Reviewing digital payment methods and the movement to a real time payment environment
The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.
Jim Maimone – SVP, Senior Enterprise Payments Platform Product Manager, Citizens Bank
Can you outline the importance of harmonizing ERP and treasury management systems?
I think the “harmonization” between the ERPs or CRM tools will be critically important. Most information reporting today is based on the bank’s final posting. However, as we move to a more instant payments environment, such as The Clearing House’s RTP system where funds are immediately available, the business’s ERP or AR system is going to have to immediately updated to ensure the proper posting of the payments in real-time.
An example of this would be if a utility company called a homeowner and said, “your electricity is going to be shut-off tomorrow morning if you don’t bring your balance current.” The homeowner could say, “I’m sorry, can I send you an instant payment?” If the utility company employs the Request for Payment (RfP) Service and the homeowner’s bank has enabled the homeowner, they could exchange transactions and the homeowner could send the payment in real-time. However, there is still one more leg of the transaction. Since the RTP payment acknowledgement only acknowledges that the money has been deposited into their account, no other system will know that the transaction has been completed. Unless the ERP and the bank information are synchronized, there is still the potential that the homeowner’s electricity could be shut-off, creating serious customer dissatisfaction.
Integrating the back-office systems with the banking information will be critical. This also could apply in situations of landlord tenant relationships with evictions, mortgage relationships avoiding foreclosure proceedings, and the prevention of erroneously cancelling insurance coverage because the back-office system was in sync with the banking information.
Why is it important to embed payments into application functionality for a seamless experience?
Commercial businesses in the upper middle-market and large corporate space typically have multiple bank relationships. Embedded APIs can help businesses control access to key payment services within their ERP systems. Legacy payment channels have businesses doing their invoice approvals and payment initiation separated from their banking experience.
Legacy banking applications require AP departments to manage multiple banking platforms. This requires businesses to manage entitlements in the banking app as well as their ERP and can represent a risk working in this new distributed environment and the disabling users as was necessary during the Great Resignation. By embedding the API in the ERP, the business has greater control using internal processes and do not have to repeatedly disable users on each banking platform.
In addition, this will save the business time training staff on multiple platforms. The AP team can concentrate on their own systems.
How do you believe digital payment methods will continue to evolve?
Today, commercial businesses are aware of ACH, Wire Transfer, Checks, etc. as payment instruments. I believe as more consumer applications provide the appearance of immediate payments; these individuals will start to demand that experience in the corporate environment. Think about young people today, many don’t know there is an actual bank account behind their debit card, nor are they aware of the actual number. As a result, the digital improvements have made the type of payment less important. I believe companies will want immediacy when the situation presents itself and rely on other batch processing for other payments.
This will lead to an intelligent routing environment for payments. Intelligent routing, meaning companies will simply provide the payment information they have, and based on the bank receiving that information the bank will decide on how best to route that payment. For example, a payment of $1MM due today, payable to a bank account at an RTP bank can go same-day ACH or RTP, if it’s 7 PM ET, it will need to go RTP. Therefore, the routing logic will take that payment instruction and decide that settlement is today and must go RTP. Therefore, ACH and Wire payments will simply become “payment instructions”, based on rules established between the bank and the corporate AP department, the instruction will be executed in the payment method dictated by those rules.
Although, this change will be coming, I’m sure there will need to be risk reviews and legal reviews as today each payment has its lists of rules and regulations, and a more in-depth review will need to be undertaken.
Jim Maimone will be speaking at our upcoming Customer Experience and Digital Banking Congress taking place on November 1-2 in NYC at Etc Venues Lexington
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