Business payments digitization is reaching an inflection point.
There will be no going back from modernized processes to manual ones.
As traditional payment methods and legacy systems are increasingly giving way to future-fit alternatives, the way businesses manage their money in and out will continue to evolve to meet new needs and emergent market realities.
“It’s been a revolutionary period, just thinking about the total amount of investment that’s gone into payments in the last few years,” Dean Henry, executive vice president of global business financing, payments and digital experiences at American Express (Amex) told PYMNTS.
“The payment landscape is changing right before our eyes, faster than ever before,” he said. “Businesses can’t afford to have their cash flows unmanaged in this environment.”
Hardly any operational aspect has remained untouched by the technical transformation of legacy processes.
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Henry emphasized that with inflation affecting all business touch points, higher cost of credit, higher interest rates, and a tighter economic environment more broadly, organizations are increasingly “looking to automate.”
“Seventy percent of CFOs are currently working on automating their AR [accounts receivable] or AP [accounts payable] operations,” he noted.
That’s because amid today’s ongoing macro challenges, businesses are looking for any edge they can get to succeed and remain competitive while, at the same time, driving customer retention.
Looking ahead, Henry forecasts that around 4 in every 5 (80%) B2B transactions will be supported by software platforms.
Still, he noted it is important to recognize that “the needs of buyers and suppliers have not really changed over time.”
Suppliers are still trying to figure out what they were paid for, while buyers want to make sure they are paying the right invoice.
“What has changed,” Henry said, “is that industry investment has made automating easier than ever before — it’s no longer such a heavy investment in tech or time.”
Connections between enterprise resource planning (ERP) systems to AP and AR software solutions are “quite frankly out of the box,” he noted, emphasizing that it has never been faster or easier for organizations to immediately start tackling core administrative hurdles within their financial operations.
PYMNTS found that more than 9 in 10 CFOs (91%) believe digitization has improved efficiency, while more than 8 in 10 (84%) say digitized systems improved their working capital management.
“B2B networks are starting to catch up to the consumer experience,” Henry said, adding that automation is helping solve many of the historical frictions at the “heart” of payment problems.
Modern solutions, he noted, are critical to allowing buyers and sellers to “share data and automate error discovery” between purchase orders and invoices, which is driving “incredible efficiencies” for the businesses implementing them.
Legacy solutions that rely on manual entry and cumbersome procedures are ill-equipped for a digital era.
“To state the obvious,” Henry said, “there is no reason today that any business should be issuing paper checks — everybody understands the need for receiving digital payments and integrating with a payment system.”
PYMNTS research shows that digital payments adoption is accelerating and companies across industries are eager to realize the impact of modern payment methods that can drive more transactions, improve cash flow, and streamline compliance.
Henry emphasized that there are meaningful benefits to updating and automating AP and AR systems, including drastically reducing the time spent paying invoices and closing the books each month.
“We [at Amex] hear incredible stories about the power of automation,” he said. “For example, we have a customer who is in the electricity business. We’ve spent a lot of time with them and listened to their core problems to ideate solutions — ultimately, we helped them take their AP processes from a daylong process each month to a five-minute task.”
The most important element of the modern payment ecosystem is data, Henry noted.
“Moving data between buyers and suppliers, aiding the reconciliations between purchase orders and invoices — it’s always been a problem and will continue to be the place where innovation happens,” he said.
Moving data with many parties is more complicated than moving data with fewer parties, Henry added.
Because Amex has a closed-loop network (meaning they function as the issuer, acquirer and network), the company can standardize the data they have across buyers and suppliers on their network. Henry said that what he is looking forward to most is continuing to unlock the role of data for future growth opportunities.
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