The machine learning branch of AI continues to make inroads to corporate banking use cases, and this referenced piece, which appears in The Financial Times, describes another one of those.
The blog was written by the CEO of Previse, a 2016 startup based in London, which utilizes data contained in supplier invoices to make smart payment decisions using machine learning algorithms. We have covered the use of AI in corporate banking in several member reports, the latest having to do with receivables management, obviously a related use case.
One can argue (as we have) that the cash cycle is all connected anyway, and digital process transition is the initiation point. Actually, comments in a previous posting suggest that cleaning your room is more fundamental, but regardless, the ‘missing link,’ as mentioned in this title, is surely one of the tools in the shed to improve liquidity:
‘At present, payments in the B2B sphere are hampered by archaic processes. In the UK, this process starts with the need for invoice approval, after which the payment will not be made until payment terms have been reached and finally, transfer of funds, which can take an additional three days. The entire process from the delivery of goods and the receipt of payment can take months in total…..In the US, the situation is even worse. B2B payments are often made by cheque, which needs to be received and then cashed, adding more days to the overall payment time. All-in-all, the way B2B payments are conducted is highly inefficient and this has serious effects.’
The author goes on to make the point about faster payments being only a piece of the solution to solving the widespread late payment issue, something particularly dangerous for SMEs in the U.K. (and pretty much everywhere else). While we have not had the benefit of a direct briefing on the business model, a brief tour of the website reveals a fee-based model for suppliers with marketplace funders providing instant liquidity.
There are many variations of such models, with latest gen tech allowing for ease of integration and broader, faster funding choices. This is another area that we closely track for developments. The utility of such capabilities become even more important during slow/no growth economic conditions, which has been a relative mainstay in the west for a decade.
‘The good news is that the issue of B2B late payments is entirely remediable. While organisations such as Mastercard and Visa are beginning to address the problem and infrastructure like Faster Payments are steps in the right direction, these solutions are focused on accelerating the speed at which payment transactions are made. However, while solutions such as these are undoubtedly a welcome step in the battle against late payments, to truly overcome the issue a holistic solution that streamlines all elements of the payments process is needed. Tackling invoice approval in the long chain of steps in the B2B payments process is essential to unlocking instantaneous payment, akin to those that are the norm in the B2C world.’
Get your digital house in order, and good things can follow.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group