Business Payments Innovation Essential to Pandemic Recovery

It’s an understatement to say that small business owners have a lot on their minds right now. The routine mental stresses of managing inventory, cash flow, payroll, and everything else under the business-owning sun are exacerbated by the ongoing COVID-19 pandemic. Many entrepreneurs now have to scrutinize every element of their business (even more so than normal) to aid in weathering the storm. 

There is, however, a silver lining that manifests within recession recovery periods. Businesses are forced to concentrate on resiliency and turn their attention towards innovation that maximizes efficiency, creating positive change long after a recession ends.

The light at the end of the tunnel

In a recent report titled Managing through COVID-19: Six imperatives for CFOs, Deloitte offered optimism for ailing entrepreneurs, stating “Some businesses are not only able to come out [of a recession] intact, they are also able to seize on opportunities to outdistance their competition and position themselves for future growth.”

Payment innovation has a unique role to play in assisting businesses of all sizes in getting back on track towards profitability and growth. If business owners focus on streamlining processes through technology, there is potential to declutter finances while also setting up a clear roadmap towards digital transformation.

Anurag Kar, Director of Money Movement at Interac, believes the potential impact is significant.

“The pandemic has highlighted the nature of day-to-day financial activity like cash flow and payment reconciliation, and the importance of those processes,” he explains. “If the couple of days that it can take to clear a payment can be shortened to a matter of minutes, it’s a massive help because that business now has two more days to manage cash flow.”

Identifying the opportunity

Kar identifies the biggest challenges involved in the current commercial payments landscape: longer reconciliation periods and a lack of transparency into cash flow. Both of these are by-products of traditional business processes such as paper cheques and invoices, each of which can take days to reconcile. Timelines matter in business, and if there are delays in processing payments, it causes ripple effects that may potentially lead to higher costs. 

Issues like these are causing real problems. A recent BDC survey on entrepreneur mental health and wellbeing found that financial cash flow was the second-highest cause of stress for Canadian business owners, even higher than the fear of failure and work/life balance. These pressures are forcing entrepreneurs to seek out new methods to bolster their resilience. 

“Traditional B2B payments are heavily dependent on reconciling invoices with paper-based instruments, which means it takes up a ton of work hours,” says Kar. “Having technology-driven efficiencies in your day-to-day business practices goes a long way. It’s more than payment streamlining—it’s the modernization of your entire financial operations.”

One solution, according to Kar, is for businesses to embrace electronic payment services such as Interac e-Transfer®, which individual Canadians have been using for years.

A recent Interac report found that, between mid-March and May of last year, businesses received 35% more Interac e-Transfer transactions than previously anticipated. But despite the uptick in the movement of money through digital means, there are still roadblocks to overcome for many businesses. Often, financial management systems struggle with the issue of compatibility, further highlighting the need for greater collaboration across the ecosystem.

Tapping into payments efficiency

When it comes to solutions, the providers may be varied, but the problems they address are not. And according to Kar, there’s a rather simple way to face the problem and aid in overall economic recovery.

“As innovators come forward with solutions, the industry must work together and incorporate these nuances and value propositions to create a full lifecycle for the end business,” Kar continues. “When you couple these things together, you start to cater to defined business needs—only then will they holistically reap the benefits.”

As it happens, Interac has taken steps to foster collaboration within the fintech ecosystem. The company is working with financial institutions and other stakeholders to address the potential opportunities for commercial payments by enhancing the Interac e-Transfer service.

More specifically, Interac is working towards enhancements that directly address challenges businesses face around data, speed, operational efficiencies and higher limits. Elements of the service are already compatible with ISO20022, the global standard for electronic messaging, to incorporate invoices and alternate payment options, offering greater flexibility to the market. Interac is further optimizing the service by putting the groundwork in place to raise transaction limits securely and better meet the needs of industry.

Building relationships through innovation

Once Interac e-Transfer for Business is broadly available and adopted as an alternative within the commercial payment mix, a host of benefits will follow. 

In a traditional B2B payments environment, companies have the option to routinely offer discounts or promotions to customers and suppliers if they pay ahead of schedule—or even on-time, which, let’s be honest, is a perfect indicator of the B2B ecosystem. These nuanced relationships can prove exceptionally valuable, especially to smaller/newer businesses as they struggle through the growing pains of acquiring new suppliers and customers. In Business Econ 101, dependability begets predictability. 

“Once you start understanding the interaction between your clients and suppliers and vendors, you achieve that cash flow predictability,” says Kar. 

Those nuanced relationships, which are helped along via integrated digital payments and industry collaboration, also create other opportunities for growth and evolution. 

“For example, if you know your top 80 per cent of customers will be sticking with you and pay on-time instantly, that cash flow security allows you to start mapping out plans,” says Kar. “Once there is consistency in cash flow that comes with a grasp on nuanced payment relationships, businesses are able to make the strategic bets to grow.”