Cash to Card
With fintechs and other challengers moving in on the most profitable parts of corporate banking such as international money transfers and the provision of FX services, and digital payment processors racing to sign up as many customers as possible, where does that leave the treasurers?
What corporation doesn’t want to expand its working capital? The initial step involves seeking efficiencies in accounts payable processes, and the global Accounts Payable Software market is expected to reach US$1880m by the end of 2023, with a CAGR of +7% during 2018-2023.While demand for digital payments soar and corporate treasurers are actively interested in cutting-edge fintech solutions, most financial institutions are engaging with the start-up community through formal accelerators or incubators. Companies are increasingly looking for technology-driven payment providers that can consolidate their current systems and the overall market is growing. Fintech has moved from ‘disruptor’ to ‘enabler’ for many financial institutions and continues to shape the future of the financial sector. However, a failure to offer regulatory certainty and the high risk of being a lead adopter in using technology so new is unavoidable.
Taking on new technology can be unsettling, but the world of treasury and finance has an exceptional opportunity to not just keep up with new trends, but to be a real stimulus behind them. Before disruptive start-ups like Stripe, and PayPal before that, any corporation receiving card payments would have to go through the demanding and lengthy task of setting up a merchant account with a bank, which usually came with high fees and awkward online interfaces.
Thankfully, there are numerous popular payment gateways around today, including Adyen, Stripe, 2CheckOut, Tipalti, Braintree, GoCardless, Paymill, Credorax, YapStone, YeePay, Omise and Trustly Group, all replacing expensive or slow money transfer services, providing payment acceptance capability and, in some cases, secure PCI DSS compliance. The choice solutions in the modern payments space may be confusing, but most businesses, be they merchants (Uber or Airbnb) to ecommerce marketplaces (Lyst) to subscription services (SaaS companies like Slack), have one shared requirement: the need to process payments.
“Companies are increasingly looking for technology-driven payment providers that can consolidate their current systems and the overall market is growing. Pulls Businesses want to focus on their core competencies and do not need to become payment specialists, leading to a strong demand for payables automation across all verticals.”
For corporate treasurers, Adyen and Tipalti are gaining ground. Adyen, the payments processor for Facebook, Netflix and most recently Gap, has its functionality synchronized with platforms such as Salesforce, Ebizmarts, Navitaire, Cegid, Hybris and many more. Shares in the Amsterdam-based company have more than doubled in value since their stock market debut in June, currently trading at €610 from a listing price of €240. Tipalti’s open API application allows users like Amazon Indeed and Twitter to make payments across 190 countries in 120 currencies, and users can offer suppliers six different forms of payment (PayPal, prepaid debit cards, wire transfer, U.S. ACH, global ACH and local bank transfer).
Another innovative provider – Klarna – offers three payment options that cover all consumer needs for seamless shopping and helps encourage further online purchasing: ‘Pay now’, ‘Pay later’, and ‘Slice it’. Pay now facilitates straightforward and immediate online payment, while pay later, allows shoppers to ‘try before they buy’ and slice it, offers consumers the flexibility to spread the cost into equal monthly payments. In the first half of 2018, nearly US$58bn was invested in fintech firms, and when their capabilities are laid out, it’s easy to see why.
Small and midsized businesses who want to develop internationally, but have no infrastructure for making or receiving global payments, can choose from the plethora of payment solutions listed above, amongst many others. The fintech space is rapidly changing and it isn’t necessarily dominated solely by start-ups. For example, Western Union’s Edge platform ensures SMEs have the ability to create stronger connections, make smarter decisions and grow their business globally.
Edge differs from its competitors because it is designed to provide a platform that connects firms already doing business with each other and it is based on an existing network of 100,000 companies that make payments through WU anyway. Alibaba and Amazon Business are close competitors but unlike Edge, they are both a by-product of marketplaces of physical transactions. The history of international payments can arguably be retraced back to the history of US-based WU, but this pioneering company can’t just rest on its laurels as competition is rife.
“B2B start-up Currency Cloud is one of the most prominent, and in March it raised $25 million from Google’s VC arm, GV and others, and has had more than $25 billion sent across its network.”
Going paperless is hardly a new concept with companies like ACOM providing automated payments since 1983, but newer fintechs like Zuora, MineralTree, Nvoicepay and ConnectPay see a different future, one where businesses plug into one or more cloud-based solutions on a subscription basis to access particular functionalities.
Supply-chain finance is primed for a leap in productivity and is a winning combination of older technologies combined with new joint ventures. Working capital solutions provider Demica has collaborated with FCI to start piloting its FCIreverse SC platform, to help access the estimated $3 trillion of potential for SME SCF. Other SCF players like Orbian and Prime Revenue are doing the same. Lastly, LiquidX, the global marketplace for liquidity, rapidly expanded its roster of corporations, assets, liquidity providers and cross-border capabilities.
Businesses want to focus on their core competencies and do not need to become payment specialists, leading to a strong demand for payables automation across all verticals. These companies may claim to offer a powerful complementary funding source to traditional banking, however none provide any ultimate alternative, and corporate treasury must bide its time.
From coins to paper and from bank accounts to e-wallets, money has taken on various shapes, sizes, and forms in the last few years and it is still evolving. Even if a totally cashless society seems a little way off, we are still a in the midst of a payments revolution.