1. Payments Arrive Right Away
As digitization makes it easier and faster for people to make payments, they’re increasingly expecting to receive payments just as quickly.
The trend of faster payments gained traction with apps that helped users instantly transfer cash to each other and businesses. Now B2B use cases are growing, helped, in part, by the Federal Reserve rolling out its own instant payments system.
“We’re entering a new era of payments in this country,” said Jo Jagadish, head of corporate products and services at TD Bank. “These new models are going to create competitive differentiation among companies that are early adopters of these payment rails.”
These examples illustrate the benefits of faster payments:
Businesses can deliver service faster, improving the customer experience. For example, they can offer immediate funds to customers who return items, to borrowers who qualify for loans and to insurance claimants like flood victims who need emergency lodging.
Employers can give workers immediate access to their earned wages between paydays, providing employees with additional financial flexibility and reducing their need for payday loans. Employers can also immediately reimburse employees for expenses
Companies that pay suppliers instantly can negotiate for better terms and benefit from early-pay discounts, reducing how much they spend on frequently purchased items.
2. Cash and Checks Dwindle
Once an afterthought, offering digital payment options has become integral to attracting and retaining customers. In fact, more than four in five consumers expect digital options when they shop in-person, according to survey data released this year.
Meanwhile, when it comes to payments between business partners, checks continue to lose ground, giving digital transactions a more prominent role.
Explore the implications:
What's Changed – Consumer Transaction
Cash and checks were already on the wane as more customers bought online and used debit and credit cards in stores. When the pandemic hit, e-commerce picked up, and more store customers turned to contactless payment.
What It Means – Consumer Transaction
Customers who use cards spend more on average and conduct transactions more quickly. Cards and contactless are preferred among younger customers. And customers deciding whether to visit a business for the first time—or as a repeat customer—use payment options as a determining factor.
What's Changed – Business Transaction
At many midsize companies, treasury management had remained largely paper-based. With employees working from home and key equipment out of reach, this approach became untenable. The pandemic also created cash flow problems as small businesses struggled to get paid.
What It Means – Business Transaction
More businesses are paying with commercial cards, virtual cards or same-day ACH payments rather than checks. Electronic payments and invoicing pave the way for automation, which can improve cash flow, reduce manual labor and provide a holistic view of business health.
3. Data Creates Opportunities And Efficiencies
Going digital with payments creates a wealth of data that can deepen customer engagement and drive efficiency.
“With the advancements in AI and data analytics, we're seeing businesses turn data into rich insights that serve as a competitive differentiator and benefit their customers with targeted, contextual offers, as an example,” Jagadish said.