2023 payment trends: Corporate treasuries prepare for a digital wave
By many accounts, the past year was a challenging one. Geopolitical tensions and the pandemic led to heightened volatility in the capital markets, while disruptions brought on by changing weather patterns, lingering supply chain constraints and an ongoing energy crisis combined to create an uncertain business environment. From a corporate treasury perspective, evergreen issues, such as capital, cashflow and liquidity management, took on a fresh sense of urgency.
Yet 2022 was also a year of positive change, as business strategy decisions increasingly devolved to the treasury and corporates turned to their money managers to maximise operating efficiencies. Treasurers responded by capitalising on the growth of payment technologies to overhaul and digitise legacy paper-based systems, in an escalating push that will continue to transform the corporate treasury in the coming months.
The many drivers of adopting streamlined payment tech
According to Balaji Natarajan, Lead, Industry & Innovation, International at ANZ among the main trends to watch out for in 2023 will be the growth of faster payments in domestic as well as cross-border transactions, and a data-driven push for the adoption of embedded payments. “These days, embedded finance is becoming standard practice in many markets. Most invoices from corporates have started carrying a QR code, so you can just scan and pay,” he says.
Source: All about Embedded Software Payments, Global Payments Integrated
Looking into current consumer behaviour, the growing preference for digital payments is also driving change for businesses, according to Anne McDonnell, Chief Market Officer, ANZ Worldline Payment Solutions. “As consumers become accustomed to digital and even invisible payments – think transport apps automatically taking care of payment – they increasingly regard making physical payments as an inconvenience. It’s this impatience our mobile world has fuelled that’s driving businesses to digitise their customer experience.”
Natarajan agrees, noting: “We are clearly witnessing a mindset change. Take for instance in APAC where people – a growing number of whom are digital natives – no longer visit a bank branch or write a cheque. These are very significant forces.”
An increasing number of corporate treasurers, especially in markets like Australia, are moving away from paper and reducing their reliance on legacy payment tools such as cheques, according to Carolyn Young, Head of PCM Product Australia, ANZ.
Factors such as the growing adoption of ISO 20022 – a universal platform for the development of messages for the financial sector – is helping drive efficiencies in the corporate treasury function. “The ISO 20022 format is a way to help facilitate consistency, standardisation and interoperability across payment types, expedite reconciliation, and really up the use of digital payments,” says Young.
New regulations are being contemplated, such as a payments licensing regime in Australia aimed at encouraging new payment service providers’ participation, driving further innovation in the payments eco-system. As many corporates in the region are not overburdened by legacy technologies, it becomes easier to adopt new and more secure payment systems that generate consistent and rich data. Yet another factor driving payment tech adoption is a push for standardisation by central banks in the region, according to Natarajan.
Companies can also leverage their enhanced access to data to gain better insights into their supplier base. They can optimise those relationships in a way that could validate their sustainability credentials among other expectations they have of their third-party relationships, Young notes. By doing so corporate treasuries can help improve the governance component of their ESG record – a metric increasingly tracked by investors and other stakeholders – while benefiting from the improved operating efficiencies and reduced costs that result from adopting digital payment methods.
Source: Capgemini Research Institute for Financial Services, 2022; World Payments Report 2022 SMB survey, N=150.
“Overall, these factors combined will have major implications for transforming payments, fostering innovation and encouraging the adoption of new technologies such as embedded payments,” says Joanne Ong, Payments Industry Expert, ANZ.
Fostering adoption by offering varied solutions and improving functionality
As digital payments evolve in response to these myriad forces, banks such as ANZ with support from their partnersdisclaimer are helping treasurers navigate the changing landscape and understand the range of products and solutions available in order to make the right choice for their operational needs.
For instance in the Australian market, PayTo was developed by New Payments Platform (NPP) to modernise the use of bank accounts for payments. Banks, including ANZ, are expected to contribute to a scaling-up of participants using PayTo in 2023, according to Young. “From there, with more banks and participants receiving mandates and authorising transactions, we expect to see an enhanced use of this set of capabilities,” she says.
Meanwhile, PayID – a simple means to address real time payments using an email address or mobile phone number in Australia – is yet another initiative from the NPP to enhance the faster payments experience. It continues to gain momentum, with nearly 13 million IDs registered. This method is gaining users at a high rate, including among small businesses wanting to easily receive their payments with a high degree of security. Peppol, a nascent platform for corporates and government entities to exchange electronic documents, such as e-Orders, e-Advance Shipping Notes, eInvoices and eCatalogues, is also gaining traction thanks to government support, notes Young.
Current and upcoming payment offerings from ANZ
“These emerging solutions with exponentially increasing functional richness will contribute to the greater use of digital payments in Australia and offer value from a corporate standpoint,” she says.
Similar efforts are underway in other markets – notably Unified Payments Interface (UPI), a real-time payment system developed for the Indian market, and PayNow Corporate in Singapore, which allows institutions to pay and receive Singapore Dollar funds instantaneously. This has been met with significant success because, “they offer what companies want: convenience and - crucially, - instant settlement,” says Natarajan.
There is also the as yet unrealised potential of cryptocurrencies, with central bank digital currencies (CBDCs) being piloted by a number of governments across APAC, including in major markets such as China and India, while the Reserve Bank of Australia is currently exploring use cases for the digital currency.
According to Natarajan, the use of CBDCs in the wholesale market could prove to be a big plus and serve as a low-risk mechanism for instant settlements. “Right now, it takes anywhere up to T+2 to settle various market transactions and much longer for other asset classes. The digital asset world has shown us we can settle large asset transfers instantly,” he says. “There is considerable appeal for wholesale CBDCs and it’s just a matter of time before various countries roll them out for both domestic and cross-border transactions.”
Navigating the path to a hybrid digital future
While there are many benefits to going digital – including reduced costs, streamlined services, and inclusive and sustainable growth – corporate treasuries still need to navigate a range of challenges to ensure the transformation process is a success.
Some of these challenges include choosing the right set of solutions from many options; committing to what can be a costly, complex and time-consuming transition while keeping customers satisfied; complying with constantly evolving regulations; and, coping with conflicting demands in an uncertain business environment.
“I want to emphasise that this can be a very costly process… for banks, corporates and other service providers as they make the transition,” says Natarajan. “No one is pure-play digital yet and most have to continue to support legacy methods. That can be a real hit to the cost structure, especially with interest rates going up. So, how you plan the transition and move to where your customers want you to be will be very critical to success.”
Change can be difficult, Young says. “The transition to newer technologies is challenging because it involves change management. And despite the customer drive for speed, they also can be reluctant to change, particularly those that are at the tail-end of the adoption curve. So it's really all about managing the end-to-end lifecycle of our products and services with the customer experience front of mind, and across various customer segments.”
While planning and focusing on managing customer expectations are key, another way to complete a successful transition is by leveraging external expertise. Banks like ANZ, in partnership with payments solutions companies such as Worldline, can help facilitate the digital transformation, helping corporates adapt to developing technologies and delivering the value clients have come to expect.
Although digitising payments can be a big journey for organisations, McDonnell says, in order to remain competitive it’s an essential shift to plan for and make now. “The global payments space is constantly innovating to keep up with consumer demand for digital payment methods. And with many global brands moving into the APAC region with advanced digital capabilities, competition will only intensify.”
It’s a message that seems to be resonating well across the APAC region as corporate treasuries turn to technology to build operational resilience across their operations. It strengthens supply chain reporting to help them withstand a turbulent global economy, and supports their companies' growing focus on ESG metrics and sustainable growth practices.
In 2023, ANZ, a leading provider of payments capabilities in the Australian and APAC markets, will launch several products and solutions offering institutional clients the ability to better manage their treasury systems and facilitate transactions on a real-time basis. These solutions include a virtual account management (VAM) service and a purpose-driven virtual credit card for corporates.
ANZ is one of the largest providers of bank infrastructure to other banks in the Australian market and counts various domestic and foreign financial institutions among its platform customers. This infrastructure allows these entities to offer the New Payments Platform (NPP) to their customers, extending the availability of real time payments across the banking network.
ANZ’s partnership with Worldline is set to offer enhanced and personalised customer payment experiences. The joint venture will also launch an app-based platform that will serve small, medium and large enterprises, and bring omni-channel capabilities to the Australian market.
ANZ was the first Australian bank to issue an Australian dollar stablecoin, the A$DC.
Q&A with Anne McDonnell, Chief Market Officer, ANZ Worldline Payment Solutions/Digital payment trends in 2023: A retail perspective
Q: What are the top trends to watch out for in the payments space in 2023?
AM: We’ll see greater demand for mobile payment technology from businesses and consumers. Several major payment providers, including ANZ Worldline Payment Solutions, recently introduced or commenced piloting mobile app technology that turns Android mobile devices into a terminal, no additional hardware required. This innovation will improve how large businesses serve customers, for example, allowing them to accept payments anywhere in-store and eliminate the frustration of queues.
Another trend spurred on by the pandemic is the convergence of payment channels, with consumers now wanting the flexibility of shopping from their phone, online or in-store. Achieving an “omnichannel” experience is no mean feat and this will continue to be a challenge for businesses.
To help with all of this complexity and emerging innovation, you’ll also see more partnerships, allowing businesses to focus on their core business and customer experience, and leveraging experts for areas like data and security compliance, inventory management and payment technology.
Q: Are payments becoming too diverse and, in turn, too complicated for consumers?
The payments space has always been complex and will continue to be so, as more channels are added, and consumers become more accustomed to their personal preferences being delivered. I think the challenge with payments is that it will always be as diverse as your consumer base and this is where personalisation has a big role to play.
With complexity comes opportunity and I see organisations getting the edge when they have the right experts involved to support their transformation journey.
Q: Which payments products or solutions will prove to be most disruptive in 2023?
My number one is technology that turns mobile devices into a payment terminal. I think there’s a huge amount of opportunity for businesses to use mobile devices differently to improve their customer experience.
The ANZ Worldline joint venture will launch our new product portfolio for both small to medium businesses as well as large enterprises. Many of the solutions we’re bringing to Australia are already available internationally and localised for the Australian market, including our Tap on Mobile technology.
- Carolyn Young – Head of Payments and Cash Management Product Australia, ANZ
- Joanne Ong – Payments Industry Expert, ANZ
- Anne McDonnell – Chief Marketing Officer, ANZ Worldline Payment Solutions
- Balaji Natarajan – Lead, Industry & Innovation, International ANZ
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