This particular posting brief provides an opinion about some of the tech areas being addressed across the corporate payments space. While we may not agree that all are really trends versus types of fintech that are impacting corporate payments in some way, they are certainly in play and not all are necessarily new either. An example is payments hubs, which have been around now for more than 10 years. While we might say that a trend is the centralization of corporate payments, and perhaps not with a bank, a ‘hub’ is a debatable term, typically suggesting bank infrastructure investment to simplify payments delivery across multiple business units. There are several of these scenarios within the posting.
Globalisation in the past few decades has led to the advent of internationally scattered supply chains where procurement as well as production has been moved to emerging or low-cost markets. Corporates are aware of the inherent risks associated with global supply chains where procurement or supply of critical components is dependent on third party suppliers……Supply chain financing aims to minimise these risks by the use of financial instruments and technologies for optimising the working capital and liquidity. Recent innovations in the space include invoice discounting, dynamic discounting and reverse factoring.
Taking the author’s mention of a trend in supply chain finance (SCF), which is certainly gaining advocacy in several forms (Mercator covers this space in a number of reports), but we might argue that the real trend is in improving digital cash cycles that integrate the traditionally disconnected pieces across procure-to-pay. SCF is one of the previous ‘one-offs’ that is now becoming a featured option for managing working capital within the overall cash cycle flow, which is occurring through APIs and other types of partnerships in the fintech landscape. However, these types of open account options are certainly not new, having been used primarily across Europe and Asia for almost two decades, but now gaining more adoption momentum in the U.S. See one of our recent reports reviewing various models across SCF.
Regulatory compliance is also mentioned trend, and certainly applies to payments, as it does across bank holding companies in general. We might stretch this to say that the trend is for better risk management altogether, which certainly involves compliance and is a reason for the rise of ‘regtech’.
With the more sophisticated requirements for corporate payments, the ability of banks to ensure a seamless experience of payment transactions to customers is a critical differentiator for banks. We are likely to see significant investments by banks to upgrade corporate payment capabilities, and a number of new suppliers will emerge to benefit from these opportunities.
We certainly are on board with that opinion, and one can see our Mercator list of 2018 Outlooks incorporating many of these ideas in the commercial and enterprise payments space. Just use this link to download the Outlook for free.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
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