Payment rail innovation has created plenty of opportunities for corporates. Same-day payroll or greater predictability of supplier payments using real-time networks can be valuable cash flow management tactics. For financial institutions to support their corporate customers’ B2B payments modernization journeys, they must loop into these networks and identify their key value propositions.
Yet a quickly evolving payments landscape has created risks for banks and other financial institutions (FIs) looking to modernize their own payment offerings. The logistics of participating in a faster and real-time transaction ecosystem are challenging and complex, and back-end systems must be prepared.
Speaking with PYMNTS about this dilemma, Aptys Solutions President and CEO Naseer Nasim, and Co-Founder and Executive Vice President Eric Dotson, examined some of the most pressing challenges FIs face as innovations deliver greater functionality to the legacy rail of ACH.
A Risk-Reward Analysis
Emerging payment technologies can present a conundrum for financial service providers.
“The rate of adoption of new technologies, automation, regulatory changes that are trying to quickly get up-to-speed, the immediacy of payments, all of that represents an opportunity — as well as a risk,” explained Nasim.
When it comes to ACH’s evolution, the acceleration of transactions that flow on the network has created a glaring point of friction for financial institutions that have historically had an entire day to complete workflows to post those payments. As Dotson highlighted, that timing has been compressed as a result of there now being three daily windows to process Same Day ACH transactions.
“It’s become pretty important for financial institutions to move away from manual processes and to automate those processes,” he said.
It is also important for the technologies that banks use to facilitate that processing to integrate seamlessly in their back offices. The more vendors an FI uses to facilitate that workflow, the more data management, supplier auditing and vendor management burden grows.
With FIs’ own corporate customers experiencing a similar challenge as they adopt new cash management, accounting and other platforms, system disparity and data silos create “fatigue” among financial service providers, explained Nasim, and can hamper the ability for technology to facilitate straight-through processing.
Supporting B2B Payments Modernization
For organizations to move away from the paper check, they need a value proposition of electronic payments that goes beyond the mere digitization of a transaction. Automation and straight-through processing can be important features of the payment services their FI partners provide, while the speed of Same Day ACH can also offer greater capital control and cash flow predictability for corporates.
While businesses can embrace application programming interface (API) technology to interconnect their back-office systems, financial institutions have struggled to access technology with the same kind of features.
“Some of the legacy technologies are … lagging behind right now,” said Nasim. “It’s holding these financial institutions back from actually offering products that they are … capable of handling.”
In a recent bit to tackle at least part of that friction, Aptys recently announced the launch of its Receipt Warehouse tool, enabling financial institutions on the receiving end of ACH transactions that arrive prior to their effective date to hold the transaction. With support for seamless integration with existing infrastructure, the tool provides greater control for FIs to mitigate risk by avoiding the posting of transactions with erroneous amounts or effective dates — a feature that can also be useful in mitigating the threat of fraud in a world of faster payments.
It’s a solution that reflects the need of technological support for the financial service providers that are offering services based on faster and real-time payment rails. And according to both Nasim and Dotson, embracing integrated tools that can mitigate risk will be key to FIs helping corporate clients modernize B2B payments.
“Businesses want [technology] to be simple, they want it to be straightforward, they want it to be fast,” said Dotson. “Financial institutions are taking a look at this and asking, ‘What can we do better?’ … Financial institutions see this as their time to step up to the plate and say, ‘We can provide you with the technology and services you need to help your business be successful.”