cycle management, enabling providers to get paid more, faster. This is enabled through automation of the four components of the revenue cycle: patient access; insurance and third party claims; insurance and third party remittance and payment; and patient billing and payment.’ Today, the company has connections to more payers, providers and vendors than any other competitor in the marketplace.
Facilitating integration of e-payment solutions with existing A/P systems: Along with SOA-based integration, customisation of solutions for liquidity management and reconciliation have been key to driving value for clients. For example, in the case of reconciliation, the criteria that matter for payment reconciliations vary depending on the sector and companies. PSPs have enabled their solutions to offer the flexibility required.
PSPs have undertaken many initiatives to improve and customise the solutions to drive client adoption. As integrator of some PSPs solutions, the authors are convinced that additional aspects can be adopted to be more successful in helping organisations adopt e-payment automation projects.
The further aspects to help successful implementation of e-payment automation include:
Payment process standardisation across the whole company is a must to get the most out of a payment automation project, which concerns almost all departments in a company – not only the A/P department as some assume. A best practice is to review all payments-related processes across the organisation. Standardisation helps people rapidly understand processes and communicate and over the long term, training costs can be significantly reduced. Process owners should be appointed for the standardisation. It is recommended to choose experienced, highly skilled people with a very good knowledge of the company.
Obtain management buy-in: Every corporation should consider the amount of cultural change that will accompany transformational initiatives if payment automation is to be successful. Automation solutions need management’s backing at all levels because they bring about radical changes in A/P operations. Obtaining management buy-in is not always an easy task, particularly when the advantages that such a project can bring are not perceptible for the top management. A good approach is to create a business case where it can be clearly demonstrated that short and long term benefits are linked to the project. As an example, a telecommunication company was looking to implement payment automation software. Management was convinced it was the right thing to do, but wanted to postpone the project to later because they believed other projects had higher priority and a better return on investment (ROI). The business case revealed that the project had a much better return than initially expected and that it could be done in a shorter time. The project was launched with a member from management as project sponsor.
Find the right IT skills to implement payment automation: To improve the chance of success, companies should conduct an internal assessment of process, technological and human capabilities before launching a payment automation project. A lack of internal assessment leads to a lack of understanding of the many technological capabilities and enablers available to the enterprise for payment process efficiency. So the internal assessment should help management understand if the company is ready to accept all the changes required by the project and if the right IT skills and capabilities are available to carry out and deliver the project. The assessment should be done in an objective and factual way. The pitfall in this exercise is to minimise weaknesses or exaggerate forces. Find a solution to address each weakness if there is any. Hire people with the required skills or subcontract the project where necessary.
‘Lite Solutions’: With advancements in technology, leading solution providers are providing lite e-payment solutions that require a low implementation footprint, typically in a software as a service (SaaS) mode. Services are provided in a ‘pay as you go’ commercial model that improves chances of business case approval. An evaluation of such solutions is highly recommended.
Payment automation yields increased productivity, efficiency, and greater visibility. Providers have done much to improve their solutions and adapt them to the new market demands. But PSPs and companies should carefully consider how they want to approach payment automation implementation projects for a faster and successful implementation. It is one thing to know what to do, but another to do it in the right way. A good practice for success is to standardise payment process across the company, absolutely obtain management buy-in, find the right skills to implement the projects and take advantage of SaaS like solutions.
Tim de Knegt, treasurer for the Port of Rotterdam, discusses how he is looking to bring more value to the Port's clients using blockchain.
Regulation technology is fast gaining currency by transforming how financial institutions can tackle compliance in a swift, comprehensive and less expensive manner.
Many banks around the world, large and small, continue to experience major security failures. Biometric systems such as pay-by-selfie, iris scanners and vein pattern authentication can help.
The implementation date of Europe's revised Markets in Financial Instruments Directive, aka MiFID II, is fast approaching. Yet evidence suggests that awareness about the impact of Brexit on MiFID II is, at best, only patchy and there are some alarming misconceptions.