PaymentsJournal

Events in the payments space are moving rapidly. Advances in artificial intelligence (AI), point-of-sale technology, and real-time payments have left many merchants wondering how to keep up with customer expectations.

Jeff Kump, CSG Forte President, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, joined a recent PaymentsJournal podcast to discuss the trends they saw unfold in payments last year and what they expect for 2024.

You could say 2023 was the year of AI, as businesses raced to harness the technology in valuable ways. Some of the top use cases included improving the customer experience, enhancing customer support and, especially within the payments industry, reducing fraud.

Experts like CSG Forte have established themselves at the forefront of developing these uses for AI. “CSG has been in the AI business for several years, offering predictive behaviors to help improve customer journeys,” Kump says. “As part of leveraging generative AI, we recently launched CSG Bill Explainer, which helps identify monthly changes to the bill and provides a plain language explanation of why changes occurred to reduce billing confusion. In turn, this leads to fewer calls into the call center and a better customer experience.”

The past year also saw a noticeable change in how merchants and consumers used buy now, pay later (BNPL) strategies. As the economy shifted and lending became more expensive, BNPL tamped down. Due to the rise of inflation and increasing interest rates, some merchants used BNPL as a sales tool to offer 0% interest, especially for big-ticket items.

Additionally, advances in Point-of-Sale (POS) technology allowed merchants to accept contactless payments with just a standard smartphone.

“It was not a surprise to see SMBs want to be able to accept payments more flexibly and with less cost,” Keyes says, citing small to medium-sized businesses. “But JPMorgan announced that they’re launching their own mobile point-of-sale technology with Sephora, a huge retailer. This points toward an interest in this technology for larger purchasers, perhaps blended with more standard terminals. That gives customers more opportunities to check out through the store, and stores can create a more high-touch experience with employees armed with standard smartphones, who can check out consumers wherever they are.”

When FedNow was introduced, many people hoped that it would disrupt the entire payments ecosystem. “It didn’t take off as quickly as everybody anticipated,” Kump points out. “I still think it’s a great technology, and I expect real-time payments to grow exponentially over the next few years. Part of the delay is that, right now, the consumer has to initiate and push the transaction. When you’re relying on the consumer to make that type of change, it causes additional friction. Adoption will pick up at some point, but I don’t think the growth curve will be as drastic as I think everybody anticipated.”

Between the launch of FedNow and the U.S. government’s interest in regulating interchange, 2023 looked like the beginning of the end for credit and debit card dominance. Consumers switching to account-to-account payments were also supposed to signal the end of the credit card. On top of that, many felt that card rewards might go away if the interchange on credit cards became more heavily regulated, leaving consumers and merchants interested in exploring alternatives. But none of that came to pass.

Adoption of the metaverse has also been slower than expected. The usage in Asia and Europe is higher than in the United States but still not what many proponents thought it would be. “It’s still trying to find its niche of which industries or what use cases make the most sense,” Kump says. “And how do you ensure greater security, especially around payments?”

AI remains a key trend to monitor, as it will continue to optimize the analytics that can give businesses better insights into their own operations. Gaining greater insight into where a business is lagging or ahead of its peers will help optimize its strategy.

Acquiring and merchant services are often thought of as relatively static, but in 2023, that wasn’t the case. “There is likely to be more competition in 2024 and beyond for merchants and other clients to offer solutions in acquiring,” Keyes says.

Bringing account-to-account payments to instant transfers will also be a trend to watch in 2024. ACH has been a lagging payment rail, one that can require a certain amount of time. But speeding that up to an instant transfer rate will be game-changing for many industries.

Open banking is also poised for greater acceptability, especially in the United States, and Kump says it will open “a host of new possibilities and innovation that can be leveraged on top of that.”

Given the pace of changes in the payments space, businesses will do well to enlist an expert partner who can help them meet their customers’ needs. A trusted payments advisor can empower businesses with the latest technology and guide them toward what is most meaningful for the business—and away from what isn’t.  

A payments partner should know your customers and their preferences. By leveraging customer data and analytics, a provider can help a business hone in on its problem points in processes, acceptance, and lowering costs.

“In addition to offering the right solutions, you want to ensure that your provider has the latest security and fraud protections to ensure that you don’t have to give much thought to that area,” Kump says. “Your payment providers should ensure that you’re successful in securing your information and reducing your exposure to sensitive payment data.”

A good payments provider will have the infrastructure to adapt to whatever new payments channels appeal to a business’s customers. It’s a matter of being ready and able to move, which is made much easier and quicker with the right partner.

As any seasoned treasury or finance practitioner knows from experience, organizations dealing with numerous banking partners must account for a broad and constantly shifting range of protocols when it comes to processing payments. For instance, if a business has relationships with six or seven banks spread across the globe, it could easily be looking at 25-plus variants of payment formats. 

In a recent PaymentsJournal podcast, Jon Paquette, Executive Vice President of Solutions and Product Strategy at TIS (Treasury Intelligence Solutions), and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discuss the best practices for dealing with multi-bank connectivity and payment processes.

Given the variances that occur across different banks and regions for financial messaging formats, remittance data fields, regulatory reporting standards, etc., dealing with multiple banks can become very complex for organizations to manage. And it’s not just the bank connections themselves that need to be managed, but also the systems that leverage those connections. According to Paquette, operators of ATMs or payroll systems up to TMS and ERP users would all benefit from using an efficient model that allows those systems to tap into a unified connectivity structure that enables straight-through process automation.

Of course, it will never be feasible for an organization to use just a single bank relationship globally. One reason (out of many) is for insuring against bank failures. “Corporates that have relationships with non-globally systemic important banks are multiplying their number of bank relationships for fear that their deposits may not be insured beyond the $250,000 level,” Bodine said. But as the number of bank partners and underlying accounts rises, “the ability to manage all these different portals, protocols, and interfaces becomes a major obstacle.” 

Bank connectivity drives a great deal of process automation within finance. Payments are a critical piece of the puzzle, but organizations also use inbound bank reporting to automate financial records and accounting entries. Treasury, for one, relies substantially on bank data as fuel for its cash forecasting and cash positioning functions. And without a unified connectivity strategy, it can be difficult to maintain visibility across each regional finance center or shared service center, as well as across various entities, business units, and bank groups. 

Paquette points out that it’s difficult to maintain consistent controls without straight-through processing in place, to make sure that all the subsidiaries are executing payments in the same way. A lack of standardization can introduce extra risk to the payment process, which becomes a significant issue for some organizations as data management strategies take on greater importance. Without a holistic bank connectivity solution, banks often end up operating in data silos.

“If you have a multi-ERP technology structure, for instance, you’re likely using different systems in different regions, and you’re connecting your banks to those localized systems,” Paquette said. “You end up with data trapped inside localized silos that are driven by the systems in use across those regions. Having a more comprehensive connectivity strategy (i.e. all banks or ERPs feeding into or connected by a central system) helps to break down those data silos.” 

As companies are growing, trying to implement automated processes can result in extra confusion, a lack of control, and a lack of visibility. It can also become chaotic for finance to manage rapid growth as things change within the business – such as what is caused by multiple acquisitions of companies each with their own preexisting set of bank relationships and back-office systems. And without a definitive strategy in place, many companies focus on the big targets – such as the main cash management banks – but tend to overlook the outliers because they add too much complexity. 

“As a result,” Paquette said, “these partial implementations don’t serve the organization the way that they were intended to.” The end result is even more siloes and continued inconsistency with reporting and visibility.

When it comes to solving the above issues, some organizations focus on developing strong in-house resources to unify their banking landscape. If a company has a large and experienced IT team with ample bandwidth, this can definitely be accomplished. But there’s always a bit of a balancing act: Is it really worth IT’s time and effort to manage a project of this magnitude in-house, or is it more cost-and-time effective to hire an external resource and focus on something else internally? Often, internal strategies appear to be the better solution early on, but end up incurring huge IT maintenance costs – not just for initial development, but also for ongoing upkeep. Accounting for those internal costs makes the business case stronger for adopting a specialized, externally managed solution. 

“If you’re working with five to seven banks, there’s already enough complexity to start thinking about hiring a specialized provider for your connectivity strategy,” Paquette said. “It allows you to put in place a centralized connectivity hub where the provider is connecting your different bank relationships in a multi-protocol fashion.” That way, as your company expands to encompass potentially dozens of banks and hundreds or thousands of accounts, a strategy and solution is already in place to accommodate the growth.

“If you have a mix of protocols like API and host connections, all those can connect into that centralized hub,” Paquette continues. “That gives your business just one point of entry into their bank relationships. If you’re connecting ERP systems, payroll systems, and a TMS, one connection to that hub can give you access to your entire bank portfolio within each system, versus thinking about each individual connection and managing those back and forth. We find this to be a really effective strategy.” 

With a decentralized finance structure and regional shared service centers that operate autonomously, getting visibility into those processes can also be a challenge.

“The example I like to use is with the ISO 20022 protocol,” Bodine said. “There are now 60 different implementations of this so-called standard. That’s just one example of why you would not want to manage this in-house. Organizations simply don’t have the bandwidth to do this, in my estimation. You would want to partner with an organization like TIS that really knows what they’re doing here.”

Once a company has a connectivity hub in place, major simplifications can ensue. With a single payment instruction format sent into that hub, the software can conduct the transformations into the ISO variants and pick up all the geographic nuances. It also alleviates any strain on internal IT teams to constantly maintain and update those variants in-house.

Treasury, finance, and IT teams aiming to take their organization through a global payments transformation or banking process overhaul should ask themselves a few questions: 

Disbursing funds in an efficient and accessible way is critical to a good customer experience. But new economic realities and mobile adoption have challenged organizations to evolve how they pay to meet consumer demands.

In a recent PaymentsJournal podcast, two experts from Blackhawk Network, Sarah Kositzke, Director of Research, and Scott Lapp, Director of Product Marketing and Incentives, along with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the latest research on consumer payments preferences. The conversation focused on Blackhawk’s research into business-to-consumer disbursements.   

Disbursements are typically issued when a customer is owed a credit or refund. Examples include a property management company returning a security deposit, or an airline handing out compensation because a flight was canceled. Blackhawk wanted to better understand customers’ payment preferences, specifically in terms of their banking classification —whether unbanked, underbanked, or fully banked.

According to the FDIC1, the fully banked—representing 80% of U.S. households—have established relationships with banks and use them for all types of services. About 5% of U.S. households are unbanked, meaning they do not have any established relationship with a bank. The remaining households are underbanked: They have a checking and/or savings account with a bank but also leverage other nonbank transactions, like those through rent-to-own services, payday loans, pawn shop loans, and tax refund anticipation loans. They are likely to be 34 and under, Black or Hispanic, have a high school education or less, and have a household income of $50,000 or less.  

One of the strongest results from Blackhawk’s research was consumers’ antipathy toward physical checks. Nearly three-quarters of those in unbanked and underbanked households said they were frustrated by receiving a paper check. But nearly half (48%) of the fully banked households are also frustrated by receiving a paper check.   

Much of the frustration around checks is that they are a small but real burden.. “Even to deposit a check via mobile phone, you have to set aside time to do that,” Lapp said. “If you’re not using mobile banking, then you have to find a bank or an ATM. Sometimes the person needs to go to the issuing bank, and if there is no local branch, they may have to go to a check-cashing place, which means paying check-cashing fees. And depending on the size of the disbursement, there can be a hold time on those funds.”

According to Hirschfield, Javelin’s research shows that 92% of adults have a checking account. “But even with those checking accounts, most of the money is moved in a card-based or digital format,” Hirschfield said. “Even as they’re making payments, not just receiving payments, they want to use a non-paper-based method.”

People are most excited about disbursement payments that are flexible and convenient—and that encourage them to splurge. The most popular methods include physical and digital gift cards; payments through vehicles like Venmo, PayPal, and Cash App; or directly deposited funds. 

“We asked people about their ‘emotional payment connections,’ which is not something usually under consideration when sending a payment,” Kositzke said. “When selecting a physical or digital prepaid card from Visa or Mastercard, or a merchant gift card, these are viewed as treats that allow people to splurge on things they want. It’s splurging for the new dress, shoes, books, a night out. Other payment types, like a paper check, direct deposit, Venmo or Cash App were seen as a way to pay for things they need, like rent.”

Blackhawk found that gift card recipients often plan to spend more than the value of the gift card. If they receive a card valued at $50, on average they will spend nearly $60 beyond the value. If they receive a card valued at $500, they will spend slightly more than $100 beyond the value on the card.

“We agree from our own research that gift cards prompt additional spending,” Hirschfield said. “About 40% of consumers will generally spend more than they typically would when using a gift card, and 25% will generally purchase a more expensive item than they normally purchase.” 

Blackhawk also asked customers whether they preferred a physical or digital disbursement. Fully banked customers split 50-50 on whether they would prefer a physical payment, but two-thirds of the unbanked and underbanked respondents preferred digital delivery. If the value of the payment is close to or more than $200, most people prefer digital delivery. Javelin’s research shows that although volumes are significantly lower on digital cards, which make up 28% of all cards, the average load values are significantly higher, at $115 versus $95 for physical cards. 

The least desired form of disbursement, according to Blackhawk’s research, is a bill credit. Bill credits are often viewed as simply a way to pay for things. If the person is not paying close attention to the monthly statement or credit card bill, the credit may not even be noticed.  

People were also surprisingly open to sacrificing some of the funds to receive their payment faster, especially among the underbanked population. Nearly a third of underbanked people were willing to give up between 1% and 3% of that payment to receive it faster. The fully banked were less enthusiastic, but 13% were willing to sacrifice at least 1% of those funds to get it faster.

Behavioral factors should never be dismissed by those working with disbursements. It’s critical to understand whether your payment is likely to be considered a reward or a treat, and those notions can be reinforced by issuing something like a prepaid gift card. People will likely splurge with that payment type, spending up to twice the card’s value.

It’s also important to consider the friction that printed checks cause, even for the fully banked. And keep in mind that bill credits are the least desired form of payment. “Emotional payment connections” may be largely overlooked factors in disbursements, but they can have a huge effect on how those payments are used once they are received.

1Source: Federal Deposit Insurance Corporation (FDIC), 2021 FDIC National Survey of Unbanked and Under-banked Households (October 2022)

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Small-business owners want to focus on serving their customers and growing their business, not deal with time-consuming manual processes that come with managing payments and invoices. And they’re not getting the help they need. A recent survey showed that 64% of small businesses were unsatisfied with their current payment offerings, and nearly 20% said they will leave or consider leaving their current financial institution.

What are these businesses looking for in a financial institution, and what is being done to meet those needs? In a recent PaymentsJournal podcast, we asked Tim Ruhe, VP, Head of Small Business Payments at Fiserv, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, about the pain points that small businesses experience and what FIs can do to serve them better.

Small-business owners want to focus first and foremost on the business itself, not on collecting and processing payments. “They don’t have a lot of time for managing all the payment inflows and outflows there,” Ruhe said. “But instead, they typically end up using two to four tools to manage how they pay suppliers, how they collect invoices, how they collect payments from their customers, and how they send invoices. What they want is a single place to manage all that—and they don’t really have good answers for that today.”

Ruhe has seen many business owners with invoices stacking up—on paper and in emails—alongside accounting software that they’re trying to integrate into the business. Many operations remain under-digitized as business owners try to deal with sending out bills and getting paid. “We’ve found that 56% of small-business owners consider cash flow and invoice payment management an ongoing pain point,” Ruhe said. “And 81% of small businesses expect to create payment flows that align with their businesses, and they don’t believe financial institutions are delivering on that yet.”

According to Riley, sometimes it’s easier for small businesses to log all of their transactions in their personal account, but that’s not a good business procedure. “It leaves you exposed to tax problems, leaves you exposed to opportunities, and it doesn’t set the stage for growing the business,” he said. “That’s something we should address with more integration and capabilities.”

What these business owners seek is a well-engineered process that takes them all the way through from delivering an invoice to receiving payments. With a wider variety of payment methods available than ever before, that can be harder than it looks. “There’s a bit of a rallying cry that we’re hearing from small businesses that says give us a fit for purpose,” Ruhe said.

Fiserv sees its mission as helping those small businesses grow by taking the complexity of managing payments and invoices off the table and simplifying their owners’ lives. Fiserv knows these business owners want a single financial institution to turn to for such solutions.

“We’re hearing from almost every FI that improving their small-business capabilities—and specifically their small-business payment capabilities—is a top priority in the next year or two,” Ruhe said. “If you’re hitting a low point in your cash flow and need to pay with credit cards, those are tools and capabilities that many small businesses don’t have access to.”

A new study from Intuit shows that a significant number of small businesses have had to rely on credit cards as a source of capital over the past 12 months. In the United States, 30% of small businesses have used credit cards as a primary or secondary source of funding, while only 22% relied on a loan or a line of credit. 

These businesses don’t want to go one place for credit cards and another for loans. They want an easily accessible, comprehensive view of their cash flow that helps them decide when they need a line of credit or to use a credit card.

Integrating all these cash flow needs has been a priority for Fiserv. “What we’ve been hearing is, ‘I need digital solutions that map to the work that has to be done, I need the jobs to be done right, and I need to bring all my invoices into one place so I can see everything that has to be paid,’” Ruhe said. “That’s what inspired us to launch CashFlow Central, which we (recently) announced as a powerful, simple, integrated, easy-to-use tool set for small businesses to pay and get paid through their financial institution.”

CashFlow Central combines easy-to-use accounts payable and receivable workflows with Fiserv’s large biller and merchant network and high scale payment processing capabilities. “With CashFlow Central, we help the small-business owner get fully automated so they can spend more time on growing their business,” Ruhe said.

That kind of holistic approach empowers the FIs and the small businesses. “While financial institutions are building deposits and portfolio loans, it also helps the small business automate their tasks,” Ruhe said. “They can speed up their payments and get paid reliably and electronically. And that frees the small business to focus on what is most important: managing and growing their business.”  

In the past decade, the payments industry has experienced more change than in the previous 40 years. The number of payment options for consumers is multiplying, and the adoption of real-time payments is soaring.  

While this is an exciting time for the payments industry, financial services companies are facing tough challenges as payment processing requirements become increasingly complex—especially in the back office. In a recent PaymentsJournal podcast, BHMI’s Chief Technology Officer, Michael Meeks, and Director of Software Engineering, Jon Protaskey, along with Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, spoke about these challenges.

Backoffice transactions are largely hidden. After a payment has gone through a front-end system for authorization, the back office takes over and performs several key functions. It settles the transactions among the financial entities involved and reconciles them with various sources, such as front ends and network clearing files. The back office also charges the appropriate fees, handles transaction disputes, supports transaction research, and allows real-time financial positions to be viewed. 

Thirty years ago, when banks were first moving from cash to digital payments and cards, the ecosystem was different. The legacy systems that were built decades ago are just not capable of meeting today’s payment demands. Those systems were written with an isolated perspective and minimal requirements, then added to and pieced together over the years. The gaps in the operation still often require manual processes to be in place. 

At that time, nobody could have projected the transaction volumes seen today. As a result, there was no expectation for real-time processing or real-time data access for decision-making. Everything was handled in batches, and the need to support non-card-based transactions wasn’t even an issue. These historical card-based systems were written to support ISO 8583, not the new standard of ISO 20022—which makes it hard for back office environments to adapt and put the new requirements into their systems. 

“We have seen many organizations quickly upgrade their front-end client interfaces, but they have been a bit slower to upgrade outdated back office systems,” Bodine said. “Modernizing these systems is all about the elimination of friction, which means improvements in efficiency, accuracy, cost savings, and a variety of other things. As we started to get into the pandemic, we saw more folks working on back office processes. Now we’re really seeing efficiencies throughout the ecosystem by eliminating friction.”

Another challenge is the workforce that was in place more than 30 years ago and initially used those legacy systems is aging and retiring.  Those who built the systems are taking most of the historical knowledge with them. 

“It’s not a surprise to come into a new client and see them have many different systems that are siloed,” Protaskey said. “They’re all doing different functions of the back office and trying to get those systems consolidated is always a challenge.” 

With instant payments settling in 20 or fewer seconds, the potential for instant fraud is more prominent. Because those funds are irrevocable, fraudsters have the opportunity to increase the amount of money that they’re able to take from organizations. Automation and modernization are imperative to cut into what the fraudsters are doing. 

“A modern back office can play a big role in helping to mitigate the risk and reduce the cost,” Meeks said. “The solutions we’re implementing continuously load payment data within seconds of the transaction being processed. When that data arrives in the back office, our software performs the back office processing immediately, including fee generation, reconciliation, and settlement. All this happens immediately after we’ve loaded the transaction rather than doing large batch processing at the end of the day. This provides you a real-time view of all the transactions that have been processed and real-time settlement positions throughout the day.”

Real-time data visibility allows banks to make decisions based on that data.  Every business has proprietary data to capture and make decisions on. A system needs to be able to adapt to a given business’ data needs, not just what every other company has out there. 

Another key consideration is the high cost of handling disputes. A modern back office enables companies to manage disputes more efficiently, with a greater degree of automation and accuracy.  These systems need to provide quicker ways to research a transaction, audit faster, and offer more automated ways to handle chargebacks. 

“I can give an example of one of our current customers, a company that we work with in Australia,” Meeks said. “In 2018, Australia launched the New Payments Platform (NPP), and one of the country’s leading payments services providers faced a lot of challenges in allowing their back office to handle disputes of real-time transactions. We implemented a system that accepts real-time dispute requests, enabling them to meet the requirements of the platform and respond in near real-time.” 

Simply having a consolidated system can result in operational efficiency and reduced costs. With one consolidated rules-based back office system, banks can have the flexibility to adapt to industry changes with simple configuration alterations rather than expensive and time-consuming software code revisions. 

“The biggest competitive advantage we see right now is scalability and the ability to handle the increased transaction volumes,” Protaskey said. “And there’s always the regulatory compliance and enhanced security that comes with a modern system.”

“We conducted a survey a few months ago, and 80% of the respondents said that modernization of their payment operations was very important, and 46% said it’s currently a top priority for the organization,” Meeks said. “For someone who wants to sell modern back office software, that sounds great, but they also identified a number of hurdles. Most important was the perceived cost­­—not just the cost of the software to bring in, but the cost of its integration into the organization.”

Another hurdle was limited internal resources. People in these organizations already have day-to-day job responsibilities that keep them busy.  They are concerned they won’t have time to take on a significant new project. “We view our job as helping customers overcome these hurdles to implement a modern back office platform to meet these challenges and provide a nice return on their investment,” Meeks said.

When it comes to business-to-business (B2B) payments, those funneled through automated clearing house (ACH) rails are increasingly popular.  Although many businesses are still mailing checks as payment, more businesses are seeing the risks and looking toward ACH payments as a cost-efficient and convenient alternative.

During a recent PaymentsJournal podcast, Brian Holbrook, Director of Product Strategy and Integrated Services, LSEG Risk Intelligence, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, delved into the current landscape of ACH payments in B2B use cases, the potential impact of Nacha’s proposed amendments on originators, and the challenges and opportunities for originators that are arising from these amendments.

ACH payments have been growing in popularity among businesses making B2B payments. Funds are transferred seamlessly between bank accounts, and settlement times range from one to three days. ACH payments are also fast and more cost-effective than paper checks. As waiting for payment becomes less sustainable in the maintenance of cash flow, B2B use cases will continue to expand.

“So when we look at data coming out of Nacha, we can see that the B2B volume increases across ACH are up nearly 10%,” Holbrook said.

“We’re seeing a significant growth across the originator landscape, seeing multiple increases in different verticals, different industries. And, of course, with those increases come additional risk.

“We see some new rules coming out that are going to have an impact on the whole ecosystem, but particularly on the originator side.”

With the ACH network processing tens of billions of transactions, with thousands of banks in participation, and numerous regulations, the network can be difficult to navigate.

“I think that sometimes it’s a bit of a surprise—just how the infrastructure for ACH transactions, the use of the ACH network, and the need across multiple use cases is growing so very, quickly and so expertise in this space is sometimes hard to come by,” Wester said.

According to Holbrook, Nacha reported that Same Day ACH payments were up 20% in Q3 of 2023 over the same quarter a year ago, a significant jump indeed.

“When you look at that Same Day (ACH), as we began to see that demand for faster and faster settlement times, faster and faster throughput, the other side of that coin is, OK, less and less time to address issues, less and less time to figure things out like fraud, suspicious transactions,” Wester said.

“I think that surprised everybody in terms of how quickly we are beginning to move to this need for faster and faster settlement across multiple networks, but especially across ACH.”

Nacha is proposing a new risk management framework that could affect the entire network, including a third party, the Receiving Depository Financial Institutions (RDFI), the Originating Depository Financial Institutions (ODFI), or a new regulator. The proposals will require more from industry participants.

“These proposals are going to require everybody in the value chain to have more diligence on the accounts, on the account ownership, particularly with higher-dollar value transactions,” Holbrook said.

“It’s going to be critically important that they understand where those funds are coming from, where they’re going to. When something suspicious is happening, that the receiving institution has an opportunity to reject that, that inbound money, or for the originator to call it back.

“It’s going to be paramount that they have the tools to validate accounts, validate identities, and to be able to do it. And as close to real time as possible.”

Risk, Wester said, was not an important topic for a long time. The original focus among fintech players within the industry was growth. However, the tides have changed and more FIs, their partners, and technology vendors have shifted their focus to mitigating risk.

“Risk, compliance, governance, fraud, security, all of those things are now becoming more and more important in coming to the forefront,” he said. “And we’re hearing a lot more about the need for risk, and risk tools, and the things that financial institutions and the financial system have done very, very well.

“So I think that’s a very interesting switch in the last 12 to 18 months, that prominence in terms of risk and compliance being a talking point or something that we’re discussing more.”

Said Holbrook: “It’s really about monitoring across all parties in the value chain funds, recovery tools and standardizing of information so that individual names, descriptions are standard across the network, that there is an ability to recover funds, and that there is monitoring across that. I think that’s really what it comes down to across the value chain.”

Although regulations are put in place to protect participants from fraud, there will always be the challenge of establishing a happy medium between mitigating risk and delivering a seamless customer experience.

“People want these funds moved in as close to real time as possible. So striking the balance between good customer service, good throughput speed, and risk and fraud mitigation is going to be a needle they’re going to have to thread very carefully,” Holbrook said. “They’re going to have to strike a balance there, and they’re going to need processes, procedures, and tools to be able to do this.

“And those tools are going to have to work in as near real time as possible so that you’re not applying excessive friction to your customer base or to the movement of funds.”

Wester elaborated on the required balancing act.

“And that’s almost as much art as it is science,” he said. “That’s one of the things that we’ve said about security for a really long time. You can make something absolutely secure, but it’s completely useless (if it repels legitimate users with friction), or you can make something very open, but unfortunately, it’s not very secure.

“That balance that you were talking about between customer service and protecting things, making sure that risk is taken care of on one side, but also making sure that customer service and access and all the stuff that we want in terms of payments are available on the other side. It is a balance.”

And it doesn’t end there. Wester said achieving it will require constant monitoring and fine-tuning, ensuring that organizations are doing everything in compliance in terms of fraud, risk, governance, and security. This has to be done in tandem with customer retention efforts.

Although these newly proposed amendments are likely to create some headaches, there is a silver lining, and that is the many potential benefits for the ACH Network and the consumers and businesses using it.

“There’s an opportunity for them to not only improve what they’re doing today, but it’s an opportunity to help them reduce risk and loss further within their systems,” Holbrook said.

“There are opportunities here where these tools that they would apply to these types of transactions can be used in other parts of their business that will also, whether it’s at account opening or account closure and throughout a customer lifecycle. Those tools that are available in the market can absolutely help them in other parts of the business.

“And I think that’s a huge opportunity for them to reevaluate many of the systems and processes they have in place today and look for ways to enhance them, make them better, make them faster.”

Said Wester: “A lot of times we think we’re going to take a tool and we’re going to apply it to the problem. Especially a digital solution is going to come in and it’s going to fix things.

“You do have to look at those processes, those things that are internal that may have nothing to do with the technology or the tool, but you still have to address those.

“It is better to have those tools that are easier to integrate, the partners that are easier to work with because you are going to have a lot of stuff internally that you have to work on.”

Before originators can tackle and implement the directives under the proposed amendments, they must get educated. Reading up on these amendments on the Nacha website and attending conferences and webinars can be valuable ways to stay current. Once armed with information, originators can look at their current toolbox and see what they have and what they need to add.

“This is an opportunity for compliance departments to really go back and evaluate what they’re doing today, where they may have gaps,” Holbrook said. “What tools do they have in place today that are going to help address these new rules? Or do they need to be looking for something new?

“In some of the other workshops that we have done, many of our clients tell us that they feel good about where their risk and compliance mitigation is at. But there’s more to do. This is where these areas need to be out looking at new solutions and looking at different providers, and seeing what’s going to best fit their needs, what fits into their technical ecosystem, and what’s going to give them the best performance when they’re looking to strike that balance between speed and risk.”

Wester and Holbrook agreed that preparation and proactivity are keys. Organizations need to grant themselves ample time to research, invest, and implement new solutions to remain compliant.

“I think one of the things we’re also seeing a recommendation for is (to) be proactive on this,” Wester said. “A lot of times, when you look at deadlines, when you look at compliance issues, you do an, ‘OK, I must be done by this date,’ and you do a workback. This is one of those where you start sooner rather than later.

“There are issues, there are areas where there may be problems, there may be costs, there may be concerns that need to be worked through that you didn’t know, the things you know that the unknown unknowns.”

Preparation is essential, Holbrook said.

“If you’re going to engage with a new solution, you know you’ve got to get it into a road map, you’ve got to develop, you’ve got to have resources that can work on it, and then you’ve got to have time to test it and do proof of concept,” Holbrook said.

Embedded payments have been a mainstay for consumers for several years due to the rise of digital payments via smartphones and mobile apps. As consumers continue to enjoy the speed, convenience, and security of such payments, the business-to-business (B2B) space has been lagging behind.

That is not to say that many businesses are content with this; on the contrary, more businesses would like to see embedded payments featured highly within the B2B payments space so they, too, can benefit from the speed, convenience, and cost efficiency.

During a recent PaymentsJournal podcast, Daniel Artin, VP of Strategic Partnerships at Boost Payment Solutions, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed what embedded payments look like within the B2B ecosystem, why they are growing, the market opportunities available, and how to select the right payments partner to begin incorporating embedded B2B payments.

Embedded payments originally centered on such use cases as consumers hailing a ride using the Uber app or ordering groceries via the Instacart app. Both platforms offer fast and convenient ways to pay for products and services with a simple tap on an iPhone, with no need for entering credit card information.

Within the B2B payments arena, businesses are demanding the same perks that come from embedded payments, including enhancing the customer payment experience, automating the processing of payments, and providing protection against fraud.

“When you talk about embedded B2B payments, it’s always within the context of embedded finance, which as we know has become sort of the buzzword, the flavor of the month within the payments and finance sphere,” Artin said.

“So for those nascent audience members listening, we define embedded finance as the integration of financial services and tools primarily to non-financial software platforms. Think of this as incorporating banking, lending, sometimes even insurance into various (software-as-a-service) providers and platforms.

“I’ll be focusing on embedded payments, particularly in the context of B2B payments, which I believe is the edge case of embedded finance.”

Said Bodine: “I see in my research that embedded finance, open banking, it’s really going to be the major disruptor to the legacy banking system. Certainly, things like correspondent banking and getting away from the notion that you have to go through your bank in order to make a payment.

“These are very important, interesting times for the world of B2B payments.”

As businesses continue their expansion across the world, large multinationals as well as small and mid-market companies are taking their enterprises to a global level. As they move toward a more digital ecosystem, the complexities amplify, especially for back-office processes.

“And of course, we can’t forget to mention the impact of COVID,” Artin said. “I really believe consumer (tendencies) begets B2B. What we saw during those three years was almost a fast forward in the mind of the retail and the regular consumer of wanting simplicity, wanting digitization, wanting a seamless experience and businesses also caught that wildfire.

“What we’re seeing is businesses starting to have a desire and almost demand to move away from an analog swivel chair process into more of a seamless digital experience from a holistic level.”

Even with businesses ready to digitize B2B payments, there are still some businesses that happily embrace the old ways of operating. Bodine recounted a conversation he had with a wholesale restaurant provider.

“We got into the subject of payments, and I said, ‘What does your daily payments file look like? Are you sending a batch file?’” Bodine said. “He went into his drawer and took out a stack of checks about that thick, and I said, ‘Do you mean to tell me that you’re still receiving checks as a primary mode of payments?’

“He said, ‘Absolutely. It’s 90% of how we are paid.’

“It might be that particular industry, but it reminds me of a statistic that still 33% of payments made globally are made by paper check, which every time it comes out of my mouth, it just boggles my mind.”

Artin attributes business’ use of legacy processes to inertia. Businesses that have been writing checks, fulfilling procurement orders, and paying invoices in the same manner for decades seem to have embraced the status quo and feel no urgency to make changes.

As B2B payments become more digitized, the opportunities for embedded payments will grow significantly as companies seek a more seamless payments experience.

“In the U.S., depending on which report you’re reading, it’s anywhere between 25 to 27 trillion (dollars) in total addressable market for B2B payments,” Artin said. “What we’re seeing right now is that embedded payments make up roughly 5% of that, so about 2.6 trillion.

“And over the course of the next five to six years, we see that growing considerably upward of $7 trillion, a 170% increase.”

For those SaaS companies debating on whether to incorporate payments into their platform, Artin contends there’s a “first-mover advantage to be gained.”

Companies that adopt payments stand to boost customer lifetime value. Plus, it’s an effective strategy to diversify revenue streams, not only from subscription-based models but also from a basis-points viewpoint. Through the integration of payments, the transaction volume alone will give valuable insights to the sales team, equipping it with a valuable toolkit to help land more clients.

As much as businesses would love to have embedded B2B payments mirror the consumer side, a long road looms ahead. For one thing, B2B transactions are significantly more complex. There are so many moving parts within the B2B space, including invoicing, reconciliation, handling multiple parties, and risk management. Moreover, the amount of money being processed is also considerably higher within the B2B realm.

“While the demand is high, it’s a slow-moving train,” Artin said. “I think one of the narratives that’s being pushed out there is that you’re going to see in the B2B world, at least in the near term, exactly what we saw in the consumer world, which is almost invisible payments.

“If you think about getting into and out of an Uber or booking a payment on an Airbnb, or buying groceries on an Instacart, it’s going to be a long time for us to mirror that type of engagement and automation in B2B.”  

Adoption of embedded payments is happening within the accounts receivable space, where previously the focus was on collections and deductions. Businesses are now implementing a “mosaic” of accounts receivable modules. Artin explained that the order to a cash system can now be featured on the tech stack.

He also mentioned adoption within the freight and logistics space, as well as in healthcare. Manufacturing and health insurance claims are also seeing an increase in adoption.

Naturally, the B2B space has its own nuances and complexities. Therefore, partnering with a solutions provider that has expertise in the B2B space is a must. Solutions that have served the business-to-consumer (B2C) space will simply be the wrong fit.

“Incorporating a payment facilitator model is a best suggested route here—partnering with an established B2B payment facilitator,” Artin said.

“Here’s a few selection criteria that I would consider. The first: Do they have a track record of playing in this playground, playing in the B2B space? Do they have a developer software layer? Do they have a streamlined onboarding process?

“Once you get customers bought in, are they going to be waiting 2 1/2 weeks to get a congratulations letter that they’re now part participating in the program? Do they have a reliable and accessible customer support?

“Are you going to be resorted to a 1-800 number or a generic listserv or are you going to have real folks in there that can handle issues that are inevitable about coming up? Is there a robust compliance management system?”

Artin said working with a flexible and nimble partner is paramount. Businesses must ask whether their partner can conform to any shifting conditions.

In addition, partners must be able to take into account that all businesses have their own accounting systems and their preferred methods of settling funds into their accounts, whether it be gross settling or net settling. Are they able to offer seamless reporting?

“The good news is that the fintechs that are still out there are really healthy,” Bodine said. “Most of them, because they’ve had to apply austerity measures, they are profitable. They’re actually really good acquisition targets for that reason.”

“Right now, more than ever, I think it’s an ideal opportunity for any forward-thinking SaaS platforms that are out there to consider embedding payments into their platform,” Artin said.

“It’s not an encouragement. It’s a must, and if you’re looking for that sort of expertise, there are folks out there that can help guide and coach you to make sure you’re making the most educated decision.”

The rapid improvements in the payments industry over the past decade have had the unfortunate side effect of making money laundering more of a challenge for institutions to detect and deter. With a greater number of methods for exchanging money and with most transactions happening digitally, it has become harder to chase after money launderers’ latest tactics. According to the UN’s Office on Drugs and Crime, more than $1 trillion is now laundered worldwide.

During a recent PaymentsJournal podcast, Amber Goodrich, Compliance Analyst at CSI,  a leader in the fintech, regtech, and cybersecurity solutions space, sat down with Kevin Libby, Fraud & Security Analyst at Javelin Strategy & Research, to discuss how money laundering has changed in recent years and what companies should be doing to deter it.

The world of exchanging assets has changed dramatically since the initial rules and regulations aimed at money laundering were put into place years ago. “You don’t know who you’re doing business with,” Goodrich said. “And we’re seeing many different types of currency coming into play.”

For one thing, the Anti-Money Laundering Act of 2020 has yet to be finalized, with new regulations still being proposed. New rules are being rolled out to increase penalties, and discussions are centering on imposing multipliers on individuals found to have committed repeat offenses. The subsequent uncertainty has made it harder for institutions to find their footing.

“The thing that we’ve seen the most guidance on is the beneficial ownership piece that’s set to go into effect early next year,” Goodrich said. “But even with that, there’s still a lot that hasn’t been defined yet.” 

Criminals are using social media to contact and enlist recruits, making it harder to detect laundering efforts. “Criminals are using money mules who have never been involved in the practice, so there’s no prior data to use to identify them as potential money laundering parties,” Libby said. “All of those things make it harder for financial institutions to meet those regulations at all, let alone not have repeat problems if they’re getting behind on alerts or having trouble making those connections.” 

One of the most frightening developments is that professional groups are being established specifically to launder money, which presents a distinct problem for financial institutions. It can be very difficult to identify connections between parties that might have an association with a money launderer. And these cabals have been hiring professional accountants and lawyers into these organizations with the purpose of more effectively laundering the money and with greater levels of secrecy. 

Goodrich said she has increasingly heard from financial institutions CSI works with about how hard it is for them to keep up with the amount of reporting they are required to do. Budgets are a limiting factor in combating money laundering, but regulators don’t consider budgetary constraints legitimate reasons for not complying with requirements.

“Modernization is a term that they use, but it’s not defined on what they want us to do with that,” Goodrich said. “They don’t necessarily come out and say you need to go out and invest in new software systems, or you need to completely overhaul your policies and procedures to make sure you’re up to date on these things. But it’s implied.” 

Even absent these provisions, most institutions would be happy to rely on the latest state-of-the-art technology, using machine learning and artificial intelligence. This would allow organizations to adapt their rules on the fly to recognize emerging trends in money laundering more effectively and to make connections between pass-through accounts. 

CSI has an anti-money-laundering (AML) solution that offers artificial intelligence and machine learning as a part of it. “That’s huge because old systems for AML and transaction monitoring are not enough anymore,” Goodrich said. “You need systems that have smarter types of alerts that can look at past behaviors that your customers have and see where the changes are happening, without having to manually review reports and create spreadsheets.” 

According to Libby, a positive of the recent regulatory moves could be that they prompt institutions to get over the jump and invest in the technology they need.

“As Amber suggested, it’s saying with a wink and a nudge that you need to invest in these new technologies,” Libby said. “That could go a long way toward streamlining processes.” 

AI automated systems could reduce the burden that excessive reporting creates for institutions. Integrating AI involves some pain points but also some opportunities. Financial institutions should focus on the latter. Compliance is required, painful or not. 

As far as compliance risk, CSI has been seeing violations involving multiple regulatory agencies have been involved. A single compliance deficiency may be cited not just by the Financial Crimes Enforcement Network but also by the Office of Foreign Assets Control and even the Department of Treasury because it may be related to a sanctions program. There’s risk of criminal violations that come along with it as well for Bank Secrecy Act and AML officers: If they are cited for something, there can be criminal penalties for them individually. 

One of the most important things for organizations to do is combine all of their data and get a holistic picture. A solution that offers API technology can bring that together and provide a whole picture of who an institution’s customers are engaging with in business. 

Data integration is a huge part of being able to effectively identify money laundering activities that follow current trends and those that might emerge in the future. Data is everything in that regard, and the more seamless an integration is across an organization, the better. 

“How do you decide who was a high-risk customer or a low-risk customer, especially when you’re working with limited data?” Goodrich said. “We offer risk scoring that can help you decide how risky your customers are.”

Artificial intelligence and machine learning will be critical components as anti-money-laundering technology evolves. The sheer number of parameters that can be tested—and the interaction between those parameters—can only be teased out by a computer system. 

It’s never too soon to start establishing an anti-money-laundering protocol. FIs shouldn’t wait until the regulations settle on a hard start date, leaving organizations behind the curve. One area that hasn’t yet seen much regulation is cryptocurrencies, a huge risk to financial institutions even if they do not realize they are doing business in that area. Don’t wait for regulations to get started on a crypto AML plan.

As financial fraud continues to become more intricate and more commonplace, and risk remains a deterrent for innovation, the inadequacies of “black box” solutions of third-party fraud vendors are coming to light. To effectively detect and mitigate fraud – and protect the FIs, their customers and their shareholders — banks need full transparency into the strategies, tactics and performance of their third-party fraud solutions.

Transparency between parties is the key to successful fraud mitigation, and during a  recent PaymentsJournal podcast, Matt Raile, SVP of Fraud & Bill Pay Operations at BillGO, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, delved into the importance of choosing the right third-party vendors to mitigate fraud, the red flags FIs should look out for, and why transparency is the linchpin in the battle against financial fraud.

When vendors approach financial institutions, it’s common practice for them to proverbially beat their chest and announce just how many transactions they have processed, along with other success stories. Although this information may sound impressive, it does little to demonstrate what they can do for a particular organization.

“There [needs to be a] hard conversation with these vendors,” Raile said. “That’s great what they’re advertising for other portfolios, but what are they going to do for your portfolio? How transparent are they going to be with you on the performance of your specific portfolio? And how they are managing your portfolio?”

According to Wester, the right technology partners will offer a more customized solution, not just something out of a box. It’s a partnership, and an important one.

“A key point that really resonates in terms of the research that we’re doing when it comes to vendor management is that idea of the cookie-cutter model versus what a vendor is actually providing—either more personalized or actually being a partner and knowing what a financial institution is really looking for,” Wester said. “That takes time. It takes effort.”

A true partnership between a financial institution and a third-party vendor involves sharing goals and pooling resources and information to meet those goals. Above all else, there needs to be trust. For that to develop, transparency is necessary.  

“If you’re running a rules-based environment or if you’re running a model, you’re going to know exactly the model that’s running on your behalf, the rules that are running on your behalf, the configuration thereof, and you’re going to have performance data that speaks to every rule and or every model on a daily frequency,” Raile said. “You’re going to have the same level of knowledge and insights with BillGO as your third-party vendor that you would inside of your own organization.”

Overall, it’s in the best interest of customers that financial institutions continually monitor the environment to ensure there is no disruption of service.

What FIs want to avoid—particularly amid the lack of transparency that’s still consistent in the industry—is being told by a third-party vendor that something is “taken under advisement.” It’s equally suspicious when vendors refuse to share any further details because of concerns about their intellectual property. In fact, Raile points out, when third-party vendors refuse to share how their solution identifies a set activity or how it’s performing in that activity, a red flag automatically goes up.

FIs shouldn’t have to make a special request to receive more information. Rather, they should have access to information about how certain fraud patterns are ultimately affecting their portfolio.

“You hear vendors talk about their ‘secret sauce’ all the time,” Wester said. “And it’s like, well, why do you have a sauce that’s secret, especially when you’re talking about things like protecting customers or fraud or security or any of the things that go into the costs that a financial institution has to bear to protect their customers?

“Sometimes I have to take off my analyst hat and put on my consumer hat and say, ‘Why would you do that?’ It’s better for all of us—as consumers of financial institutions—to know that fraud patterns are being shared, that they are being looked into, that they are being looked at from a vendor standpoint to protect those consumers.”

If third-party vendors want to remain competitive, they need to tackle potential fraud risks more effectively. As compliance requirements grow, that would also be a key differentiator when it comes to selecting a third-party vendor.

“If you have a new fraud pattern, if it takes you days or weeks or months for your vendor to listen to you and to deploy a solution that specifically addresses your attack vector, then that’s not good enough,” Raile said. “That’s not good enough for your consumer. That’s not good enough for your shareholders.”

As Wester points out, regulatory oversight and compliance risk won’t get any easier. “We are seeing things happen in the payment space, especially as we begin to see developments in things like A2A or P2P payments, or all of these new payment types that we’re seeing come out,” he said. “We’re seeing more regulatory scrutiny, and we all know that’s going to be the case, so I would think that anything that would make those discussions easier would be a good thing because, again, it’s not going to become simpler or faster.”

Time is of the essence when it comes to fraud mitigation. To protect consumers and their experiences, third-party vendors need to be more responsive. As soon as they are made aware of a new pattern, the solution must be deployed.

“I’ve got an example here with one of our clients where a new fraud pattern had been detected on the financial institution side,” Raile said. “Thankfully, it had not yet penetrated its way into bill pay.

“However, the experience was shared with us and we were able to test and ultimately move our solution up through our production environment and have it deployed on this particular client’s behalf in just under six hours. For any of those out there listening today that are managing fraud vendors, I know when I was detecting new fraud patterns in former workplaces that response time was usually measured in months, if not quarters.”

Wester said a slow response seems to be the modus operandi for most third-party vendors.

“Not doing that [response] quickly is actually kind of alarming that it’s allowed to go on for as long as it does because it’s not just a cost to the financial institution, but you have to think about it from that consumer standpoint, from that end-user standpoint, the cost and the inconvenience and everything else that goes into that,” he said.  

Although artificial intelligence has been one of the hot topics of the past year, it has been around for a very long time, dating to the 1940s. Over the past 20 to 30 years, there have been many permutations of what is often called traditional AI—and not just in the world of finance. Now, we’re living through a new boom of the technology in the form of generative AI.

Billtrust, a B2B order-to-cash and digital payments software leader based in New Jersey, has been at the forefront of these emerging AI solutions for all types of companies. In a recent PaymentsJournal podcast, Ahsan Shah, Senior Vice President of Data Analytics at Billtrust, sat down with Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, to talk about where AI is making the most significant impact on businesses, now and into the future.

Industries have been using AI tools like anomaly detection and classification for decades. But the new wave of generative AI uses language models as a fundamentally different approach, which can then be combined with traditional AI to solve business problems. That has resulted in a lot of excitement but also a lot of confusion about what is and what is not AI.

Generative AI is a language-based capability, offering an interface that nobody expected to happen this quickly in the AI evolution. In the past, when individuals spoke in a common language, it required a great deal of modeling and training data. But with open AI, these foundational models can translate language to code, to an action language, or to SQL. “It doesn’t circumvent what could be done with traditional AI,” Shah said, “but now you have a different toolkit in the box to be able to use language in capabilities, and fundamentally all of our customers speak in certain languages. And so this offers almost a new door of possibilities and features across the stack, across the industries, across various domains.” 

Miller added: “What you’re saying is we shouldn’t really talk about artificial intelligence, but maybe about artificial intelligences. The ways that we would use these different flavors of artificial intelligence really vary from one another. The types of problems or business applications that are right for generative AI might not be right for a strictly deep learning approach.” 

Where generative AI may be most helpful is in the interface layer with customer service, to help with natural language questions about data. “When I think about generative AI, it is an augmented assistant pattern to yourself as an individual, whether you’re in marketing or sales or at a SaaS (software as a service) company, whether it’s B2B or B2C,” Shah said. “It’s almost like an add-on assistant. A situation that might have taken a collections agent a long time—to find out which buyer to go to and personalize those types of workflows—is going to have a much more efficient process using AI, with the human element augmenting it to reduce that overhead.” 

To this point, many people’s interfaces with AI have been limited to a chatbot that pops up when they access a website.

“There’s a difference between a chatbot that is consumer-facing and is the only thing that the customer interacts with and an interface that is used by a customer service agent to retrieve information who delivers that information through a chat interface,” Miller said. “With new technologies, folks often start by trying to match the technological capability to, for example, the type of data that’s available. You might further then segment your customer base and determine which type of experience they’re going to have, and different technologies may be appropriate to deliver those different experiences.”

Companies can personalize the experience far more than what was possible even a year ago. The chatbot can be prompted to say here’s the person you’re speaking to and here’s their background, and even suggest the tone of communication. “You can tell it to be soft with the person, because they’re frustrated after waiting at an airport for five hours with their family,” Shah said. “That’s information that’s out there, but your system has to be designed in such a way as to have that information source as part of the dataset. We want to talk to customers, understand their pain points, then use a phased approach in embedding AI workflows into our products in a systematic way.” 

Enterprise value creation from generative AI is a different engineering exercise from a simple chatbot, requiring enterprise data far beyond the window of what Open AI or ChatGPT can do. “What I recommend people to do is start small, with use cases that have tangible business value, and really go out there and explore,” Shah said. “The worst thing you can do is to do nothing.” 

A simple thing like invoicing can be a helpful place to start. “When we look at our customers, their goal is to get paid faster,” he said. “That’s really in a nutshell what we try to do. When an invoice comes in, it has to get paid, and if it doesn’t get paid, it goes to collections. You can look at something like that and ask, ‘What if I knew using traditional AI that an invoice that might be forecasted to default?’ But I might know something about the buyer based on their communication, their emails, and the correspondence to feed a personalized recommendation to that buyer. It combines personalization content with enterprise data.” 

Billtrust is building a unified accounts receivable system that can converge these functions to optimize the cache flows. The notion that the back-and-forth negotiating can actually take place in real time and perhaps even at the point of a transaction creates some very interesting potential opportunities. If, for example, a company’s agent and a seller’s agent are able to negotiate in real time, it’s also possible that financing offers could be included and evaluated in something near to real time. As the process becomes more templated, early adopters are likely to get an advantage. 

“If you’re looking for something that’s extremely atomic from a financial transaction perspective, you may not want a generative AI model going and actually processing a payment for you,” Shah said. “Where you do want it is in that interface layer that helps with customer service that helps with natural language questions on your data. There’s no doubt the different types of AI will eventually help you reduce manual overhead, simplify workflows, and ultimately deliver a better user experience.”