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What is the likely impact of the virus on the business-to-business (B2B) payments?
As discussed in a previous blog, the dislocations caused by the COVID-19 virus and governments’ responses to it mean that counterparty risk is much more of an issue than previously. In the world of payments, the security that can be offered by a B2B services provider is more crucial than ever.
In part, this is because the health risks associated with physical notes and coins have been recognised. Traditional payments methods can be, and are seen as being, unhealthy. Central banks are already quarantining, cleaning or destroying banknotes – and especially if they have come from countries like China or South Korea where the COVID-19 virus has been rampant.
Social isolation has become a key concept, as governments act to stop the spread of the COVID-19 virus. Online payments are likely to become more important. Many businesses that had previously handled a lot of payments in physical notes and coins will have to find another way. Online payments services providers such as Safenetpay offer an obvious solution.
In the meantime, it is important to remember that some businesses are having to deal with an explosion in payments to/from other businesses. In a number of countries, supermarket operators, wholesale suppliers and logistics operators are having to deal with a wave of panic buying by consumers. The number of transactions taking place along supply chains has surged. In each transaction, there is a business that is making a payment and a business that is receiving the payment.
For B2B payments services providers, it is more important than ever to be able to scale up, and to be able to handle complex payments. Complex payments are those that, for example, are made simultaneously to hundreds or thousands of suppliers, across national borders and in different currencies. As a new payments services provider, set up in 2015, these are challenges that Safenetpay is designed to meet.
Governments and central banks around the world have realised the importance of keeping businesses and economies alive in these extraordinary times. As governments take steps to control the spread of the virus, the disruption has been enormous. This leads to a second observation: speed and efficiency in B2B payments is now more important than ever before. The implications of delays in payments, where they take two business days instead of the normal one, or three rather than the normal two, can be catastrophic.
Of course, problems will still occur. That means that payments services providers who can truly provide their clients with answers to questions and solutions to issues around-the-clock will have an edge over those who cannot. At times like this, excellence in customer service is more fundamental than ever. This is something that we have really focused on at Safenetpay.
The governments have rightly recognised that the main risk from the disruption is a potential wave of unemployment. The impact on individual consumers and small and medium-sized enterprises (SMEs) could be huge. The most likely response appears to be a wave of cash payments to people and SMEs. Given the scale of the crisis, the need for speed and the nature of payments in most developed countries, it will often not be feasible for the payments to consumers and SMEs to be made by cheques that are sent through postal systems. In any event, cheques are traditional payments instruments which are required to be presented physically by or on behalf of the payee.
It remains the case that not all of these people and businesses will have bank or payments accounts that they can use - or accounts that are best suited to these very challenging times. There will likely be a wave of new accounts that are opened.
This leads to another important observation. Now is not a time for red tape. Those payments services providers whose on-boarding systems enable them to enrol clients in a matter of hours will have an edge relative to those who are constrained by long-established and bureaucratic procedures.
At Safenetpay, we are proud of the speed in which we can sign up new clients – which usually happens within 48 hours from the moment that they approach us.
Does your payments services provider understand the challenges of the COVID-19 world?
Visit Safenetpay's website: https://www.safenetpay.com/