• Anant Patel, General Manager and Vice President EMEA at WEX


• 22.04.2021 05:00 pm
payments

Why was 2020 such a defining year for the payments industry?

I think we’d all agree 2020 was a year like no other. For every sector, digital transformation was accelerated, in fact, according to McKinsey, COVID-19 sped-up digital transformation plans by seven years. 

For the payments industry, faced with crisis, disruption, mass cancellations and huge shifts in consumer behaviour, the pandemic highlighted the true value that payments technology can have for a business. It reinforced that backend, manual processes are no longer viable due to behaviors such as working from home, and that we need to look at new technologies to help automate archaic processes. Not only did businesses come to realise how investing in payments technology could help drive out inefficiencies during uncertain times, but also offer customers extra value, which is imperative for a business to rebound right now.

What impact has this had on the B2B payments industry in particular?

Most significantly, the pandemic exposed the pitfalls of businesses neglecting investment in B2B payments technology. Those companies that relied on outdated, siloed B2B payment systems before the pandemic were more exposed to issues of fraud and soaring costs with negative implications on customers and supply chains. Recent research from WorldPay found that cheques still accounted for 29% of B2B transactions in 2019, with two-thirds of those cheques issued by SMBs. 

This therefore provided a clear opportunity for the innovations we have seen underway in B2B payments really come to the fore  to add greater value and solve bigger problems for firms. For example, we’ve seen the proliferation of virtual cards, with Juniper Research estimating global transaction value of virtual cards increased 11% as a result of COVID-19 to $1.6 trillion in 2020, while projecting that number will more than triple between 2020 and 2025.

So while B2C movements in the fintech and payments space had always been the centre of attention industry news and stories, we are now seeing the B2B payments have its moment in the sun. The pandemic has set underway a ripe environment for more B2B payments transformation which should continue to carry momentum as we head into the next year. 

What would you say were the key trends that have emerged from the crisis for B2B payments?

The main trend we have seen from the crisis has been automation and the digitisation of payments. While this was a trend already underway before the pandemic, the implications of COVID-19 meant businesses needed to streamline efficiencies more than ever; and at a greater pace than expected. 

A recent report from Accenture forecasts nearly 420 billion transactions worth US$7 trillion are expected to shift from cash to cards and digital payments by 2023 – and increase to US$48 trillion by 2030. In addition, with three-quarters (75%) of surveyed bank executives saying that the pandemic has increased the urgency of their plans to modernise payment systems. 

Another area we are seeing significant uptake, is in cloud-based payment solutions. During the pandemic businesses were faced with issuing  thousands of refunds in a timely manner, particularly those in industries impacted by the ongoing nature of partial lockdowns. Cloud-based solutions were recognized for their agility and reliability  and ‘always on’ nature that businesses so desperately needed in managing their workflows during this time. Findings from Synergy Research Group have revealed that cloud spending is up and has not been hampered by the ongoing COVID crisis. Q1 2020 spend on cloud infrastructure services reached $29bn, up 37% over the same time last year.

Finally, despite the fact we are now emerging out of the crisis, the need to reduce back office labour will continue to persist as businesses grapple with the longer-term impacts of the pandemic on its business. We have already started to see technology providers in the payments space move into new verticals – offering customers a holistic payments solution across all areas of business, such as accounts payable, marketing, rent, and many more. 

What are companies looking for from service providers in the ‘new normal’?

Businesses are now looking for payments providers as a long-term partner as they head out of the crisis into recovery. In fact, our recent WEX research in partnership with The Economist, showed that 86 percent agree that companies that lead with technology will thrive in recovery from the current economic and health crisis and that and 83 percent have already leveraged payment technology to innovate new sources of business value.

In addition to increasing efficiencies through process automation, businesses will be looking to those providers that can go the extra mile. Partners that offer flexibility, stability and help businesses to deliver a better experience for customers by adding value beyond its payment processes, will be the ones that thrive in this new reality.