Modulr joined a panel of expert speakers at the CPI Global Commercial Cards & Payments Summit in New York City to discuss ‘The Commercial Payments Challenge’.
The summit focused on discussing core challenges and opportunities facing the commercial cards and payments industry, today.
Various topics were discussed, but we identified two prevalent things that any forward-thinking business should be considering: firstly, the introduction of new regulations that encourage open-standard, open-access communication and secondly, technology advancements that could help revolutionise payments in the future.
The Rise of Regulation
Industry regulations are becoming more pervasive now than ever. From Interchange Fee Regulation reforms to open APIs, commercial businesses need to have a plan for responding to the ways regulations will affect us going forward.
Regulations such as the Second Payment Services Directive (PSD2) introduce significant opportunities that enable FinTech companies and Banks to create new and innovative payment services. This could redefine how we use our bank and payment accounts in the UK and Europe.
Naturally, there is significant debate over how and when PSD2’s will be implemented, and we do identify one significant challenge for B2B payments – secure customer authentication. Its underlying principle is a solid one: ensure there is a strong authentication of payments, using 2 factors to verify that the issuer has actually approved the payment. However, the model was largely developed around consumer use-cases and without much consideration for automated B2B transactions like virtual cards, procurement cards, automated clearing house and bank payments. This poses an, arguably, unnecessary issue where otherwise automated and secure processes could become interrupted by these new strong authentication requirements.
Still, we see the opportunities outweighing the challenges for B2B. PSD2 and similar regulations that encourage open-access to the payment systems are breaking down the barriers to entry, which have limited the range of services non-bank financial institutions could offer.
For one, approved service providers with authorisation from businesses will be able to offer services to collate information from multiple bank accounts across multiple banks. This will allow them to provide, for example, consolidated cash and treasury management information.
Businesses will be able to grant access to their data to enable, for example, banks and alternative lenders to make more accurate and better lending decisions. This will create a level playing field for lenders to compete for lending opportunities to a business, which has previously been restricted to a business’s current bank, as the only provider having easy access to their businesses historical bank statements.
Additionally, businesses will be able to allow newly approved providers to send payments from their existing bank accounts. This will allow much easier creation of services to integrate and automate core business processes, such as accounts payable transactions from ERP and accounting software platforms.
Technological Disruption
Technology continues to be a major focus in payments discussions – the CPI Summit being no exception. The conversation centred on how technology will disrupt the status quo.
We agree that recent technology trends and changes will have a major impact on the commercial payments industry. Technology is fundamental for newer systems and solutions to be implemented. It is a key component for ensuring payment systems are as efficient and cost-effective as possible, while remaining secure.
Alongside system infrastructure development, equal importance must be placed on ensuring user experience is not jeopardised by increased functionality. Interfaces must remain user-friendly and optimised for different devices and APIs should be readily accessible, so users can identify the benefits of new systems, easily.
Blockchain has become somewhat of a buzzword in the FinTech industry, with some people believing it is over-hyped, but some believing it will take over cross-border payments. The demands of the accelerating pace of digital channels, multi-channel convergence and marketplaces such as real-time payments and ever greater demands for more data, will certainly put a strain on the older infrastructure used in existing payments systems. We do see this as an opportunity to use newer technology, such as Blockchain, to re-build older infrastructures into more durable, transparent and consistent replacements. However, implementing this type of change cannot be achieved in small increments. It’s likely that payment scheme operations such as card schemes, bank payment schemes or national payment schemes will need to come on board to implement such change.
The new regulations and technology developments create the opportunity to redesign the industry, including how we operate B2B payments. As these services come to market there will be exciting opportunities for businesses to access new functionality providing greater insights and efficiencies.