By 2025, 30 to 50% of B2B payments will not only be done digitally, they will also be done in real time.
FIS Senior Vice President of Digital Payments Ginny Chappell made the bold prediction to Karen Webster in an interview, noting that B2B payments are, numerically speaking, “catching up” to other types of transactions.
She pointed out that peer-to-peer (P2P) payments have grown significantly, spurring more real-time B2C payments and, in turn, providing a tailwind for B2B.
Real-time awareness of the benefits that real-time could bring to B2B payments, primarily in the form of improved cash flow, is pushing companies to further engage in payments modernization.
Chappell said chief financial officers (CFOs) and treasurers are actively investing – or are willing to invest – in real-time payment solutions, with a view to integrating real-time functionality into their payment streams.
Business leaders are thinking about how real-time payments can positively impact liquidity and cash flow. Real-time payments can cement one of the essential ingredients of the financial system and interactions between buyers and suppliers, she added.
Knowing that a transaction will settle in seconds rather than days can build trust in the B2B relationship, as well as with suppliers and partners. Executives are also free to pursue other more strategic initiatives within their organizations, as digital payments carry more robust data payloads (via the ISO 20022 messaging standard) and reconciliations can be made more easily.
“The notions of better communications and cash management should not be taken lightly,” Chappell told Webster. Without real-time payments, she noted, “there are still treasurers in many organizations who spend their days calling their banks to figure out where the payments are. These are real pain points. “
About a third of B2B companies have integrated real-time payments, according to Chappell, who referred to a recent survey of financial executives conducted by FIS, which indicated that there was a lot of “fruits at hand.” to pick.
“The lowest fruit is obviously replacing checks, and slowly ACH, for use cases where people need speed,” she said. “These use cases may be around accounts receivable, or it is a business-to-consumer experience where the consumer needs funds faster. “
Wire transfers are clunky and come with fees, she said, which means lower value transactions (say, for less than $ 100,000 in B2B) could be done more efficiently on RTP rails.
And as Chappell pointed out, verifying eligibility, Anti-Money Laundering (AML), and Knowing Your Customer (KYC) “are integral parts of the whole experience” and build confidence in system, which can have positive spillover effects along supply chains. She said the “accuracy” of real-time payments can help businesses manage inventory more efficiently, with just-in-time transactions, and can make cross-border transactions more transparent and efficient. The shift to digital payments also promotes flexibility across the B2B ecosystem, as recipients can choose how they are paid.
As with any pivot to advanced technology, there are gaps that hinder progress, mainly in the form of knowledge and skills gaps. These gaps can hamper ubiquity, Chappell said.
The shift to implementing real-time payments – and capturing the benefits – is easier said than done, which is why some verticals have more readily embraced real-time functions.
Chappell noted that knowledge gaps may be among the biggest barriers to adoption of real-time payments and are rooted in the overall digital shift, which may need to occur before full adoption of RTP.
The hospitality and travel industries, she said, have proven to be able to transform into digitally-driven or digital-only businesses. But other companies, in the life science industries, for example, can chart their digital transformations over years, not months.
It takes time to completely move away from paper and manual processes, even if executives are keenly aware of the pain points. To handle the complexities of technical integrations with aplomb, Chappell observed that executives need to prioritize skills enhancements among their back-end staff, even as companies embrace partnerships with third-party vendors to modernize their operations.
In about four years, she said, between 30% and 50% of B2B payments will travel real-time tracks, because “we’re going to be in a different world,” as many executives are explicit in stating that they will adopt real time. The increased adoption will come as 42% of B2C business executives have already embraced real-time payments or are driving these changes. A B2B tidal wave will naturally follow, Chappell predicted.
On the hub of real-time digital payments for commercial payments, she said: “I think we’ll get there by 2025.”