Michael Costonis describes six trends in corporate payments, from always on, real-time payment information services to APIs.

As I mentioned in my last post, corporates face a number of challenges when it comes to payments—and banks have an opportunity to turn these challenges into a competitive advantage. But as they consider ways to address payments challenges, banks should note that the corporate payments sector globally is currently being impacted and reshaped by six key trends.

1. Evolving customer expectations and consumerization of corporate payments

The needs and expectations of corporate customers are rising, as they seek greater speed and efficiency through automation and digitalization, and demand a digital, multi-channel payments experience comparable to the one they enjoy in their lives outside work.

Rapid innovation in retail and consumer payments has left the corporate payments experience lagging behind, and to engage, retain and win corporate customers banks now need to close the gap. But banks are responding. They’re beginning to offer rich functional capabilities supported by increasingly sophisticated applications. And they are moving to focus more on selling new value-added services around the payments core.

2. Always on, real-time payment information services

The enhancements being made to banks’ corporate payments services include the capability for customers to get information real-time on payments round the clock. This does not necessarily mean that the services offer real-time payments—but it does mean that they’re providing up-to-date, on-demand information on payment status, tracking and context, 24×7.

3. A changing environment for international trade

A few years ago, only large corporations tended to conduct significant volumes of cross-border payments. Today, advancing globalization has pushed these volumes ever higher, and even the smallest small or medium enterprise (SME) is likely to have significant numbers of international suppliers and/or customers. The result is a rising demand for cross-border and multi-currency payments services.

While these effects are being felt worldwide, the fastest growth in international trade and payments over the coming years is expected to be in Asia, causing banks’ payments operations to be dominated by a strategy for that region. And globally, the ongoing shifts in international trade are creating fresh demand for corporate payment products and services as well as for local knowledge and new banking relationships.

4. Pressure from ongoing regulatory change

The payments industry is facing an unprecedented global wave of regulation that is impacting payment providers and corporations in every market and region. The new and evolving sets of regulations, standards and schemes include more stringent global requirements for activities such as e-payment, sanctions compliance and anti-money laundering (AML).

The challenges of achieving and maintaining oversight and compliance are heightened by the increasingly cross-border and multi-currency nature of payments flows, and further complicated by differing regulatory and political agendas in different countries.

All these regulatory developments at global, regional and national levels are creating new challenges for banks as they seek to design and deliver regulatory-compliant products and services for their clients. The regulatory pressure faced by banks—including monitoring and reporting requirements—looks set to intensify still further in the future.

5. Disruptive market entrants—including FinTech players

Alongside the effect of seamless and convenient consumer payments services, new entrants to the corporate payments market are also helping to reshape corporate expectations of the payments experience in the workplace. One of the most dramatic developments has been the emergence of FinTech companies—financial technology businesses (often startups) founded with the purpose of disrupting incumbent financial systems and processes.

FinTech companies have been quicker than banks to take advantage of advances in digital technology, developing banking products that are more user-friendly, cost less to deliver and are optimized for digital channels. They are also less burdened than banks by the demands of regulatory compliance, and are unencumbered by complex and costly-to-maintain legacy systems. As smaller organizations designed to generate innovation, they are more in tune with the peer-to-peer (P2P) culture engendered by the explosion of social media, and usually focus on creating single-purpose solutions that deliver an improved experience within just one product or service.

The impact on banks varies between countries and regions: research from Accenture suggests that banks in the Nordic region risk losing up to a third of their revenues, as a wave of new FinTech startups enter the market. Examples of FinTechs that are gaining traction in the corporate payments market include Flinqer for cash management and Traxpay for B2B payments.

6. Application programming interfaces (APIs)

The trend toward open banking/open payments is seeing banks exposing their payment systems externally and allowing third parties such as merchants or software vendors to embed payment functions—balance look-up, payment initiation, funds transfer and so on—into their applications.

This shift reflects the wider move into an “API economy”, in which APIs provide the glue that connects information and services from various sources and service providers to create the user experience that API aggregators want to deliver to their customers. Examples in other sectors include the Citymapper app, which combines APIs from metropolitan rail, bus and train companies together with weather services, to provide travel and routing information in multiple cities. In financial services, figo has just launched its XS2A enabler for PSD2. PSD2 will act as a catalyst for progress toward greater use of APIs in corporate payments in Europe.

Ultimately, APIs will enable corporates to manage all their payments and cash management from a single portal across multiple banks. There is an opportunity for banks to publish “branded” APIs where their brand is displayed alongside the function, such as providing account balances.

In my next post I’ll explore the implications for banks’ corporate payment services.

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