What B2B payments can learn from early ATM network interoperability
By Mitchell Rose, Senior Vice President & General Manager, Corporate Segment, Billtrust. Originally published in Q1 2021 Perspectives by CRF, the official publication of Credit Research Foundation.
When the first automated teller machines came on the scene in the late 1970s and 80s, it offered us newfound flexibility and freedom. Up till then, most of us were programmed to go to the bank – during banker’s hours, of course – and write a check for cash to have some money for the weekend. ATMs created incredible convenience and flexibility, allowing us to access cash when we wanted it. The only catch? At the beginning, we were limited to using our own bank’s ATM or one that was a part of the network to which our bank belonged. This worked quite well if our financial institution’s machine was near where we lived and worked. When we were out of town and needed cash, and our bank was nowhere to be found? Not so much.
Initially, there were dozens of different ATM networks like STAR, Cirrus and PULSE, and they still exist, but it wasn’t until they joined together were people able to draw cash from machines not belonging to the bank where they have their accounts. Today, these interbank networks play a key role in facilitating transactions between cardholders, merchants and participating banks. And, although you may not use the ATM as much as you used to because it’s more convenient to use other forms of digital payments like debit card, credit card and peer-to-peer payment solutions like Venmo, this interoperability has created the robust and flexible B2C payments system we have in place today.
Decades later, can something like this ever happen with B2B payments? In spite of hundreds of different ERP systems, an ever-growing number of accounts payable platforms and thousands of banks, I believe the answer is a resounding yes. In the U.S., surprisingly, we’re still cutting a lot of checks – fewer than we used to, but still trillions of dollars’ worth adding up to 42% of all B2B transactions, according to AFP. And after what we’ve seen this past year with remote workforces and challenges in mail delivery stemming from changes with the U.S. Postal Service, it is clearer than ever that there is a need for change in how B2B handles its financial processes. Simply put, manual processing and keying payments is not a long-term answer – we are moving towards mass digital adoption. These very factors are kick starting a movement away from a very-much-still-analog B2B payments ecosystem into a realm where consumers have already boldly gone.
So like those early ATM networks where interoperability was the key to creating universal compatibility, it’s time for all parties involved to work together to form a B2B network of networks to streamline digital payments and exponentially hasten adoption. Is this easy to do? Well, it is happening now. Payments networks have formed and are growing and constantly adding partners – accounts payable service providers, software companies and banks processing B2B transactions – to make them stronger.
The basic concept of joining together instead of going it alone makes sense, with accounts receivable professionals becoming primary beneficiaries of this cooperation and convergence. Along with the ability to broadcast payments preferences through a network, both mail float and manual keying into an ever-increasing number of AP portals are eliminated because payments can be received and processed on the same day they’re initiated by buyers who don’t have to change the way they want to pay. Besides payment flexibility for both buyers and suppliers, payments networks automatically process and gather remittance for ACH, wire transfer and credit card payments, solving that age-old problem.
Will mass digital adoption happen overnight? Of course not. But, think about manually processing paper checks being a distant memory. Just like running to the bank to cash a check before they close.
About the Author
Mitchell Rose is Senior Vice President and General Manager, Corporate Segment at Billtrust, He has worked with hundreds of businesses to help them automate their order-to-cash process. Before Billtrust, he held senior-level marketing positions with Coca-Cola, Mattel and Warner Lambert. Mitch holds an MBA from Columbia University in Marketing and a BS in Applied Economics from Cornell University.