U.S. treasury trends: payments.

• Author: Quackenbush, David
• Position: Treasury

It may be coincidental, but in the wake of the credit crisis, the payments industry appears to be going through an unprecedented period of change. The way in which corporations respond to this sea of change and seize new opportunities can be a significant factor in their future competitiveness.

* Electronic Payments. Improving efficiency is always a significant part of treasury's role and this is particularly true of payments processing. A key focus is increasing the use of both electronic payment initiation and electronic processing of data relating to payments.

Unfortunately, the corporation's destiny is often not in its own hands when it comes to payment methods. A 2007 Aberdeen Group industry survey revealed that 74 percent of U.S. business-to-business settlements of accounts payable items were still paper-based.

The majority of interviewees (40 percent) stated that this situation was primarily caused by suppliers' unwillingness to accept electronic payments. Other major obstacles cited were limited information technology resources and integration/data exchange issues between accounts payable systems and electronic payments technology.

In some cases, supplier attachment to checks is assumed, when in fact AP departments simply lack the resources to fully engage with payees. In this situation the corporation may ask its payment bank to match those entities it knows already accept electronic payments against the corporate client's vendor database, thereby expediting the vendor migration.

There is also cause for optimism on the technology front. Some electronic banking platforms have increased in power and connectivity in recent years to the point where they are approaching the capabilities of treasury management systems. A few are now even completely instrument-agnostic, in that they allow the processing of all payment types (e.g. card, automated clearing house foreign exchange, wire or check) in a single file.

In addition, intelligent use of Web technology now enables flexible data management without having to resort to proprietary applications.

* Purchasing Cards. Despite the resistance of some vendors, electronic payments are becoming increasingly popular, as PayStream Advisors' recent Electronic Payments & P-Cards Adoption Survey confirmed. PayStream surveyed more than 500 organizations during the first half of 2009 and 57 percent of respondents reported increased ACH usage, while purchasing card usage had risen for 48 percent of...