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Payments Are Catching Technology -- And Treasury Benefits

  • By Ryan Stewart
  • Published: 7/11/2016
A fundamental shift within the payments industry, driven by the financial crisis and the rise of fintech, should be music to the ears of corporate treasury professionals. Real-time transactions have the ability to radically change the way treasurers handle liquidity and cash flow. Meanwhile, alternative payment methods that have greater security and more control are pushing the industry forward.

Real-time payments

Real-time payments have the ability to send and receive payments within seconds, 24/7/365. But a common misconception of real-time payments is that they have real-time settlement. Although the money is automatically withdrawn and deposited from accounts, this is happening through standard banking tools like memo-credits. The settlement still occurs on a batch basis through the ACH network.

Real-time payments have the opportunity to systematically revolutionize a company’s cash flow and liquidity. Treasurers will be able to process payroll, disbursements, and invoices instantaneously. Invoice discounts for real-time payments will drastically decrease the payment range from the current average of 20 days. Governments will be able to send money for disaster aid at times of need, while SMBs will have greater insight into the financial health of their business. Unlike many payment methods today, real-time transactions will also be able to support longer messages, allowing greater transaction detail to assist in reconciliation.

While countries around the world are working to bring their central banking and payment infrastructure up to speed to support real-time payments, security continues to be a main concern for the public. The sheer speed of real-time payments poses security and fraud concerns. This is a significant consideration to the overall proliferation of real-time payments. To protect businesses, real-time authentication with behavioral, enrollment, login, and device identity will become table stakes.

Today’s opportunities

Although real-time payments have emerged through P2P, it will still be a few years before the infrastructure can support B2B or B2C. Therefore, organizations still receive a large number of B2B payments by check. Checks pose the greatest risk of fraud with very little security controls in place. To help address this, today’s treasurer can get more transactional detail and greater security by utilizing credit card alternatives.

Virtual credit cards, or controlled payment numbers, are single-use cards that can be used when making electronic payments. Virtual credit cards are a string of numbers with tight controls and security parameters. The card can be loaded with an exact payment amount and date limits, reducing fraud and payment processing errors. With no space limitations within the payment message, companies can add as much data as they like to simplify reconciliation. Virtual credit cards have an additional layer of security by hiding the originating account information. As virtual credit cards become more mainstream, treasuries will be able to turn to them for increased efficiency and greater control.

Today, many B2B companies are using a standard commercial credit card, prepaid cards, or crediting a credit card for card-present and card-not-present payments. Standard credit cards are a flexible option, with the added bonus of earning loyalty points. Reconciliation is typically easy, and the payment is quick and secure, in comparison with a check. While standard credit cards are more heavily used today, the security and control features of virtual credit cards are likely to drive adoption rates, ultimately shifting the B2B landscape.

Today’s treasurers need solutions that allow for faster payments, have greater security controls, and reduce the need for manual reconciliation. The payments industry is equipping treasurers with all three through alternative payment methods such as real-time payments and virtual credit cards. The once static B2B payments space has begun to transform the way businesses manage payments, cash flow, and liquidity. Now business must evaluate and incorporate the newly available solutions that continue to drive the industry away from legacy payment methods and towards more secure, real-time payments.

Ryan Stewart is head of product development, North America for Beanstream, a Bambora Company. He has worked in the payments industry for over 15 years.

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