The Future of Payments

Clara Chua, DigitalCFO Asia | 31 January 2022

How will the new era of payments affect CFOs?

In recent years, the payment landscape has adapted and transformed significantly. Payments are becoming more efficient and convenient with technological advancements on both local and global scales. It is evident that organisations will require the agility to adapt to the ever-changing global payments ecosystem, without neglecting the financial stability the infrastructure is built on.

With the usage of digital wallets surging, non-cash transactions have grown by 6 percent from 2019 to 2020, as consumer preferences have evolved even within contactless processes. The most notable development being distributed ledger tools as it offers a different organisation way in managing payment systems and overseas payments worldwide. As blockchains continuously remove the barriers between domestic settlement systems, real-time payments will eventually become a standard commodity and more importantly, automated.

Changes for CFOs

Users instantly transferring cash to one another and businesses have been the trend surrounding convenience and concern for public health. As digitalisation simplifies this process, businesses are looking into rolling out its own instant payment targeting business to business (B2B) transactions.

The B2B payment area has shown strong growth internationally with invoicing and accounts receivable/accounts payable (AR/AP) management solutions. Integrating customer relationship management (CRM) and enterprise resource planning (ERP) systems could reduce gaps in companies’ AR/AP processes by aggregating their payments operations in a single platform. Giant transaction banks like Goldman Sachs continue to invest in innovative solutions, developing a platform including integration with SAP Ariba.

This has been especially for small and medium-size enterprises (SMEs) as Covid-19 had pushed businesses to reorient their payment operations and customer interactions. By understanding the tools and platforms available, CFOs can develop and standardise automated payment processes and enhance fraud prevention. DigitalCFO has joined together with Kyriba and Azzana for an upcoming webinar session where we will discuss various aspects of the Future of Payments, you can click here to learn more about the power to manage and transform.

Over the next few years in Europe, it is expected to see the Revised Payment Services Directive (PSD2 growing) and driven by more embedded payments. A major customer want is for payments to be a seamless end-to-end transaction – companies such as PayPal and Revolut are launching phone applications to combine payments, savings, bill payments, crypto exchanges, shopping and many more features.

On the other hand, merchants want to understand the best payment methods to provide customers, seamless checkout and offering financing for buy now pay later (BNPL) schemes. In the last year, BNPL and account-to-account (A2A) transfers have also gained in popularity, with A2A transactions in Europe accounting for around 13% of checkouts. 

The growth of payments using QR code has evolved in a way that restaurants can share menus and settle billings from customers. Influencers have also garnered this traction on their social media platforms, promoting products with a QR code on the screen so consumers can be journeyed to the online shopping cart immediately. It is expected to see more QR code-based payments integrated into digital commerce channels to enable current omnichannel experiences and new ones as they evolve.

DigitalCFO Asia recently partnered with Kyriba for a Webinar to address the significant changes in the payment landscape over the recent years due to the advent of technology, innovation and more convenient global payments. Industry experts in the panel included Steven Otwell, Director of Payments for Kyriba, Pulat Yunusmetov, Treasury Manager at Danone with its panel discussion moderated by Antoine Degardin, Managing Partner of Azzana. 

Talk to the banks and talk to them early. Who are your banking partners today and what do you think your business will be in 3 to 5 years time? Look into your footprints in the next few years as the value of your future payments will depend on that.

Steven Otwell, Director of Payments for Kyriba

Challenges Faced from New Methods

For many companies, significant costs for new IT structures will be required to comply with PSD2. The severity of this challenge will depend on which stages a company is at with regard to strong customer authentication. More importantly, ensuring that strategy, culture, skillset, and regulatory knowledge is properly aligned. As companies will be competing with technologically advanced stakeholders on the same playing field.

As mentioned Pulat Yunusmetov, Treasury Manager at Danone, “The future of finance means you have one standardized way of processing your payments.”

A potential challenge with BNPL is that each scheme has its own set of number of installations, duration, interest rates and credit reporting. As the options are created to increase conversion rates in e-commerce sales, such solutions may sometimes be interest-free for first time purchases.

QR codes are naturally risky, there is no way of knowing where a code will redirect you after scanning. Pair it with the convenience at which these codes can be created and it becomes a platform for growing fraud. This wide-spread issue has affected China with over 23% of Trojans and viruses being transmitted via QR codes.