Corporates aren’t that interested in real-time payments. At least, that’s according to a report from the EuroFinance Corporate Treasury Network published last month, which found less than half of corporate treasurers say having the ability to make a real-time payment is a priority.
But as more FinServ players explore B2B payments use cases for faster payments initiatives, like the U.K.’s Faster Payments scheme, some are beginning to realize that, when it comes to corporate payers, real-time payments capabilities can offer more than speed.
Kosten Metreweli, CCO of Modulr Finance, which operates an API-driven payments platform, says the U.K.’s Faster Payments can provide corporations with the transparency and overall heightened user experience that they need, even if corporates don’t care about the speed of a payment itself.
“The really significant thing is it’s not so much the speed, but the reliability behind it,” he recently told PYMNTS, adding that a massive part of that reliability is being able to understand the status of a payment in real time.
“You could end up in a situation where the user experience is terrible. It’s the worst possible user experience when you send a payment, and the only time you know that it hasn’t worked is when the person who is receiving the payment calls up angry and says, ‘Where’s my money?’” the executive explained. “What corporates want is the ability to send a payment within seconds and get a notification that the payment has arrived, so you know for certain what has happened. And if you get a response back that there has been a failure, you can fix that problem immediately.”
That kind of visibility into transactions is key for any payer, consumer or corporate. But Metreweli noted that corporate payment scenarios can greatly benefit from the transparency that Faster Payments offers, including the ability to more quickly act on information delivered in real time about these transactions.
“There are a whole set of treasury functions that we’re focusing on automating in real time,” he said. “The payment can come in and get reconciled automatically against an invoice in the ERP system, and payouts can be triggered. It’s the real-time in-and-out capability, as well as what happens in the middle, that allows a company to respond to payment-related events in real time.”
He offered the example of a property rental firm, which must accept payments from renters but then disburse payments to landlords.
“You want to take the rental payment in and, as soon as it arrives, split up the commission and send money to the landlords,” he explained. “You can automate that process, and it’s a real win. It means you can offer everyone a good user experience.”
Businesses can’t get that kind of service with other payment schemes like Bacs, he explained, which not only requires several days for payments to complete, but also forces payers and payees to wait the same amount of time to find out if anything has gone wrong.
Take payroll, for example.
“Generally speaking, there is a bit of a panic at the end of the month,” he said. “A payment file has to be sent out through Bacs, a three-day process. And at the end of that period if you get a few errors in that file, they won’t come back immediately, and you have a humber of days until you find out that things have failed. That’s really significant if your employee is getting paid late, and it takes a few days to discover that payroll hasn’t worked.”
The U.K.’s Faster Payments scheme offers this type of transparency and real-time visibility that enables corporate payers to gain a better grasp of payment status and cash positions in accounts payable. But, Metrewali said, corporate access to Faster Payments remains a challenge.
Even as the Faster Payments Service works to expand Direct Corporate Access (DCA) into the scheme, Metrewali warned it doesn’t always work the way it should.
Banks’ DCA offerings still rely on batch mechanisms, which means there must be a certain number of corporate payment files for the batch payment to actually go out, and a single error in one file could delay all transactions in that batch — meaning even with access to Faster Payments, B2B transactions aren’t necessarily “fast.”
“Frankly, one of the biggest issues with DCA is it goes down on a regular basis,” he said. “It was designed for a nine-to-five, five-day-a-week world, where it doesn’t work on weekends or after hours.”
He cited a recent outage of one major bank’s DCA service that went down for 10 hours, rendering businesses unable to make payments using the scheme.
“From our perspective, that’s unacceptable,” Metrewali said.
Earlier this month, Modulr announced that its API-driven payments platform is now linked into Faster Payments, an effort to enable more reliable, ongoing access to the real-time payments scheme for business customers of the neo- and challenger banks that are built on Modulr.
It’s certainly an effort to accelerate corporate and B2B payments, Metrewali said. After all, a lender that’s able to more quickly send funds to a borrower has a competitive edge, and a supplier able to receive a B2B payment in near real time will undoubtedly land in a better cash position. But increasingly for corporate payers, the executive noted, the benefits of truly continuous access to Faster Payments is about real-time visibility of accounts payable — and the ability to act on that real-time information.
“For everything to operate in real time on your phone, that’s becoming the expectation,” the executive said. “Neo-banks and challenger banks are absolutely majoring on that user experience. From a corporate perspective, if you can trigger an event to happen as soon as a payment comes in, then that’s enormously helpful.”