Corporate payments are at an inflection point. A combination ofnew market entrants and emerging technologies is creatingdisruption and driving change in the way organizations pay otherorganizations. Established banks have responded by innovating.Several new solutions, such as the RTP network from The Clearing House, arebeginning to experience widespread adoption.

For businesses facing myriad payment pain points, new solutionscan help provide quicker, more transparent, and more cost-effectiveways to serve clients. That's why many corporate finance executiveshave shifted their focus from considering what is possible tomaking concrete plans for what, when, and how to implement emergingpayment technologies. This is one of many developments that weidentified in the report “The Future of Payments—A CorporatePerspective.”

Here are four key considerations that corporate treasury teamsshould keep in mind as their organization moves toward paymentmodernization:

1. Start with education.

The transition to a more modern payment infrastructure can bechallenging, especially if legacy systems and processes have beenin place for many years. Before a business can begin implementingchanges in this fundamental corporate function, corporate treasuryneeds to understand the latest payment options and theirprospective benefits.

In a recent BNY Mellon survey of U.S. domestic andmultinational corporations, nearly 90 percent of respondents saidthey believe moving vendor payments from checks to an electronicformat will have a significant impact on their business within thenext three years. Nearly 70 percent believe real-time payments(RTP) will substantially impact their organization in four or moreyears. And 64 percent believe tokenized payment solutions (such asBNY Mellon's implementation of Disbursements with Zelle) will affect theircompany within four years.

The treasury function's role in the payments process continuesto evolve, but treasury is usually responsible for influencingorganizational decisions around whether to undertake a particularpayment initiative. Treasury teams who are not well-versed in thelatest payment technologies can ask their banking providers andpeers in their industry about how new solutions are alreadyimpacting organizations similar to theirs. In addition, they canseek out educational materials on this topic from organizationssuch as the Association for Financial Professionals (AFP),The Clearing House, and Aite Group.

Treasury staff may also need to understand payment technologieswell enough to support the technologists who will customize thosesolutions to meet their unique organizational needs. Beyond justadding a new payment type to their accounting and treasurymanagement systems, treasury teams typically need to coordinate theintegration of new payment solutions with their banking partners'systems.

The benefits of these efforts can be profound. Applicationprogramming interfaces (APIs) enable companies to stay constantlyin sync with their banks for all activities on their accounts. Thismeans treasury's cash flow information is always updated inreal-time, compared with an environment in which bankreconciliations happen once a day, causing treasury systems to bemany hours out-of-date most of the time. Faster payment solutionsalso enable companies to create new transaction experiences fortheir customers and business partners. Real-time e-billing,immediate acknowledgements, and control of settlement timing canenhance the partner and customer experience, helping to reduce thefriction of conducting business.

2. Develop a corporate payments strategy.

A company's payments roadmap and planning process will depend onits current state and future needs. Paper processing of payments isstill predominant among U.S. treasury organizations because bankinformation is hard to collect, customers and business partners arereluctant to share their financial details, and/or the company isconcerned about storing sensitive information. These issues haveprevented many businesses from fully adopting electronicpayments.

However, treasury teams need to ask themselves whether—andhow—an upgrade of their existing payments infrastructure mightenable them to better meet future stakeholders' expectations aroundreliability, security, ease of execution, cost, and the informationthey exchange with banks. The recent BNY Mellon survey found thatmore than half (54 percent) of respondents believe reliability isthe characteristic of their payment systems that needs the mostimprovement. Concerns about security, payment information, ease ofexecution, and cost round out the top five areas for paymentimprovement cited by survey respondents.

Regardless of its industry segment, a company will fit into oneof three categories: bold movers, steady adopters, or paperloyalists.

• “Bold movers” are the earliest adopters, the companies thathave the most input into how a new service or solution works. Theywant to be first and are technically capable, but they are notscared to fail fast and move on.
• The majority of businesses are second movers, or “steadyadopters.” These organizations are more willing to adopt solutionsas they mature, rather than helping create new solutions themselvesor with their banks and financial technology firms.
• “Paper loyalists,” meanwhile, are companies that continue toprefer paper processing of payments. These organizations may havevery complex processes or business ecosystems, which createpragmatic challenges to removing or even reducing their volume ofpaper. As the number of digitized payment options continues togrow, more and more “paper loyalists” are seeing the benefits oftransitioning away from checks.

Regardless of which category a company fits into, it needs tohave a payment modernization strategy in place. Disbursements byZelle is one example of a new payment solution that removes some ofthe barriers preventing some companies from migrating from paper toreal-time payments. The solution enables U.S. corporates toinstantly disburse funds, 24×7, through an email address or mobilephone number, without requiring a traditional routing number oraccount number.

Although the benefits of such a solution might seem apparent,companies developing a payment modernization strategy need tounderstand how their peers that are “bold movers” are takingadvantage of the new payments landscape.

3. Make the case.

Once a treasury team has decided they want to adopt a particulartype of payment solution, they will need to help drive sponsorshipand secure funding to implement that solution. Getting buy-in oftenrequires treasury to educate other functional areas across theorganization about the reasons behind the impending change, as wellas the benefits they stand to gain from it.

Think about the ways in which the new payment solution willenable the business to offer clients enhanced billing and paymentoptions. For example, will consumers now be able to initiatepayments from smartphones, tablets, and electronic wallets? Willbusiness customers be able to pay via a direct API connection toyour treasury or ERP system, or through automated file transfersvia the Internet? What benefits will these new payment optionsbring to your customers?

In parallel, how does your organization stand to benefit fromthe new solution? Will you receive payments faster? Will reducedpaper usage save money? Will more streamlined processes free upstaff time in accounts payable (A/P) and other functions for morevalue-added activities? What about risk? The new payment platformstypically help companies minimize the risk they must assume,because the payment solutions improve security around bank accountinformation compared with older electronic payment systems. Andalmost every digital payment platform reduces the risk of fraudassociated with check payments.

Organizing these and other projected benefits into a businesscase is a crucial step in securing executive support for theproject. And the move from a traditional payment-processingenvironment to new payment mechanisms, such as RTP or Zelle,requires the full support of the company's senior leadership.

4. Prepare for implementation.

Businesses with legacy software systems that are intricatelywoven into existing back-office operations may have reservationsabout implementing new payments capabilities. One concern oftenrevolves around whether the company's technology applications,operational processes, and service components will able toaccommodate the changes.

It's important to choose both bank partners and software vendorsthat can provide continuous assistance and support throughout thecompany's payment evolution. Banks, in particular, should beeducating their corporate clients about the latest innovations andhow businesses can future-proof their payments infrastructure. Atthe same time, corporate treasury teams need to take responsibilityfor performing the necessary due diligence of speaking with banks,technology providers, and industry peers about how new paymentoptions might impact their processes and infrastructure.

Treasury teams planning a payments transition should keep inmind several key factors that may affect the initiative'ssuccess:

• Think through all the ramifications of 24x7x365 transactionsettlement. Most existing payment systems and banking servicesfunction five days a week during business hours. They are closed onnights, weekends, and holidays. With new services like RTPproviding payment settlement on a continuous basis, companies needto consider how activity during traditional off hours will impactaccounting, liquidity management, and cash forecasting on bothsides of the transaction.
• Corporate treasury professionals should think about changes notjust from a back-office processing perspective, but also from amarketing and sales perspective. How will the company leverage newpayment options in interactions with their customers and businesspartners? How will it communicate about the new ability to morequickly process refunds, claims payments, urgent vendor payments,or instant collection of payments from first-time customers?
• RTP leverages the ISO 20022 standard. Companies moving toreal-time payments should consider the initiative a catalyst tomove to ISO 20022, if they haven't already taken that leap. Inaddition, if a treasury team will use the ISO 20022 protocol formessage exchange with their banking partners for their real-timepayments, they should also leverage it for traditional paymentchannels such as wire transfers, ACH, and check services.Consistency across the payment types will reduce internal frictionand may streamline future implementation of additional paymentoptions.
• Payment process transformations require strong projectmanagement. Although banking partners can help guide theinitiative, and can provide resources to assist in the transition,organizations must also allocate sufficient resources to buildeffective connectivity with their banks and technologyproviders.

Throughout all steps of this process, the corporate treasuryteam should maintain an ongoing and consistent dialogue withinternal stakeholders. Before the new payment method goes live,treasury should explore the change's potential impact—in terms ofboth benefits and challenges—to all the company's customers andbusiness partners. This foundational knowledge will enable treasuryto support corporate leadership and the project team as theydevelop an action plan and identify which initiatives to move onearly, which to wait for, and what path to take moving forward.

As the company proceeds on its digital journey, the treasuryteam can work with its banks to continue to gauge how paymentnuances are impacting their business, as well as the externalorganizations they work with. Treasury can also help coordinatepilot projects that, if successful, can be scaled up to involve alarger proportion of the company's A/P or accounts receivable (A/R)portfolio.

At the end of the day, digitization of payments is a change thathas to take place. The most important question for corporatetreasury groups is no longer what needs to change, but how much andhow quickly that change can happen.

Jeffrey Horowitz ismanaging director, market head for relationship management in thecorporate, government, and not-for-profit segments at BNY MellonTreasury Services. He and his team help organizations findconsultative solutions for their cash management, trade, payment,and liquidity needs, both in the United States andglobally.    

Carl Slabicki is adirector and product line manager for immediate payments at BNYMellon Treasury Services. In his current role, Slabicki isresponsible for strategy and development of new faster paymentsolutions, such as The Clearing House's RTP and TokenizedPayments^® now available with Zelle^®.

BNY Mellon has been a leader in the move toward RTP payments andcontinues to help drive bank payment industry innovation whilesupporting clients in this transition. For further information onthe topics in this article and on the current state of payments forcorporates, please consult BNY Mellon's report “The Future of Payments—A CorporatePerspective.” The report focuses on the needs, painpoints, and priorities of corporates; their attitudes toward thewave of new technologies that have impacted payments so far; andtheir thinking around adoption of those technologies in thefuture.