Sponsored: The future of payments is virtual

The challenging economic times are putting new strains on relationships between businesses and their suppliers. However, high-tech transaction systems, such as virtual cards and one-click payment, are benefiting everyone in the supply chain.

Last Updated: 09 Oct 2013

Could the economic fortunes of UK plc appear any more mixed? Anecdotally, there's plenty of talk of 'cautious optimism' - the sense that things are bound to pick up again at some point. But at the same time it's likely that we haven't seen the worst of it yet. There's the small matter of a potential triple-dip recession to get through. And when things turn this rocky, everything from the broadest financial projections to the tiniest hike in suppliers' fees can suddenly spark a major headache.

In a bid to better understand how UK plc is managing its financial processes, MT teamed up with Barclaycard Global Business Solutions to quiz 205 executives across a range of sectors on what they see as the key challenges, and how they plan to tackle them. The results paint a picture of a business community having to do more with less, where working capital is becoming all the more important. These days, it's all about efficiency, and when the going gets tough, the number-crunchers are forced to get clever.

When asked about the biggest current challenge to their organisation, 31% of respondents cited finding new business. Given that the Bank of England is warning of the imminent triple-dip, this is hardly surprising. But other concerns were also revealing: 14% cited dealing with rising costs, while 13% mentioned holding on to customers. This suggests that just as businesses should be focusing on going out and getting that crucial new work, they're also having to waste valuable resources and man hours struggling to hold on to what they already have, while fighting to keep a lid on their outgoings.

At times like this, what should be a mutually beneficial relationship with suppliers becomes fraught. Of our respondents, 38% expressed concern at having to pass suppliers' price hikes on to clients; 20% said those price hikes were directly causing them problems; and 19% were struggling with suppliers altering payment terms and conditions. 'These three risks have a distinct overlap,' says Douglas Gray, product director, Barclaycard Global Business Solutions. 'The supply chain is a clear cause for concern, yet everyone in that chain benefits from the same thing: payments made in an efficient and controlled manner.'

It soon becomes easy to see how things could be improved: by cutting costs through making the supply chain better. But how can business go about countering inefficiencies here when everyone's resources are at their most stretched?

It seems the answer lies, once again, in circuitry: 51% of respondents said they'd be happy to turn to new or improved technology (compared with 26% who said they'd reassess internal communications, and 16% for whom the answer lies in training). 'People are having to do more with less,' says Gray, 'and it's now the natural expectation that this comes with tech- nology, and we're seeing an increasing take-up of these models once people understand them.'



When asked which models they could foresee taking off, 36% of respondents said they could imagine using one-click technology for corporate payments in the next five years; 21% said the same of mobile payment platforms, and 20% of virtual card systems. You can see the benefits: the likes of Barclaycard Global Business Solutions's Barclaycard Precisionpay virtual card replace the manual approach to one-off payments - giving all the speed, flexibility and visibility of a purchasing card but with more efficiency and robust pre-approval controls. For regular purchases from preferred suppliers, Barclaycard Global Business Solutions offers the Payables platform, an alternative to traditional methods such as BACS or cheques: it allows a business to pay suppliers earlier and settle with the bank later - helping boost its working capital and improve supplier relations.

And this issue of supplier relations couldn't be more important. The good news is that 61% of our survey's respondents said they were fairly happy they were getting the best terms from suppliers. Yet these are the same respondents who said price hikes were one of their greatest concerns. So while they may recognise it's not their suppliers' fault, it's clear there's great need for improvement. Especially as only 4% described themselves as very happy with those terms.

Again, technology may just have a key role to play here. 'For the supplier, such technology can mean reducing the pay time and unlocking those funds more quickly, rather than having them tied up with the buyer,' says Gray. 'It's invaluable for suppliers to get their money early to unlock that cash flow. Buyers, meanwhile, can find themselves settling accounts earlier with the supplier. This increases the drivers for paying early - you start qualifying for things like reduced rates for paying up faster. Everyone's a winner.'

So are we about to see the financial heads of UK plc face down in their BlackBerries as they settle major accounts on the shuffle out of M&S in their lunch break? Probably not: there is still some resistance. The biggest hurdles to introducing new technology are concerns over compatibility with existing systems (20%) and security threats (15%). Gray suggests such concerns, while understandable, are unfounded. 'The advantage of these new platforms is the level of integration,' he says. 'System-to-system payments are easy and platforms such as Barclaycard Precisionpay are designed to use the web as an interface, so you don't need to rip out your existing systems.' As for security, while mobile platforms will probably not be used for big accounts, controls are available to restrict payments by date, user or value.

Providers also have to meet rigorous standards of encryption and identity protection. 'In traditional B2B payments there's a strong need for control,' says Gray. 'Take that away and you change the underlying proposition. As such, larger, more structured payments will probably never move to mobile. But there's every reason to believe that we'll be seeing businesses requesting or approving more ad hoc payments by mobile soon.'

While adoption of such tech may be cautious, it seems the future is being met with optimism. When asked where they saw their best chance for expansion, 32% cited organic growth in the UK. Which is promising, as it suggests people still see the country as a bed of potential, not just concern. Meanwhile, 25% said they simply need to do what they're already doing, only more efficiently. It seems a tightening of the processes could go a long way. As such, the future of payments may indeed be virtual.

For more information, go to www.Barclaycard.co.uk/business/campaign/b2b



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