As originally published on PYMNTS.
Mass payments are no novel concept. Readers of this space know that many verticals and functions, from insurance to payroll – where payments are on the grandest scale in terms of volume – could see improvement in convenience and choice if only more companies would embrace instant and digital disbursements. The paper check remains a stubborn fixture in many areas of business.
And readers also know that when it comes to Latin America, in the switch to banking done in ones and zeroes, transforming the way B2B is done may be best served through partnerships between financial institutions and FinTechs.
As part of a continuing series on the digital transformation taking shape in the region, in an interview with Kevin Fox, executive vice president of NovoPayment, he stated that the trend is not a new one, but that it definitely has new twists.
“Digitizing a company’s manual, cash and paper-based processes and payments has been going on a long time,” he told PYMNTS. “The difference is that solving it today provides not only a new service for banks to sell, but often their first truly transformative digital use case.”
Progress has been a hallmark over the last several years – and yet, for firms like NovoPayment, greenfield opportunities abound. That is especially true in Latin America, Fox said, where in many emerging markets processes could be streamlined, where bank’s client companies are grappling with the demands of their own logistics and operational costs, and where traditional methods are just not cutting it.
The age of the portal is over, it seems, and banks are finding that in product lines like corporate prepaid, enterprise customers want real-time, scalable and seamless payment experiences. Banks, once wary of FinTechs and of collaborative and API-driven models, are realizing the competitive advantages of digitizing payments functions, which in turn allows them, ultimately, to better serve their customers.
“The catch is the urgency to the corporate client,” Fox told PYMNTS. “These payments can impact the operational flow of the business through procurement and key vendor relationships. We have found that there are a lot of organizations with large geographic footprints that may have considerable requirements to be able to support different business processes.”
Thus, he said, complexity may stymie banks’ abilities to satisfy their clients’ desire for mass disbursements of funds to different stakeholders – ranging from employees to contractors who help fulfill different operational requirements on scales both small and large. It’s the last mile, in a way, and no easy task to tackle.
Think, for example, of a logistics company served by independent trucking fleets, bringing various goods between cities or across borders. Mass payouts via an enterprise solution could be used to pay for expenses critical to the flow of business, such as fuel, tolls, stipends and drivers’ fees.
Education and Dialogue — and APIs
Fox contended that as client firms work with banks seeking to centralize operations and simplify last-mile activities, the API offers a new channel of delivery, where once the teller or the portal was a conduit for transactions.
In outlining NovoPayment’s approach to Latin America, education and dialogue are key when seeking to smooth operational processes, he stated.
“When you combine the importance of the mass payout problem to the client, the specific challenges it presents to the bank and the best practices for solving it today, you have an ideal recipe for testing some pretty top-of-mind stuff,” Fox said, as his firm helps to streamline, say, enrollment and compliance efforts through closed and partner APIs delivered through banks.
Among the challenges in Latin America, as stated by Fox: “A significant share of your end user/recipient population probably lacks formal banking relationships and electronic payment instruments.”
And against that backdrop, through the API, the client self-serves in what Fox termed a fully digital manner, pulling in services in an automated fashion, enrolling and authenticating workers and vendors.
And when it comes to payments, he said, with the aid of APIs, those clients are able to go about ordering and electronically funding co-branded debit accounts, dynamically loading and reloading accounts at the individual transaction level, sweeping back and redeploying funds, and blocking and replacing accounts.
Getting to the Heavy Lifting
None of this takes place in a vacuum, said Fox.
The banks have to understand what questions to ask of their clients. The pace can be daunting in adapting and adopting the digital mindset – and for some banks, there is the challenge of accepting the reality that in linking with FinTechs, the FI may need to accept a smaller role in executing some of the transformation in exchange for a bigger impact on the backend.
“From the perspective of the FI,” Fox said, “the challenge is really to fundamentally understand the business processes of their clients. In some cases, financial institutions are not accustomed to getting very granular with their clients to determine where in their workflows they might add additional value.”
An optimal experience, he said, is one where the bank client is consuming those aforementioned services from within the banking institution and via a White Label platform, rather than having to go to the bank for those services, picking and choosing them individually on an as-needed basis.
“So the opportunity here,” he said of the FI linked with the FinTech and dialoguing actively with the client, “is to really get ingrained within the customer’s value chain.” As banks get their arms more fully around the idea of mass/instant payouts, in working with their enterprise clients, Fox suggested that all parties benefit from setting short-term goals, with a constant feedback loop in place.
“There need to be champions,” said Fox, of digital initiatives across the FI and the client, “and those champions currently do not fit a specific profile” – as they can come from not just the C-suite, but also from marketing, sales and IT departments.
But when is all said and done, “the bank emerges more digitally mature at the end of the process, which today is strategic gold.”