How Fintech is shaping the future of accounts payable
Rick Fletcher, Group President of Corpay Payables, outlines strategies and trends driving innovation in the accounts payable industry.
Published: January 18, 2023
You have to spend money to make money. It’s an old saying, and it’s true. But it actually takes a lot of time for people to pay. It’s essential to your business, but it’s not why you’re in business.
That means there are opportunity costs. You need to spend money on spending money rather than on income-generating activities.
There are also mindshare costs. Making vendor payments is a brute force activity. Accounts Payable (AP) teams are stuck on a hamster wheel, constantly scrambling to get payments out the door and then reconciling them on the back end. They deal with a lot of manual work and several partly automated, partly integrated systems. They spend a lot of time correcting mistakes.
It’s about execution and handling all kinds of administrative details along the way. They do not have the systems and visibility they need to work more strategically.
But over the next ten years, AP will move from brute force execution to strategic decision making, thanks to new fintech offerings.
We haven’t really seen true fintech offerings for business payments in the market until recently. To make business payments effective, you need three things: money, infrastructure and process. A true fintech brings all three.
Most companies today still make payments through their banks, and there is no doubt that they are the heart and soul of payments. But the banks only help with one and a half of these three things. They have all kinds of lending products that can help you fund your expenses so they can help with liquidity.
They also have part of the infrastructure. They are chartered by governments to manage money and move money around. They invest significantly in licensing, regulatory compliance, networks to move money and data, and fraud protection.
But there’s one big part of B2B payments infrastructure that they don’t have: supplier networks. This has meant that it has been up to each individual company to carry out its own activation campaigns to move suppliers to electronic payments. It holds the companies back.
Fintechs are now building B2B supplier networks at scale. Companies can plug right into them and start paying around 80 percent of suppliers electronically right out of the gate.
Where the banks really fall is in the process. Process automation, on the other hand, is where technology companies excel. We’ve seen many ERP, procurement and invoice automation vendors start to offer payments as an add-on. It makes sense because people already use their software to automate the workflow leading up to the point of payment. But the software vendors don’t have vendor networks or the ability to offer liquidity.
This is why vendor payments are such a disjointed process. Until recently, no vendor offered the combination of “fin” and “technology” needed to handle the end-to-end process.
Today’s fintech delivers technology and services that take costs and inefficiency out of the process. They give AP teams insight into the status of approvals and payments. But most importantly, they unlock mindshare so they can use payments as a strategic lever.
AP teams can get out of the payment processing game and still have all the visibility and control they need to run their business. They have the insight they need to become a management and decision-making group. They have time to think, as opposed to just trying to keep things moving.
They can use their knowledge of the company’s inner workings to contribute in a number of areas – cash management, job cost accounting and cost and process optimisation. The efficiency gains, combined with increased discounts from leveraging the B2B supplier network to pay multiple suppliers by card, can turn the back office from a cost center into a revenue generator.
For far too long, companies have had to live with a set of back-office shortcomings that they are well aware of. They recognize challenges of working with different systems. They know that there is too much manual work that does not add value, and that the time intensity of error correction is significant. They have resigned themselves to these shortcomings because it has been this way for decades and there has not been a better way.
It is now. It’s been a long time, because business payments are complicated. To really solve the problem, you need to be a true fintech with a complete set of assets – the relationship with the banks and credit card companies, the network and the technology. You have to have them at scale, because the volume of B2B payments is huge. It is a new solution that has been under development for 50 years. This means that supplier payments no longer need to be suboptimal.
Rick Fletcher is CEO of Corpay Debtwhich enables businesses to spend less through smarter payment methods.
