The digital payments landscape has undergone a significant progression, evolving from a luxury reserved for large enterprises to a necessity for businesses of all sizes. Businesses seek to optimize their operational efficiency as part of their digital transformation.

In today’s business environment, physical checks present several challenges that hinder operational efficiency, including time-consuming processing, high costs, and susceptibility to errors or fraud. Although the use of checks continues to decline,  as of 2021, the Federal Reserve reported 11.2 billion payments (27.23 trillion dollars in value) per year still being transacted via check.  And despite this being a significant decrease in volume, check fraud continues to increase. In February 2023, the Financial Crimes Enforcement Network (FinCEN) advised financial institutions of a number of mail-theft schemes targeting check payments:

“Mail theft-related check fraud generally pertains to the fraudulent negotiation of checks stolen from the U.S. Mail. Fraud, including check fraud, is the largest source of illicit proceeds in the United States and represents one of the most significant money laundering threats to the United States.”

Simplify Business Processes With a Comprehensive Digital Payments Strategy

The best way to confront these issues is through a comprehensive digital payments strategy that can provide more efficient transactions, help lower fees, enhance security, and simplify record-keeping. With technology continuously advancing, businesses that persist with physical checks run the risk of falling behind and missing out on the benefits offered by modern payment systems.

Key Benefits of Digital Payments

1. Greater Security

Some businesses still rely on paper checks to pay suppliers and vendors, despite the rising prevalence of check fraud, as highlighted in a FinCEN alert from February.  Paper checks are inherently vulnerable to fraud due to the sensitive information printed on them, and fraudsters have become increasingly adept at stealing company checks from mailboxes.

Moreover, instances of check fraud surged during and after the pandemic, prompting many treasury banks to caution against broad check utilization unless accompanied by adequate technology or services to mitigate fraud risk. Companies are seeking payment providers that offer enhanced security measures to counter the persistent threat of fraud.

2. Time Savings

Over the years, companies have turned to solutions such as single-use virtual cards and comprehensive accounting and reconciliation automation to enable timely payments for invoices. Like payroll automation, the speed of vendor payments has accelerated. Digital payment methods allow accounting teams to effortlessly track payments electronically, eliminating concerns about managing paper trails. By automating and digitizing payments, employees in accounting, finance, accounts payable, and accounts receivable can allocate more time to high-value tasks that drive business growth.

3. Cost Efficiency

The cost of updating infrastructure to facilitate the transition to digital payments is often cited as a barrier. Yet, the cost efficiency of embracing digital payments far outweighs the initial investment.

On average, businesses have approximately 24% of their monthly revenue tied up in accounts receivable. With accessible and affordable B2B payment technology, this need not be the case. Digital payments enable quicker settlement, providing businesses with greater opportunities for growth.

4. Faster and Real-Time Payments

One of the significant advantages of digital payments is the accelerated speed at which businesses can pay vendors and receive funds from customers. The laborious process of writing checks, which is prone to human error, often results in voided checks and delayed proceedings.

Furthermore, the time required to process incoming checks prolongs the settlement and revenue realization timeline. Digital payments facilitate near-instantaneous transactions, eliminating the need to physically deposit checks at a bank. Businesses can access funds promptly, allowing them to focus on growing their operations.

Conclusion

Digital payments represent the future of the payments industry. As businesses continue to prioritize digital transformation, digital payments offer faster and more efficient transactions with lower fees, improved security, and simplified record-keeping.

Perficient specializes in creating and engineering payment strategies that bring efficiency and savings to your account receivables, account payables, and collections process. Reach out to one of our subject matter experts today to learn more about how we can elevate your customer experience and bring new efficiencies to your business.

Life is full of intersecting points. The payments industry is no different, and we’re quickly approaching a new intersection point due to the Real-time Payments’ movement into the US.

These days, as the US prepares to embrace real-time payments in 2023, the intersection of real-time payments and automation has become a key point of discussion. Perficient is looking forward to joining this conversation with other financial services and payments experts at the upcoming Bank Automation Summit in Charlotte, North Carolina on March 2-3.

During the Summit, we’ll seek to socialize and discuss how the adoption of real-time payments services like FedNow and RTP in the US will bring a new dimension of change for banks, fintechs, retailers, large corporations, and other stakeholders.

This change will force impacted stakeholders to reconsider their services, products, and operational procedures, thus generating new opportunities for automation. Among the automated services impacted, we may find authorization services, posting and reconciliation processes, settlement timelines, and even notifications and reporting – just to name a few.

Because real-time payments run on the ISO 20022 data standard, a revision or remapping of existing automation schemes to accommodate the new data standard may be required. Workflow timings may now be altered due to the immediacy of transactions, which can have a domino effect on operational, risk management, and reporting teams.

With all this considered, key strategic topics like buy vs. build, risk, and operational readiness cannot be ignored. Ultimately, change equals risk. Many stakeholders should explore the real-time payments and automation conversation with a risk-driven mentality. One place to start is ensuring your technology is ready and adequate to take on this new opportunity. Our Payments team at Perficient has developed a Technical Readiness Assessment for ISO 20022 to support all those looking to prepare.

While the migration to real-time payments in the US will be optional at first, this initial adoption period represents a great opportunity to experiment, innovate, and get ahead of the competition. The market demand is real and fueled by the younger consumer generations; online publication pymnts.com explains that “Consumers — especially those who are younger or financially challenged — clearly have a high level of interest in the ability to use real-time payments, and a significant share is willing to pay or switch FIs for this option.”

Perficient is well-positioned to support real-time payments. We bring payments and automation expertise and have extensive experience in creating cohesive and pragmatic strategies to help our clients and partners.

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No matter where you are in your bank’s automation journey, we can help you strategize and execute cutting-edge experiences.

Interested in learning more? Contact one of our financial services industry and automation experts here, or connect with us at the Bank Automation Summit coming up in Charlotte, North Carolina on March 2, 2023. 

Across industries, consumers are communicating the same demands; they see the thing, they want the thing, and they want it in their hands within hours, if possible. And if it’s not possible, they wonder why not since it usually is through Amazon.

Because money is what makes the world go-’round, the payments industry has responded to this heightened sense of urgency from consumers to get ahold of merchandise, services, and funds seamlessly, immediately, and with little to no human interaction by creating more innovative payment products, providing more flexible payment models, and paving more payment avenues.

In 2023, we expect to see this response exaggerated and heightened. Here are some of the biggest payment trends we’re forecasting for the new year.

Security/Biometric Payments 

With the widespread popularity of digital payments continuing to grow, security remains at the forefront of concern for payment companies and their vendor partners. In fact, according to The Business Research Company’s 2022 Payment Security Global Market Report, the payment security market is expected to reach $43 billion by 2026. Vendor and payment companies alike are seeking and creating solutions to provide their customers with the most secure digital payment experiences possible. One example of this effort, which we expect to see more of in 2023, is biometric payments.

A biometric payment is a point-of-sale technology that authenticates payments by pairing a payment card with a physical identifier of the cardholder. The most commonly used physical identifiers for authentication are fingerprints and facial recognition scanning. Both Visa and Mastercard rolled out pilot biometric payment cards in 2022.

Visa launched its pilot biometric payment card with Mountain America Credit Union and Bank of Cyprus, introducing the fingerprint scan as an alternative authentication method to a pin number. To use this offering, cardholders enrolled a fingerprint to have securely stored on their card. The card had a fingerprint-reading sensor that users place their fingers upon during a transaction. If the fingerprint matched the fingerprint stored in the card, a green light flashed, and the transaction was authenticated. This card was useable in transaction terminals that accepted Visa cards, so no new POS systems were needed.

The Mastercard’s pilot biometric technology, on the other hand, if widely adopted, would require more intensive widespread hardware and software updates. To partake, users had to take a photo of their face or scan their fingerprints and register them in an app, linking the identifier to a payment card.  At the select stores that participated in the pilot, users could either scan their face or their finger to complete transactions, eliminating the need for a physical card, but requiring stores to have compatible POS systems with facial and fingerprint scanners.

Social Media as a Payment Channel

Considering that the average American spends 147 minutes a day on social media, it is no surprise that businesses across industries seek the visibility that social media advertising and eCommerce can provide.

For example, many companies have reaped the benefits of using Instagram’s shopping capabilities. Instagram rolled out its Instagram Shopping feature in 2020, satisfying today’s customer’s itch to mindlessly scroll and the much sought-after instant gratification high from “adding to cart.” One avenue for Instagram Shopping is the Instagram Shopping tab, where users can search for specific items and shops, or filter item type by category and simply peruse, just as they would on their standard Instagram feed. In addition to the shopping tab, Instagram also allows vendors to create “shoppable” posts that can be posted anywhere on Instagram. Shoppable posts are photo posts of merchandise that have hyperlinks to their respective product pages. All of Instagram’s shopping features allow users to add items from multiple vendors into an Instagram-operated cart. According to Instagram, 130 million user accounts tap on shopping posts to learn more about products every month.

In 2023, we anticipate that more and more vendors will hop on the Instagram Shopping train. We also expect other social media channels to roll out their own shopping capabilities or upgrade their existing shopping features. The success of social media payment capabilities showcases the need to meet customers where they are.

Subscription-Based Payment Models

Between entertainment, health and wellness, food, alcohol, pet goods, and apparel, the subscription commerce model has made its mark on just about every industry. Subscriptions jumped in popularity at the onset of the pandemic for various reasons, among them being that people craved their familiarity and predictability and most subscription services don’t require people to leave their homes.

Today, we have seen many consumers stick to the subscriptions they acquired during the pandemic because they have grown accustomed to the convenience, comfort, and variety that their subscription models have provided them. On the other side of the token, however, prices have inflated, and for many, subscription-model goods and services are the first to be cut when trying to lower monthly expenses.

Therefore, in 2023, it is essential for businesses that use subscription commerce to offer a lot of variety and flexibility with their plan management to ensure they don’t ostracize customers. Successful subscription-based vendors will need to allow customers to easily pause, skip, and edit their subscription plans.

Buy Now, Pay Later (BNPL)

BNPL has been making waves in the payments space for several years now, and for 2023, we expect that it will continue to evolve in its variety and sophistication. In fact, according to research by eMarketer, the number of BNPL US users is forecasted to climb to 88.2 million this year and 94.4 million in 2024.

In the beginning, the majority of BNPL purchases occurred between retailers and end customers in the apparel and cosmetics spaces, but there has been a shift toward using BNPL for bigger ticket items, in both business-to-consumer and business-to-business landscapes. With this shift has come the infiltration of BNPL into new industries, such as manufacturing, education, healthcare, and raw materials.

Real-Time Payments

Real-time payments (RTP) are account-to-account fund transfers that permit the immediate availability of funds to the beneficiary of the transaction. They’ve gained a lot of traction in recent years, in part due to the enhanced visibility of and accessibility to funds they allow. In fact, according to ACI Worldwide’s 2022 Prime Time for Real-Time Report, real-time payments had a transaction volume of $118.3 billion in 2021, a year-on-year growth of 65%.

Currently, India is the dominant leader in the RTP space –  48 billion real-time payment transactions occurred in India in 2021 and the number continues to grow. The widespread adoption of real-time payments resulted in an estimated cost savings of $12.6 billion for Indian businesses and consumers in 2021, helping to unlock $16.4 billion of economic output. Given these monumental savings, other countries are eager to amp up their real-time payments capabilities; according to Fact.MR, the overall market for real-time payments is expected to advance at a compound annual growth rate of 33% over the next 10 years, reaching a yearly volume of about $300 billion by 2032.

In the United States, the Federal Reserve Bank is expected to launch its FedNow Service midyear, which will be available to depository institutions in the United States and provide “interbank clearing and settlement that enables funds to be transferred from the account of a sender to the account of a receiver in near real-time and at any time, any day of the year.”

Since the FedNow Service is backed and operated by the federal government, it cannot turn a profit, paving the way for it to be more competitively priced and accessible to financial services institutions than other real-time systems. Given this new practicality, many financial services institutions are lining up to participate in the program.

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In 2023, successful payment companies will continue to prioritize and emphasize the convenience and flexibility of transactions while balancing customer choice. No longer will consumers settle with being burdened by a friction-filled payment experience; competition is endless, and customers will be quick to take their business elsewhere if they cannot conduct a transaction in the manner they prefer.

Perficient specializes in strategizing and engineering seamless point-of-sale and embedded finance experiences for businesses across industries. Reach out to one of our subject matter experts today to learn more about how we can elevate your customer experience.

Our Payments Practice recently had the opportunity to represent Perficient at the 2022 Real-time Payments & Fraud Management Summit held in New York City.  

The conference was attended by several Financial Institutions, Service Providers, Fintechs, and Industry Regulators. Among its attendees were representatives from The Clearing House (TCH), The Federal Reserve Bank of Boston, and SWIFT, along with some of the largest financial institutions in the U.S.  

Themes & Takeaways 

Real-time payments are going mainstream.  

Industry thought leaders came together to discuss the adoption of real-time payments, share lessons learned, and caution on execution challenges others may face. As we head into 2023, the international ISO 20022 data standard will serve as the backbone of various new payment services that will enable real-time payments in the U.S. These new payment rails will be offered and sponsored by The Clearing House (TCH), The Federal Reserve, and SWIFT (to mention a few). 

Industry demand and use cases are maturing. 

It’s easy to reach the conclusion that real-time payments are better for several reasons and understand that legacy payment systems have not been perfect. As an example, real-time payments in practical terms will accelerate how fast merchants get paid and will eliminate the waiting period for funds to settle. They will also enable employees to get paid faster. Real-time payments can also eliminate the chargeback risk for a merchant because the funds are irrevocable and delivered immediately.  

2023 will bring to mainstream The Federal Reserve “FedNow” service and The Clearing House Real-time payments (RTP) Network. These services are different from NACHA’s “Same Day ACH,” or Card Network solutions. The key difference is real-time payment rails will transact and settle transactions instantly.  

Plan and adapt or chase and catch up.  

So, what does this mean for fintech and financial institutions? Ultimately, these services will deliver the much-desired financial and technical infrastructure needed to make real-time payments a reality in the U.S. However, the Federal Reserve and TCH are only creating a rail, and it will require additional steps to operationalize and productize the service – especially for smaller financial institutions. This is because even if the rails are built, technology will be needed to connect to the rails. An orchestration layer may also be considered to connect apps and services to send the payments over the rails: the so-called “last mile.” 

Each of the new payment services will have specific use cases and features that will seek to satisfy a variety of consumer and/or corporate use cases. More importantly, the new services will enable financial institutions and fintechs to create enhanced experiences, enabling a higher level of tracking transparency while delivering real-time access to funds.  

2023 will, in some ways, force real-time payments to the mainstream. Some are ready to adopt it and leverage the new capabilities to enhance existing money movement services and create new ones. Others may be fast followers and wait until plug-and-play solutions are ready for them to adopt. Regardless of your financial institution’s approach or strategy, the reality is that real-time payments are coming and most participants in the industry will be forced to engage with it, either by plan, client demand, or to reach competitive parity. 

Perficient’s team of industry experts is experienced in working with ISO 20022 and all the opportunities real-time payments will bring. We can help you navigate this new landscape and deliver value to your base.