Digital channels

The ubiquitous cheque has been the staple in corporate payments for years now. Despite being the most expensive payment instrument, the cheque has dominated the corporate payment world for decades. It is not just the processing cost of the paper cheque that makes it a burden for banks. It is also a security headache. It is well known that paper cheques are the largest vehicle of payment fraud.
All that is changing. And, as it usually happens, this started with the consumer payments business. As the direct-to-consumer models continue to evolve, the B2C payments business is growing rapidly (annual growth rate of 15 per cent led by digital e-commerce). And the digital payment technologies that are coming out of the consumer payments industry (Zelle, Paypal, digital wallets, et al) offer a rich choice for banks and corporates to offer digital experiences to their customers:

• Disbursement of funds: Transfer volumes of Medicare/ Medicaid funds by healthcare providers to their members continue to rise and should, by and large, be digital.
• Refund management: In a direct-to-consumer world, corporations need to manage refunds to customers from excess payments and product returns. Customers used to instant digital payments from the e-commerce world are expecting a similar experience everywhere.
• Loyalty/reward disbursements: As corporations build deep relationships with their customers, they continue to adopt customer engagement strategies from e-commerce retailers. These include cash-back payments and encashing of loyalty points, which need to be executed through digital channels.

A similar revolution is around the corner in B2B payments, with the expansion of consumer-like payment rails, such as digital wallets, in addition to the existing ones like ACH, Wire, virtual cards, etc. We believe the convenience of digital payments is only a starting point. There is so much more to it by way of benefits:

• Streamlining of payment processes has a direct impact on working capital management. Trade finance is key to enabling global supply chains, and fintechs are coming up with specific solutions.
• Cross-border payments to suppliers and subsidiaries need to stand up to heavy regulatory requirements in addition to managing the risk of fraud. Digital payments are increasingly the safest alternative. In addition to enforcing compliance, digital channels can ensure transparency of global fund flows.
• Of late, acquiring a deeper understanding of the supplier ecosystem has become an important factor (see the section on payment analytics below).