The Business Case for Digital Payments

In 2020, many companies began reevaluating their payment and receivables processing to ensure business continuity. The implementation of digital payment solutions that were previously placed on the back burner—such as digital treasury management, contactless payment processes and real-time payment capabilities—suddenly became must-do initiatives.  

 

Advantages of Digital Payment Systems for Business

 

A digital payment system allows you to send or receive payments in a digital format—ACH, virtual card, real-time payments, wire, etc. Payment digitization advances your organization’s strategic plans and delivers multiple benefits:

• Sell more goods and services to more customers because digital payments make the buying process more efficient
• Improve cash flow and working capital because you can get paid faster, have better control over disbursements and increased opportunity to earn rebates on transaction volume
• Increase back-office efficiency because it eliminates manual data entry and paper processing
• May contain built-in features to help protect against fraud with better system controls and transaction integrity.

 

Here’s how to get started: 

 

First, Set Your Targets

Lower cost, greater efficiency and greater risk control in your payables process are significant outcomes you can expect with a transition to a digitized payment system. 

Benchmarking your payables and receivables will help inform your targets. Know the following:

• Total spend
• Spend by vendor and category
• Spend by payment type
• Spend by payment term
• Discounts captured or missed

Identify your prioritized area for improvement. For example, you can reduce the number or percent of paper checks processed, streamline invoice processing, optimize working capital, maximize rcard ebates and optimize finance resources, to name a few. Then, set an achievement goal. This becomes the internal target that will help define what the success of your digital transformation program looks like.

 

Next, Implement the Program

With a goal in place, you can choose and implement your digital payment program. Consider these steps:

• Collaborate with suppliers and customers: Payment digitization programs are designed to enhance collaboration with internal and external stakeholders. To support that engagement, get input from your internal stakeholders about what processes need improvement and the operational gaps that must be bridged before program rollout. Similarly, connect with your external stakeholders to explain the benefits they will receive from your new payment digitization program. As a best practice, consider having a vendor or customer digitization enablement campaign. This campaign will accelerate stakeholder adoption. Many banks offer this as a value-add service.
• Conduct training: Payment digitization can transform your organization. To ensure a successful transformation, it’s important to assess the impact to existing processes and ensure your program includes the necessary training and communication to impacted stakeholders to ensure a smooth adoption. 
• Measure your program: Set up a system to monitor how the digitization program is performing against targeted objectives. Aligning performance-oriented metrics with your company’s strategic imperatives may lead to greater visibility and recognition from executive sponsors.

 

Types of Digital Payment Tools Available

Digitized payment solutions are designed to enhance productivity and boost transparency. Consider the types of digital payment tools that can support your business:

• Accounts receivable: A customer payment portal streamlines accounts receivable by making it easier and more convenient for your customers to pay you. It saves you time and processing costs while you collect faster. It also helps make cash forecasting more accurate.
• Cash management: Increasing mobile and remote capabilities for bank deposits, cash withdrawals and payroll mean you can streamline cash forecasting and optimize liquidity.
• Accounts payable: Conduct payables digitization with a continuous focus on converting check processing to lower-cost digital transactions like card and ACH. Additionally, consolidating payment processing and potentially outsourcing that function can optimize finance resources and significantly reduce accounts payable costs.

 

How Digital Payments Can Help Reduce Fraud 

 

Current studies show that on average fraud risk translates into 2.8% of a company’s revenues.¹ And accounts payable is considered the function at greatest risk of fraud.² Migrating to a digital payments system could reduce your exposure to fraud and risk in several ways:

• Access control: Digitization allows you to control access and ensure the right people have the proper access to your financial system, dependent upon their role on the team. You can easily separate and authorize roles for data, approvals and payments.
• Fraud screening: Digitization allows you to set up business rules for invoice and receivables routing and processing that cannot be bypassed. Digital enforcement of multistep approvals, approval thresholds and digital PO matching lower the risk of fraud.
• Transaction integrity: Digitization helps combat payment fraud risk, including forgery, unauthorized debiting and counterfeiting with features like multi-level approvals, multi-factor authentication and positive pay. 

The business case for digital payments in accounts payable and accounts receivable is compelling. Your commercial banking partner should be able to help you benchmark and quantify the value of  digitization. They can also help you identify the solutions and services to help you achieve your goals. 

 

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1. 2.8% revenue at risk. Source: Accenture, “Ninth Annual Cost of Cybercrime Study in Banking and Capital Markets Report.” July 2019.

2. AP highest risk function. Source: 2020 AFP Payments Fraud and Control Report 

 

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For Informational Purposes Only

The information contained herein is shared for educational purposes only and it does not provide a comprehensive list of considerations or best practices. This information does not represent any opinion, guidance or recommendation, whether formal or informal, of Capital One, National Association, or any of its officers, directors, employees, advisors, attorneys, consultants, affiliates or subsidiaries (collectively, “Capital One”). Nothing contained herein shall give rise to, or be construed to give rise to, any obligations or liability whatsoever on the part of Capital One.

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