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Visa Says Frictionless B2B Payments Are The Future; Rails Must Adapt To New Use Cases

In payments, speed is everything. So, it’s no surprise that in a fireside chat with PYMNTS Karen Webster, Visa‘s Alan Koenigsberg, global head of new payment flows at Visa Business Solutions; and Tim Summers, vice president of Visa Direct global segments and market development, said B2B payments between buyers and suppliers are poised to pick up speed as they travel round the globe.

The conversation came against a backdrop where, at a high level, B2B payments account for $120 trillion globally on an annual basis. Faster payments schemes also number more than 50 and counting. But as companies embrace the great digital shift and revamp back-office functions, they’re examining the requirements and challenges of moving money in and out of their coffers.

In payments, speed is everything. So, it’s no surprise that in a fireside chat with PYMNTS Karen Webster, Visa’s Alan Koenigsberg, global head of new payment flows at Visa Business Solutions; and Tim Summers, vice president of Visa Direct global segments and market development, said B2B payments between buyers and suppliers are poised to pick up speed as they travel round the globe.

The conversation came against a backdrop where, at a high level, B2B payments account for $120 trillion globally on an annual basis. Faster payments schemes also number more than 50 and counting. But as companies embrace the great digital shift and revamp back-office functions, they’re examining the requirements and challenges of moving money in and out of their coffers.

Riding The Rails

That in turn sparks an examination of the payment rails themselves and begs the questions: Are all rails created equal? Which will thrive and which may merely thrive — and is there room for, well, everyone? The duo noted that the companies themselves are less concerned with the plumbing that underpins B2B payments. It seems like the only people who may think much about rails are the ones that own and/or operate the rails.

As Koenigsberg stated, “when we think about rails, we think about them as a means to an endpoint.”

The business, Summers explained, is agnostic to just how funds get to where they need to go. The enterprise simply wants to have a seamless solution in place when, for example, they want to convert three days’ worth of sales to cash, or when they want to pay an invoice.

“They want a user-friendly solution, but most importantly, they want those funds,” he told Webster.

B2B Use Cases Are Mushrooming

And, in the digital-first world that has been wrought amid the pandemic, the B2B use cases of moving money beyond the confines of the paper check have been exploding as data and payment need to be matched up seamlessly. That includes cross-border payments (done, for example, through Visa B2B Connect), with lower associated costs and better transparency as intermediaries are eliminated.

Reconciliation is of the utmost importance to corporate clients, noted Koenigsberg, and real-time data and payloads, generated automatically and alongside the transactions, mean that payments post much more efficiently. That same drive toward pairing data and dollars, so to speak, illuminates the fact that, as Summers noted, networks and rails, financial institutions (FIs) and infrastructures can work together to create ubiquity, giving rise to scale, and leveling the playing field between smaller and larger firms, at least when it comes to payments.

“Frankly, the story never changes. It’s just the tune keeps adapting,” said Koenigsberg.

Using Technology To Solve Key Use Cases

In other words, the technology on offer is where change and evolution happen. Not all that long ago, the hallmark of progress in the back office came as check systems and ACH systems were linked to create biller efficiencies. Now, we’ve moved to offerings like Visa Direct, which enables real-time push payment capabilities across account-to-account interactions — domestic and across borders — for consumers and small businesses.

Visa, said Summers and Koenigsberg, is bridging the gap through incremental steps toward a journey that will never end in creating systems and stitching them together — no matter if those systems are open or closed. That means addressing some of the challenges and opportunities that Summers stated are pointing the way toward use cases such as real-time payroll, which he said represents the future of work.

“Workers have essentially given employers a reverse loan for their wages until it’s actually payday,” said Summers.

But there remains roughly $100 billion in earned but unpaid income every payroll cycle, a particular hardship for workers living paycheck to paycheck (roughly 60 percent of the U.S. population, according to PYMNTS).

The biweekly paycheck cycle is fading away, he said, eroded in part by the rise of the gig economy. Joint efforts by Visa and FinTechs through Visa Direct enable workers to “pull” earned income as needed. Visa Direct also lets merchants push funds to demand accounts.

Faster funds to merchants, he said, help alleviate cash flow management — in a world where, as PYMNTS/Visa research has found, roughly 76 percent of small- to- medium-sized businesses (SMBs) report struggling with cash, and 91 percent of firms have expressed interest in real-time settlement.

“We’re working with a number of providers to facilitate that settlement virtually in real time,” he said.

Faster funds, according to Koenigsberg, also prove useful in cross-border payments, as Visa’s offerings including Visa Direct allow for a single point of integration across a range of partnerships — and global endpoint availability from banks to remitters.

Koenigsberg added that more than half of FIs surveyed by the payments firm expect revenues from cross-border payments (in particular, high value transactions) to increase over the next five years and drive revenues by more than 25 percent over that timeframe.

Of course, traveling the last mile of payments remains critical, and platforms coupled with advanced technologies are emblematic of the adaptability that Koenigsberg said needs to underpin efforts to scale. To get a sense of that scale, consider the fact that Visa Direct has grown to facilitate nearly 3.5 billion transactions across 16 card-based networks, 65 domestic ACH schemes, 7 RTP schemes and five payment gateways.

The Rails Stretching Ahead

With the emergence of a slew of new rails — real-time, blockchain, bank-centric among them, with cryptos traveling those rails in some cases — Summers and Koenigsberg said that card rails can support a range of payment flows and partnerships (in recent months, with PayPal, with MoneyGram and Western Union among the roster of joint money-moving efforts).

The networks, then, are not looking to change the rails themselves, but as Koenigsberg said “are adapting to different currencies, whether they’re digital or otherwise. Efforts are really grounded in bringing FinTechs and FIs together (the Fast Track program, centered on FinTech development, has grown 360 percent since going global in 2019, according to Summers).

In a way, the network of networks effect means that Visa is less concerned with which rails rise and which fall because the networks provide the connectivity to all of them regardless of payment type or form factors that herald new milestones in B2B transactions.

What 2021 Will Bring

Looking ahead, the Visa executives told Webster that, in Summers’ words, the four pillars of reach, flexibility, history and security will remain unchanging. Headed into a new year, said Koenigsberg, accelerating digitization has been a headline of 2020 and will continue to be a key theme in 2021.

As Summers told Webster: “On the B2B Connect side and the Visa Direct side, we’re encouraging the broadening of the commerce ecosystem.”

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