Looking back, as they say, it’s 20/20. And hindsight In regards to 2020 – well, that’s a whole different thing.
After the initial wild ride of the great digital hub, the compressed timeframe where years of innovation have been accelerated and adopted in the span of a few months, it’s finally time to take stock and think about what could have been done. differently.
Manish Kohli, head of global liquidity and treasury management at HSBC, told Karen Webster in an interview that he believes traditional financial institutions (FIs) would have started their digital transformations a bit faster.
“There has always been the idea that the North Star for financial services was digital banks,” he told Webster.
Before the pandemic, he said, there may have been a debate about how quickly banks should go digital, with some executives pushing back initiatives for a year or two. But as the pandemic disrupted just about everything, banks realized they should have gotten a bit more ‘pushy’ on digital hubs, as they could have helped their corporate clients, especially smaller ones, a bit more. nimbly.
Now, as banks are busy helping customers navigate tough economic times and supply chain pressures, Kohli said, they need to focus even more on cost, speed, convenience and transparency. payments.
“These guiding principles must be present in the design of every new payment, with customer focus and the desire to provide a seamless digital experience 24/7,” he added.
Banks, including HSBC, have daily conversations with their customers about the optimal ways to make and receive payments – and to exploit the footprints those payments leave to better understand their operations.
As trends are in place for reimagining corporate payments for the digital economy, finance and treasury teams are themselves reinventing payment flows to leverage the digital economy to their own advantage.
We are seeing a confluence of factors – the intersection of economic challenges, new technologies, and a collaborative spirit bringing together buyers and suppliers – that gives these leaders the opportunity not only to reinvent B2B, but to actually change the way. from which these payments take place.
The urgency is there, given the harassed supply chains that are forcing buyers and suppliers to reconsider and recalibrate their own interactions. Headlines are piling up every day, and beyond the threat of empty shelves, buyers and suppliers themselves face cash flow disruptions.
Kohli argued that the supply chain issues may not have been so unexpected, given the healthcare crisis that has led to an economic crisis.
“The next evolution of this is a supply chain crisis,” he said, and what has been surprising is the severity of the supply chain pressures.
Many HSBC client companies have reconfigured their supply chains to include new geographies and new partners to alleviate these pressures. But they (especially small businesses) are also looking for new financing and liquidity solutions to help them make and collect payments in these new regions.
Kohli noted that HSBC has seen a growing demand for pre-shipment solutions to help small, export-oriented businesses manage their cash flow. Large buyers are showing increasing interest in supplier financing to help keep supply chains functioning.
All this is based on a spirit of collaboration between buyers and suppliers to help each other. And, as Kohli told Webster, there is a “massive desire” for FinTechs and banks to collaborate, reshaping finance far beyond the limits of supply chain dynamics.
These partnerships leverage infrastructure to provide new solutions for treasurers and chief financial officers (CFOs). Kohli pointed to HSBC’s recent announcement that it would work with Oracle NetSuite to launch Banking-as-a-Service, where (among other things) corporate clients can automate Accounts Payable (AP) and Accounts Receivable (AR).
Read more: HSBC to deploy BaaS platform
At least in part, Kohli said, automating back office workflows is part of the “basic hygiene” of financial services transformation. The flight to automation has indeed been in place for some time, long before the pandemic, but as new technologies came into play, treasurers have streamlined treasury functions, leading to new business models. .
“There are new opportunities to engage consumers and business customers in different creative ways,” Kohli noted.
As a result, large companies are tweaking their own business models to include direct-to-consumer (D2C) options, and brands are becoming platforms themselves. Big Tech is increasingly diversifying into the banking industry and offering flexible loyalty and rewards programs.
One area where we could see other innovations: blockchain. Kohli was quick to separate the blockchain from cryptocurrencies like bitcoin (which HSBC and other FIs don’t view as payment instruments). HSBC and other FIs are actively working with governments to discuss and develop central bank digital currencies (CBDCs).
In the meantime, the blockchain holds promise in demonstrating and building confidence in commercial payments, Kohli said, and in verifying that companies engage in “arm’s length” interactions.
On the path to payments innovation, Kohli said we are moving inexorably towards the consumerization of B2B payments – as businesses, FinTechs and FIs take inspiration from B2C and even P2P to reinvent commercial payments. .
As Kohli said, “The way consumers choose to pay influences how businesses choose to collect. This means that new methods of exchanging money, getting and getting paid, such as real-time payments, will continue to gain momentum.
When it comes to real-time payments, Kohli said, we shouldn’t expect them to be the cornerstone of B2B transformation, spawning a super app. But real-time payments have value by giving treasurers and CFOs solid data and visibility that improves cash flow management and planning.
Overall, he said, real-time payments serve a noble cause: to help customers and large companies change their business models and enable them to create products and solutions that “speak better”. to a digital economy. Real-time payments can help boost the economy, enabling instant refunds and a range of other value-added experiences.
“Enhanced real-time payment information, converted into an interactive experience integrated with” application programming interfaces (APIs), can fuel new business models that monetize the speed and choice of payments, he noted. , adding that “the greatest form of monetization is the happy customer.”