Simplifying the Payments Processes

[00:48] Speaker 1:

First up, we have. Jane Larimer, CEO of NACHA. Jane, please come up to the stage. Next up, we have Eileen Dignen. Welcome back, Eileen. She’s a true veteran. She’s head of product strategy at PNC. Next up we have Katherine McClure, director of partner development at PPro. Welcome to the stage, Katherine. I don’t know if you noticed, but Katherine was there on the day one video. And she was number four. Lastly, we have Andrea Occhi, Director of Product Development, MasterCards. Andrea, thank you for coming. And last but not least, let’s say to your chief product officer at HighRadius, this is your lineup for this panel. Please give them a big round of applause. Thank you.

[01:13] Sayid:

Good morning, everybody. This is our last session. And tell you the truth. This is the second session that I’m moderating. And the last session, the analysts finally got big feedback. What happened to diversity? We had five men sitting on stage. And so I’m feeling so proud today that the men are outnumbered in this panel. Right. So let’s get started with our questions. So the audience may or may not know the full context of what you represent from a payment perspective. The payment methods and so on. So let’s get that out of the way first. Give me your two-minute pitch on why corporate should be using the payment method that you represent to simplify their B2B payments process. We’ll start with you, Jane.

[02:07] Jane:

Great. Thank you. And thank all of you for being here. You’re the few proud folks here at the very last session. So appreciate that. All right. I’m Jane Larimer and I’m the CEO of NACHA and we administer the ACH network. Also known as EFT. I think a lot of you are into, ACH network. Last year, twenty-four point seven billion transactions at about fifty-five trillion dollars and a growth rate of seven point seven percent were observed. Interestingly, B2B payments outgrew our total volume at about twelve point two percent. So B2B transactions, I think are perfectly suited for the ACH for a few reasons. First of all, they see ACH ubiquitous. Every financial institution in the country can send and receive on the ACH. It is payments plus information so your information can flow through. As you know, EDI, ISO twenty or twenty-two can flow through, their debits and credits come through the ACH network. And while we know and we’ll talk a little bit later about some friction points in pre and post-payment processing and not just also working on that to make ACH even easier for businesses to use.

[03:25] Eileen:

You know, I’m the sole banker on the panel, which is unusual. So I like the diversity not only in the male-female ratio but in what we do. So I thought it was interesting when we prepped. So as a bank, we act and offer end to end payment types, we innovate around the payment type. So I think on the panel yesterday, I say innovation is a daily activity. If we don’t innovate, we won’t be here. So we partner with most of the folks that are sitting up here except for you and I. And we’ve talked about maybe just having a conversation later. So with that into the corp, what we do it for our corporates in the B2B space is look at not specifically what the payment types are, but what the corporates need and marry those payment types against what the corporates need. It’s interesting, Jane, in the payment industry. So in twenty nineteen the overall payment industry only grew a little over 2 percent. So, I’m happy to be here. And thank you all for being here.

[04:47] Katherine:

Hi, everyone. I’m Katherine McClure. I had a business development for North America for PPro. So we’re certainly not a household name as a number of the other companies that are up here on this panel. But my focus is on the rest of world types of payments. So certainly, you know, there’s a variety of different ways that people pay around the world for things. And even though we’re very comfortable with a number of the payment methods represented on this panel, a lot of. B2B business happens with other payment methods. For example, about a quarter of Brazilian B2B payments are done with something known as A boleto, which is a payment voucher. And so what PPro does is we aggregate these local payment methods used around the world, everything from Alipay to SEPA to Boleto to help facilitate international or the cross-border payments. And we’ve recently integrated into the EIPP.

[05:41] Andrea:

So let me tell you a secret. MasterCard is more than cards. When we started our journey we started on cards. And we love cards so much that we decided also to put in our brand name. But again, to Carter, you’ll never, never be under any dream of being able to capture 100 percent of transactions. And therefore, what we’re working on is we are developing solutions that are independent of the payment trail. And because that would always be a use-case where an ACH Makes Sense, where a card makes sense, where a real-time payment makes sense, where a new blockchain solution that doesn’t exist yet would make sense. I believe that payments should be a basic unit and we should look at what comes with payments. That’s of value in terms of services, in terms of security. And that’s what we’re working on. We were talking about before how in the consumer industry if you use our credit card, it’s a safe, secure environment that somehow is magical. We are working to partner with most of you to deliver the same experience in ideal B2B.

[06:55] Sayid:

Great, great. Thanks. So hopefully you got a sense of where each of our panelists is coming from. But then let’s open it up a little bit. Right. And maybe I’ll go in the reverse order. Who do you think your number one competition is? Or will it be? and what are you planning or how are you planning to respond to that?

[07:19] Andrea:

So I believe that the number one competition that we are going to face in the next two years would be inertia or the status quo. The way people are used to doing things today because to really move out to a real B2B where we don’t look on one side of the equation. In B2B, we have suppliers and buyers. And to move to what we believe is a better place, we will need to do things slightly differently. We need to be able to motivate buyers and suppliers to do things differently. And, you know, today if you walk me to HighRadius. You’re great. You made a great choice as a car receivable company. They’ll help you. They know your business very well. They have a Huge technology that can help automate lots of things. The same is true for your buyers that are working with AccountsPayble automation companies. And the key thing is that you end up having all these islands that don’t talk to each other. Therefore, I mean how if you’re able to live in HighRadius island to bring all your buyers or all your suppliers and to run 100 percent of the business on your island, you’re even a happy island. You’re a happy buyer or a Happy supplier. Reality is that today lots of buyers need to access multiple Portal to make payments, download the invoices and the same is true for suppliers that to download remittance data need to access various portals. And we plan to leverage to fight against inertia. We plan to leverage what we learn over 50 years in the consumer industry, partnering with HighRadius and other players, And as we believe that the experience of the end buyers and suppliers will be even better working with our HighRadius and other technology partners.

[09:17] Sayid:

Great. So the B2B network and we have our Radius One and that piece of it. And we’re collaborating with you to see what else we can do to expand that network. Far greater reach within buyers. Great. Thanks.

[09:33] Katherine:

I would like to kind of add on to say that isolationism, which also ties into inertia, you know, having options to sell your goods worldwide. You know, a lot of people think of the US as a consumer of things and we’re always taking things in. We actually are a fantastic producer of goods, whether there are physical goods, but also in the digital space. There’s a lot of opportunities there. And inertia can make us think, well, this is my market. This is where my business lives. When there are businesses and consumers and everyone out there that actually do want what we have to offer. And in order to do that, yes, there’s some complexity. Certainly, we were speaking earlier about, you know, for example, repatriating funds out of Brazil as an example is something that can be challenging. But there are partners out there that can help you make that an easier journey. And, you know, if you feel like your market here is saturated, there’s a lot of other places to go.

[10:32] Eileen:

So competition is an interesting question for a banker, right? Everybody’s a competitor. Other banks, fintech, you know, innovators. Anybody that seems to have a nation at one of the spaces along the value chain. But that also challenges us to have better partnerships and to continue to innovate. So, you know, we could say we compete. Each other right. But in many ways, we could. But then we choose to partner. So, yeah.

[11:02] Katherine:

And to tag on to that. The concept of cooptation. Some people might call it frenemies. I like the competition. There are so many different ways in which, you know, my company. We’re a fintech. We’re kind of in each player, but we work with seven out of the 10 top institutions in the world. There are so many different ways where companies can work with each other and build something better. And I think fintech is one of those places where we’ve actually done a really good job of that, even though we saw the long way to go. There are really amazing opportunities there. And the goal is certainly to make commerce happen and get people paid. And competition’s a great way to make that happen.

[11:45] Andrea:

So I would say check, which Eileen had teed up just a few minutes ago, which is the twenty nineteen Federal Reserve payments study, showed that there were still last year 14 and a half billion check payments made. And we know that there have been big inroads in check payments on the consumer side. A lot of card transactions. But on the B2B side, it’s still a stronghold for check payments. Now last year they showed as opposed to, I think three previous years, there is a decline starting again. It had plateaued for a little while now. Last year, there was a decline in check payments. So I think we still really need it. So we’re talking about great things like blockchains and standardizes API and other, you know, kind of new and not futuristic anymore, but I’d say newer technology. But we still are focusing on this old school, the paper check and how do you get it out of the system? And I think what we say is if it was really easy to do, it would be done. So in 2000, there were 42 billion checks written. So we are way, way fewer now But but the reason why people still write checks means there haven’t been perfect solutions yet to solve for their needs or they’re looking for fully electronic solutions, which might be ACH plus or other real-time wire or something else. So they have this fully electronic solution that they can get. So I think that’s still from NACHA where we’re focusing on how do we get rid of check payments. And one of the initiatives that we’re working on, it’s a payment information exchange platform. We call it fixes. And that is going to help because we know that there are still pain points and friction around the pre and post-payment processing. And so we’re trying to create a platform through blockchain and standardize API to allow for the secure exchange of information between F I’s and portals to try to help with that. So I think it’s payment systems plus, you know, Andrea, you’re talking about the things that are surrounding it to make processes more easier, say vendor onboarding or, you know, other things like HighRadius has a cash application. We need to find those pain points and solve for them to really get to this straight-through processing, automation, simplification. So you have the full promise of electronic payments and moving into account.

[14:13] Sayid:

That’s a perfect way actually into my next question, which is, yeah, we want to drive more electronic payments adoption. It looks like overall in the ecosystem there’s still a lot of checks for various reasons, including friction in the adoption of fully becoming electronic. So my next question is, could you discuss one success story or example of how electronic payments got driven in the system? Right. Whether it is moving away from checks or any other means to a more electronic fully end-to-end electronic payments process? I’ll start with Jane. Do you have any additional things to add on?

[14:57] Jane:

Absolutely. Just jumping in the same way with ACH. So I think as we look at changes that are being made to help, I think, innovate around the payment system, one of them is, of course, faster payments. And so you have a spectrum of the speed of payment. And the ACH, which now has same-day ACH, which is there are two same day windows a day plus an overnight cycle. It’s now a million payments a day or moving through same-day ACH. The dollar limit has been something that we’ve heard from corporate’s what was a real pain point, which is twenty-five thousand dollars as of March of this year, we’ll be moving it to one hundred thousand dollars. And as of March of next year, we’re adding yet another window. So there will be four settlements a day on the ACH each to start moving those payments faster. So I think I mean, that’s just one success story of innovation in the payment space that I think is going to get us to this ecosystem where things are fast, Automated and simplified.

[15:57] Eileen:

From a banking perspective, when we started talking about the same ACH and we all looked at the application, we all thought, OK, who’s going to use the later window? And really, that’s what it is. Who needs that couple of hours? And so we all thought, you know, let’s make some predictions. And the predictions were that there would be emergency payments or things that were forgotten or a file that was bad. And actually, I think from banking or from a bank’s perspective, we’ve been very shocked because there’s a premium on the second window, remember? So people pay more for that. But it’s the cash flow. What that tells me is corporate cash flow is getting quicker and quicker. And so they’re seeing more applications and use cases for that next window and thinking that the premium price is worth it.

[16:43] Jane:

So I love hearing that there is a demand for that. We would have gone out and talked to corporates and talked to financial institutions to say, is there what you know, what are the use cases? But you don’t know until the switch is flipped. If it’s only going through the first day we had the same ACH, we were waiting and like, well, the volume will go through.

[17:01] Eileen:

OK. So that leads me to RTP that the switch has been flipped. But who’s going to use it? And I made the point in the panel yesterday, so I’m a repeat here, but that the companies are not pleading to give them real-time payments. First of all, we need to educate the market on what the differences are. But they’re saying I’d like to do things faster from a corporate perspective. I’d like to have better control of my cash workflow. I’d like to do it faster. And from our perspective, as providers, we should come up with the right solution. So you asked me about a success story, and I’m proud to say PNC yesterday did the first one hundred thousand dollar RTP transaction in the industry because the debt levels just went up from twenty-five thousand to one hundred. So that tells me that there is a demand for it, even though we don’t talk about it as RTP. I still believe the request for payment which changes the game, it pushes out proactively. If someone has a little bit of inertia about, you know, making their payments, it pushes out the information. All they have to do is say, yes, let’s pay. Yeah. So, again, that changes the game, right? We’ve talked about that.

[18:13] Sayid:

Absolutely. And I think I can see that a little bit of discussion is going on between same-day ACH and RTP in terms of limits and so on. Right. Can I turn to you for a success story in terms of Katherine, in terms of what PPro or what you’re seeing in terms of driving?

[18:32] Katherine:

Absolutely. The example I’m going to talk about is related to Latin America. So we work with a number of technology companies, one on name Nintendo, because we’ve presented with them in the past. They were challenged in getting funds out of Brazil. You know, there were other sessions throughout the conference talking about some of the unique challenges around taxation and around other regulations in Brazil. And you think, well, Nintendo is a pretty big corporation. You guys work with a number of large corporations. Don’t they have the infrastructure in Brazil? And the answer is, yeah, they do. But it’s very specialized that’s required to do that. And it creates a lot of complexity. So what we’ve been able to do is serve as, say, like a merchant of record to where we can collect the funds, we handle the effects, we get them their U.S. dollars in a much more cost-efficient manner than they would be doing it themselves. And that’s a really key piece, both of technology and certainly, as fintech, as I mentioned, if you can find someone to manage that complexity for you, it’s a good direction to go to.

[19:34] Andrea:

I can think about an investment that we made three years ago, a partnership with a fintech company, where we took an equity stake in the company and we invested in them. Basically, they intercepted invoices that suppliers signed up in whatever format and they made it available electronically for the buyers. Then buyers tell about who to pay, how much to pay and when to pay, and of you decide how to pay the suppliers based on the value proposition and based on what they’re looking for. And it can be via credit cards, via ACH which Jane was just talking about before that ACH carry data to help get a re-conciliation. And we saw in the last two years that a huge adoption took place, because if you look at an accounts payable file. Thirty-five percent of the payments had been done to virtual cards and 5 percent in ACH and this means 40 percent of electronic payment is out of the accounts payable. If you keep in mind that within MasterCard In average they spend on the virtual cards between 9 and 13 percent. It means that throughout, we were able to double or triple the number of electronic payments in some cases.

[21:01] Sayid:

So that brings up a great point. We are all sitting from our supplier perspective and you’re bringing out the buyer perspective, right? There are things happening on the AP side, the AP system and every one of you in the receivables side, probably in your own company, have a counterpart on the accounts payable side. Right. So Let’s put that hat on for a little bit. Right. And push ourselves to and, you know, think about a couple of things. So you talked about real-time payments as an example. So what would be a use case? Right, where, you know, a buyer, currently doing an ACH, printing a check, through any other system or directly, why would they want to do a real-time payment? Right. Or, what is a use case I think you talked about a particular delivery kind of situation. So what can you share a little bit about a use case were from a buyer perspective and a supplier perspective, it makes sense to do at real-time payment because often we think about the consumer side makes sense? I want to give somebody a payment, but in a B2B perspective, you are invoicing and there’s a new date and so on. Why would you want real-time payments? Can you share a case?

[22:17] Eileen:

Yeah, I’ll do an intro and then turn on every unit. Let’s look into a use case. So why would anyone want to use real-time payments? Right. It’s a new rail. They have to integrate it with their back office. They’ve got lots of payment types. Again, it’s about where’s the pain point? What industry? Where’s the flow? Or am I having a cash flow issue? And so card really serves a purpose and cash flow for a lot of reasons, but for real-time payments. Looking at, you know, the health care industry, that could be a great industry. But we’ve partnered with MasterCard on a specific use case and the food industry is one that is so inefficient because of spoilage. I used to be a lender and I had a lot of the food candy companies. But the food industry is another industry that has some pain points. But the delivery of this is something. So we actually took it down to industry. Let’s look at the market. Let’s look at the industries with the pain points and then let’s look at specifically what that journey is in the industry. So. So let’s talk about our partnership, the U.S.

[23:28] Andrea:

To expand to what Alan just said. There is not a real-time payment that fits all. You really need to be pragmatic and to look at your case by use case. And in this specific example, we look at which all are the cash industry? Then They reach cash industries. And what we need within five days, a great candidate for their use case for real-time payments. The alcohol distribution, basically what’s happening today, this distributor goes to our restaurant or to our star delivering the case wine and they need to wait for their store owner to be ready. And after they end over a piece of paper, that is the invoice their store owner needs to figure out where he left their checkbooks, need to sign a check, need to give it back. Many times a day, the driver drives back with a briefcase full of cash. It seems like one of the old mob movies. And really there are lots of things that can go wrong. Money can be stolen. But also when the driver was back to the quarter. Oh, here we go. Here are my checks or I have another one. It’s an awful process. And then, the quarter, we need to figure out, OK, who paid me. Now the driver Shows up a day, at the Restaurant with an iPod that is connected directly to the accounting software. They’re able to show you, as is the buyer in the invoice. You can modify the invoice. You can approve. And as soon as it’s approved, it gets on a quest for payment. And the flow of the money and of information is sometimes lately. Basically, you find the money in your account and both parties get the data that you need to reconcile their payments. And this is possible because of the nature of real-time payments that are available, funds immediately that are irrevocable and that they are available 24 by 7. And yes, we are excited that many more use cases that you’re looking at. But again, it’s not about what you have. 10 payments are everything it’s about. Let’s be pragmatic looking to use case by use case.

[24:58] Jane:

And I think that’s just a great example of when you look at the buckets of where check payments are heavy and cash. So both of those are very expensive and inefficient payment types. And so finding these case by use case, you’re saying real-time would be fantastic for that or whatever it is to move to fully electronic. We just assume that most everybody is electronic, but there are really these niches that are heavily cash and check dependent.

[25:24] Eileen:

I’m sure the delivery of meat and produce. Did anyone saw the Irishman? We saw how the meat was delivered later and we don’t want to do that anymore. Right.

[25:35] Sayid:

Now, that’s a great use case. And again, among our own clients who have done some very interesting things in terms of whether it is a mobile app, mobile payments, showing invoices, being able to accept even though it is still checked. Right. That’s step one, for example. But at least they’re not cutting checks back and trying to figure out how to reconcile. We have some great use cases among our clients that have widely adopted this of solving that problem or even whether it is check-ups acceptance or the example now that you bring up about real-time payment specific use cases. So going from that same team of thinking about the buyer. Right. And talking to both perspectives, having both perspectives, it has to make sense for the buyer and the supplier for a payment method to be widely adopted. Let’s talk about Virtual Cards which are no doubt loved by payers. Not so loud by peace in terms of the cost of payments, acceptance and so on. So how do you think virtual cards will make an impact on B2B Payments. So I’ll probably start with you, Eileen, and then I’ll let others and let Andrea also respond.

[26:57] Eileen:

So let me talk a little bit about virtual cards. And we talked earlier. The funny thing about virtual cards and virtual cards, as everyone knows, it creates a dynamic card number for one time use, which can have certain limits. It can have limits as to who’s using that virtual card. And it can have limits on the amount. But virtual cards were actually created for use on the Internet with devices because there’s a problem on the Internet with devices. So I thought that was rather funny because the card not present is one of the highest rates of fraud in the card environment. And that means someone has your information and we just heard it in the Northeast. Huawei just had a huge breach, which they’ve acknowledged. And so how many people use their cards at Huawei? Well, those cards were like any other breach, were stolen and resold. So with virtual cards, it’s a one time use. You can’t steal that information and reuse it because it’s gone. PNC has virtual card applications, of course, and there is very definitely a market for it.

[28:11] Andrea:

Yeah. So you say that the cards are expensive. It comes out expensive. I still believe that they’re not getting paid is even more expensive. And jokes aside, I believe that the credit cards, as well as many other payment methods, traditionally the focus on day by your side, basically the head by you to achieve their goals, but really not in B2B. We need also to look at suppliers. We need to balance the equation and traditionally how it works. A credit card of your card, the one time use a 16 digit number is sent to the supplier who receives an e-mail. And within this e-mail, they find a credit card number and remittance data. Therefore, if you start receiving lots of virtual cards, it means that you need to hire many people just to spend their time entering the credit card number into the terminal and copying and pasting data, remittance data in your systems. I mean, how did we solve Rita? we launched straight-through processing. What basically now we improve the supplied experience because the flow of the payment goes directly into a discrete account. Therefore, that is nothing to be touched by the supplier and also the remittance data are made available for suppliers in a variety of formats directly, for example, into your account software. If you use an SAP or whatever, the flow now comes directly to your system, allowing go to conciliation. So this is the first step that we need to improve their usability. And it’s a great experience. I believe that the credit report cards in B2B will never be 100 percent. We see that they are increasing and we believe in improving. If that is a value proposition, if that is a pricing, If there is a process that makes sense for suppliers, we believe that that number will keep growing. And we believe that when credit card payments will be using B2B, it will be much easier than what it is today.

[30:16] Eileen:

Can I just jump in? What we’re all trying to do here is trying to make it easier for the corporates to do their jobs and to function. And, you know, virtual cards came about because of the high level of fraud, well, they say the fraudsters are always five steps ahead of us. So it’s our job to innovate around what’s going on in the market, to create a secure environment and to create the right choices along the payment chain.

[30:51] Andrea:

And if it can jump on it, I believe that many times the cards are too expensive. But really, you need to think, what is the value? What are the hidden costs to use other payment methods? Because a card allows the supplier to get paid faster and it provides data for reconciliation. And for example, if you’re not willing to extend credit to all your buyers, that’s also sold for it.

[31:12] Jane:

The tricky part really isn’t virtual currencies. There’s definitely use the market for virtual cards. And I think from the fraud perspective, absolutely. I think the tricky part for suppliers is when other payment if it’s not the buyer’s choice. If that choice is being made somewhere else down in the chain so that they don’t know that. I think that’s potentially where suppliers get kind of that anxiety. That’s that part. Not that. I think from all the things you’re saying, that absolutely. It’s just that up that other chain, that other piece of it from the supplier perspective.

[31:50] Sayid:

Now, that’s a great point in terms of our advocacy for our clients, our suppliers, from our own HighRadius perspective, we are very much in terms of how do we control and give some of that control to the suppliers. Is it based on in your EIPP solution, for example, below a certain dollar threshold, you want to accept cards as an example. Right. And about that, maybe other payment methods are the very manual process that you just talked about of receiving an email and typically going out to a bank’s portal to download the virtual card number. It may not even come now, at least in the email itself. We can automate and help a lot of that for our suppliers. Right. And help a reconcile it back. So we see the reality right of virtual cards. And they may be unique cases that the panel just discussed where it makes sense. Right. And we’re here to help with that for our suppliers as well.

[32:53] Katherine:

And there certainly are cultural aspects to that as well. So if you think about, say, like Chinese payments, right. It’s on the mobile. It’s a QR code. You know, they’re scanning of codes, you know, either for, you know, for a buyer or a supplier via a screen. A lot of opportunities for security within those codes as well as other data that can be transferred through. There’s a lot of different types of payments that have really evolved around the world. And it’ll be exciting to see as we adopt more of them here that can bring you an immutable payment, which is important, ones that bring additional data fields, which are very important for suppliers, as well as bring that consumer, bring that familiar experience to the buyer.

[33:38] Sayid:

So we’re probably in the last couple of minutes of our panel. So I wanted to give each one of you a chance to you know what, if you had to save one key takeaway for this audience here, right? What would that be? I’ll go out on the panel, starting either side.

[34:04] Andrea:

I’ll take it. So to me, MasterCard is more than cards. It’s about value delivering value. It’s about delivering data and it’s about giving suppliers getting back to your point, controller and visibility. And we are partnering and getting the best in the lot. And we are partnering with AR and AP companies and the companies such as how they used to really bring a Full B2B experience that touch and solve for both buyers and suppliers.

[34:36] Katherine:

I think a key thing that we all talked about is that we’re all working to make B2B payments better. We understand that there’s a lot of complexity and, you know, just thinking about, those of us that work in the U.S. market versus those of us who work across the globe. There is a lot of different opportunities for us all to improve the experience for everyone in the value chain. We know we have a lot of work left to do, but it is something that we’re working on.

[35:28] Eileen:

What I would you to leave with is that it’s a complex and we’re all navigating it together so to continue the conversation together and to continue to innovate globally and learn from each other.

[36:28] Jane:

It’ll be the lightning round for me. Now, I completely agree with what you’re saying. It’s complex, but we need to be moving to a fully automated, simplified electronic environment. ACH payments are one part of that. They’re exceptionally efficient, but there’s some pain involved. I know HighRadius is helping with part of that and looking at how we help improve those pre and post-payment processes through Fix’s, which is our payment information exchange platform, is one of our biggest goals to really look at how do we improve that whole the whole ecosystem around that.