The pandemic ushered in a receivables revolution as disruption forced an “innovate or perish” urgency in cash management, money movement, payout options and related fraud risk.
As part of PYMNTS’ monthlong series of discussions around the digital transformation of business, we invited Abhishek, global head of B2B acceptance at Visa Business Solutions, to lead a talk on competitive advantages to this rapid digitization in receivables.
He was joined by Alloy Chief Financial Officer (CFO) Kiran Hebbar and 7Shifts CEO Jordan Boesch, with some added commentary from Ingo Money CEO Drew Edwards.
As a global identity decisioning platform, Alloy found itself busy in recent years with banks whose branches had been closed by COVID-19 and needed to onboard customers safely.
“That drove a push towards rapid digitization for such banks” as the FinTech boom drove neobanks and “app-based ways to acquire new customers, give credit to them and so on,” Hebbar said.
But fraud continues casting a shadow on this function, and he added that “the rise of fraud to such exceptional levels” is informing Alloy’s roadmap heavily going forward.
Noting how services like contactless payment and delivery became do-or-die for restaurants starting in 2020, Boesch pointed out that they were initially uncomfortable with adopting new technology but have since become more open minded.
As there was (and to an alarming extent still is) much old-school bookkeeping in sectors like restaurants, Hebbar said: “A lot of customers had manual ways of doing it. When they decided to go digital, the first thing was to convince them that going digital doesn’t necessarily mean opening the spigot and getting more fraud. That was a bit scary for some of the customers.”
Digital Overcoming Legacy Issues
Overcoming inertia and accepting digital transformation came easier for some than others, Boesch said. Many restaurants are still relying on Excel sheets to reconcile timesheet data with worker gratuities.
He added this is doubly so in the restaurant space where cash now accounts for only about 18% of consumer spend versus digital, driven down by use of QR codes and delivery aggregators.
“For any CFO or someone taking on those responsibilities in a restaurant, when it comes to things where there is some sort of money movement, in our case tipping, there is so much human error that can occur,” Boesch added.
Edwards said much of the progress in accounts payable (AP) and accounts receivable (AR) automation has been focused on paying major vendors — telecom providers and trucking companies, for instance.
“But it’s leaving out millions, or thousands anyway, of smaller billers and smaller providers,” he said. “There’s still a lot of work to be done with digital automation of AP and AR around smaller billers, the [small businesses], the people you’re only paying a few times a year.”
With the labor pool for restaurant workers seen as at least 1 million shy of needed levels, Boesch added that features like tip pooling and direct payout have increased retention by 76%.
From the CFO’s perspective, Hebbar said macro headwinds and the risk they carry continue to be a point of concern for banks and financial institutions, which “translates into potentially short-term payment risks. When there are payment challenges which appear as a receivable that’s delayed or whatnot, then the question is not just whether our customers are facing pressure, but also is your product relevant?”
That kind of data-based introspection also leads to innovation.
Still Early Innings
Billing is undergoing its own overhaul.
“Before, if something showed up as a problematic receivable, you had to work backwards and see if your contract process is right,” Hebbar said. “If the way you count your billing units and put it in your invoicing is correct, especially in an environment where there is a lot of complicated consumption-based billing, that’s another area that I’d like to see some innovation in.”
That’s going to show up in other sectors and operational areas, with Boesch saying: “We’re already seeing a lot of technology companies coming out of the woodwork and focusing on a very narrow problem within the restaurant space. On top of that, I think that also it’s going to breed more consolidation within back-of-house restaurant technology.”
In wrapping the discussion, Edwards said: “Why does disruption have to be the mother of innovation? There’s so much money flowing to innovative entrepreneurs all over the world who are challenging every business process.”
“In every environment, you should always be looking for how do we get rid of that spreadsheet, how do we improve that experience, how do we save money, how do we get paid faster?” he added. “This innovation that maybe has been started by the pandemic — I’d just love to see it be the norm going forward.”