The corporate finance provider landscape has traditionally been defined by a simple truth. However sophisticated enterprise resource planning (ERP) became, eventually someone still had to go to the bank to move the money.
But the news Tuesday (Oct. 6) that SAP has launched new embedded payments capabilities bringing payment execution deeper into Cloud ERP shows how that relationship is undergoing an inversion. While chief financial officers have spent years connecting their ERPs to banks, ERP systems are now beginning to connect the invoice, approval, payment and reconciliation inside the same ERP environment.
An ERP system already knows what a company owes, when it owes it, who approved it, what cash is available and how the transaction should be recorded. Give that system the ability to initiate payments, and eventually to select among payment methods, and the bank itself risks moving one layer down the corporate finance stack.
Banks are unlikely to lose their fundamental role safeguarding deposits, managing liquidity, underwriting credit and accessing regulated payment networks. But they now face a different competitive question. Who owns the interface through which the CFO decides what happens to the money?
Read more: Two Years Ago vs. Today: CFOs and the ERP Shift
ERP Is Becoming the Payment Control Plane
Corporate payments have traditionally been fragmented across systems. ERP might generate the payment file, a treasury management system might manage liquidity, banks provide accounts and rails, while payment providers handle particular corridors or methods. And, ultimately, finance teams reconcile the result afterward.
Much of the innovation of the past decade has focused on connecting those pieces. The next phase could eliminate some of the decisions between them.
After all, ERP possesses something banks generally do not: operational context. It knows that a payment corresponds to an approved invoice, which supplier should receive it, when it is due and how the transaction should be recorded. Once payment execution becomes native to that environment, the bank can remain essential infrastructure while becoming less visible to the employee making the decision.
Still, payment execution has historically been only one part of the workload. Finance teams also need acknowledgments, transaction statuses, bank statements and enough reference data to reconcile payments back to invoices.
ERP providers want those steps to disappear into the workflow. Oracle, for example, offers embedded banking services connecting Fusion Cloud ERP with participating banks for disbursements, collections, bank statements and reconciliation. Its embedded virtual-card program has expanded to issuers including J.P. Morgan, Wells Fargo, Barclays, HSBC, Westpac and others.
See also: Everyone Is Selling CFOs Real-Time Finance. Most of It Isn’t.
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AI Makes the Interface More Valuable Than the Rail
Whoever closes the loop between obligation, execution and accounting can potentially become the operating environment for corporate cash movement. That makes permissions, identity and auditability increasingly important battlegrounds. The winning platform will not simply move money quickly. It will need to prove why an autonomous system was allowed to move it at all.
“We see challenges around legacy ERP systems with limited AR API capabilities,” Michael Younkie, vice president of product management at Billtrust, told PYMNTS in January.
“We like to tie clear measurable KPIs to upfront things like DSO reduction, straight-through processing, digital invoice adoption,” he added.
The PYMNTS Intelligence report “Time to Cash™: A New Measure of Business Resilience” found that 77.9% of CFOs see improving the cash flow cycle as “very or extremely important” to their strategy in the year ahead.
Still, none of this means banks are surrendering the interface. Their response is increasingly to put banking capabilities inside the software threatening to displace the portal.
J.P. Morgan, for example, offers embedded-payment application programming interfaces (APIs) as well as ERP integrations designed to let companies initiate payments, manage accounts and receive transaction information without requiring employees to operate primarily inside a bank interface. ING similarly markets APIs allowing businesses to initiate payments and retrieve balances directly from ERP and treasury systems.
ERP vendors want payments to feel like a native consequence of business activity. Banks want their regulated infrastructure, accounts and financial services embedded deeply enough into those platforms that they remain indispensable even when the portal disappears.
For CFOs, the important development is not another payment product. It is the gradual collapse of the boundary between accounting for money and moving it.
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