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APMS FOR B2B PAYMENTS – BUZZWORD OR NEXT BIG THING?

Despite delivering convenience, speed and a better user experience in the consumer payments market, alternative payment methods (APMs) feature less prominently in the world of B2B transactions. It’s high time this changed, argues Pat Bermingham, CEO, Adflex.

To understand why APMs are become increasingly important in B2B payments, let’s first clear up some confusion:


What are APMs?

APM is a catch-all term to describe any payment method that does not require the use of a credit or debit card. There are three main types:

·         Bank transfers: Bank-direct payments and direct debits – essentially, ecommerce transactions where buyers approve purchases using an online banking facility.

·         Wallet-based solutions: A secure digital space, usually on a smartphone, with access to funds – either directly from a bank account or through a debit / credit card. Apple Pay and Samsung Pay are good examples.

·         Cash-ins / pre-paid: Prepaid cards need to be loaded with value in advance of the user performing a transaction, and comprise of cards that run both on and off traditional payment rails.

As a rule, APMs provide flexibility, accessibility, and convenience for users. More often than not, they are also more cost-effective for issuers than traditional payment methods.  

So why the hesitation in B2B markets?

When a consumer APM transaction is performed, it is usually low in value and involves just two players, like buying a coffee with Google Pay.


In contrast, B2B payments are usually for larger amounts, and require more complex workflows like PO systems, customer numbers and invoicing processes. They often involve multiple parties, too. The perception is that APMs are not designed for more complex transactions, which is why business demand has remained low. Perception rarely equals reality, however, and certainly doesn’t here. When delivered as an integrated part of a digitised B2B payments platform, APMs can offer businesses just the same savings in time, money, and effort that consumers have been enjoying for some time.

An APM-ready platform that pays

Integrated payment platforms, provided as a cloud service from dedicated third party specialists, enable transacting businesses to move away from manual payments processes, and tap into a whole raft of new features that both enable greater efficiency and drive down the cost of initiating and accepting payments. They enable automated reconciliation and invoicing, for example, which does away with manual paperwork, streamlines internal processes and boosts efficiency. They increase financial visibility for both buyer and supplier through the provision of bespoke payments portals, and facilitate the rapid onboarding of new suppliers. By promoting easier, faster and more cost effective integration between buyers and suppliers, they open the market up for everyone by giving each party access to a broader range of potential partner firms.

APMs only add to this suite of benefits. Not only do they further increase convenience by enabling B2B payments through mobile devices, they also reduce costs and processing times, particularly in the case of bank-direct payments.

Crucially, APMs also simplify cross border payments in two key ways. First, because most have been designed for use internationally, they were built in compliance with international payments regulations. Reducing the burden of payments compliance when a business is expanding overseas, (or buying or supplying internationally) is hugely attractive to businesses of all sizes. Second, both consumer and corporate buyers favour business relationships that offer more payments choice. APMs not only offer a range of different ways to pay, they also promote familiarity and trust between businesses, since many APMs (such as Paypal, for example) are known and well regarded globally.  As the trading world continues to shrink, the need for businesses to initiate and accept cross border payments will rise. According to the WorldPay Global Payment Report 2017, over half of all online transactions will be made using alternative payment methods by 2021. While initial growth is coming from consumer payments, B2B supply chain payments will soon catch up. The payments platform providers that have the vision to provide early stage APM support, without the need for invasive system updat

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Finance

‘MOVE FAST BUT DON’T BREAK THINGS’ – WHY FINTECHS WILL COME TO LOVE REGULATION

move fast

Alex Johnson, Director of Portfolio Marketing, FICO

 

The guiding ethos of fintech is move fast and break things. It’s the fundamental advantage that disruptors have over the incumbents they’re disrupting — the ability to move quickly and make mistakes, learn from them and deliver innovative services to customers. Generally, this ethos is presented as a virtue. Banking is ‘broken’ so any investments in improving it are both notable and noble – even if there are bumps along the way.

Conversely, anything that stands in the way of this ‘march of progress’ is generally cast as a villain.

The most prominent villain for fintech companies is regulation. From their perspective, it’s a competitive moat, based on rules written for a different century, that protects banks’ ability to make money without needing to innovate and offer more or improved services to their customers.

So, it’s easy to see why a fintech company — believing fully in the virtue of its mission and faced with a litany of illogical and intractable regulations — might just say ‘we’re doing it anyway.’ That’s what Robinhood co-founder Baiju Bhatt reportedly did when his company tried to roll out a checking and savings product that it claimed was insured without confirming that with regulators first.

The problem is that while we may mythologise the ‘move fast and break things’ ethos in the abstract, consumers don’t love it when their stuff breaks in the real world.

And when fintechs and challenger banks aren’t constrained by regulation (as they mostly are in the U.S and Europe) the harm caused by this ‘move fast and break things’ approach can be much more severe than a service outage or a false claim of deposit insurance.

 

Stories from overseas

In China, online P2P lending exploded in popularity, with the number of P2P lenders growing from 50 in 2011 to 3,500 in 2015. Then the whole industry imploded when it was revealed that 40% of P2P lending platforms were Ponzi schemes.

In India, online lending companies raised a record $909 million in venture capital last year (the third-biggest market behind the U.S. and China). And those lenders are now using personal data from borrowers’ mobile phones to make lending decisions – which although illegal, is reportedly ignored by Indian regulators.

In the Philippines (another emerging market where venture capital dollars for online lending are pouring in), the National Privacy Commission is investigating hundreds of complaints from consumers about lending apps leveraging their personal data to shame them into making their payments.

 

A prediction for the decade to come

In the 2020s, I believe fintech companies will come to love – or at least quietly appreciate – regulation for two primary reasons:

 

Brand protection

Fintechs and challenger banks understand that brand recognition and affinity is key to their long-term success. Building their brands will be a challenge. A recent survey of 2,000 Brits found 40% don’t trust challenger banks at all and 67% said they are more likely to do business with banks that have branches on the high street. As Zach Bruhnke, co-founder and CEO of U.S. challenger bank HMBradley recently said, ‘We’re going to have to grow by word-of-mouth and doing the right things for our customers.’

Fintechs and challenger banks focused on the long-term task of building brand affinity and trust will, over the next decade, come to despise bad actors that skirt the rules and dress up get-rich-quick schemes in the same language they use to describe their own firms. Regulations that constrain and/or shut down these bad actors will be increasingly appreciated by legitimate market participants.

 

Disruption-friendly regulations 

In the 2010s, we saw the beginning of a trend that will strengthen in the 2020s — regulations designed to foster competition between incumbents and new market entrants. To date, such regulatory action has run the gamut, from vague (innovation sandboxes and special-use charters) to hyper-specific (U.S. regulators’ cautiously approving the use of alternative data, or the Bank of England considering giving non-banks access to its 500-billion-pound balance sheet). Perhaps, most promising, has been the work done by the Competition and Markets Authority (CMA), which has been proactively driving the adoption of rules and standards around Open Banking for past couple of years. O

ver the next decade, through careful management of public perception and increased investment in lobbying, fintechs and challenger banks will further reshape the regulatory environment from a competitive moat to a more level playing field.

 

Reaching fintech maturity

’As a licensed broker-dealer, we’re highly regulated and take clear communication very seriously. We plan to work closely with regulators as we prepare to launch our cash management program’.

This was the statement issued by the chastened co-founders of Robinhood shortly after they backed away from their plan to launch a checking and savings product without government insurance. And here’s the crazy part — that’s exactly what happened! Less than a year later the company announced a new deposit product, this time insured by the Federal Deposit Insurance Corporation (FDIC).

As fintech companies mature in the 2020s and the focus of their strategic objectives shifts from growth to profitability, regulation will play a vital role in transforming the ethos of those companies into something a bit more sustainable. Call it ‘Move fast, but don’t break things’.

 

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Finance

HOW TO MERGE YOUR FINANCES AS A COUPLE?

Finances

By Nelisiwe Ndlovu, Certified Financial Planner at Alexander Forbes

 

There is never a good time to discuss finances with your partner, married or unmarried, and one key issue that needs to be discussed is whether you should merge your finances.

Joining all your money matters can seem overwhelming at first, so you don’t have to combine every bank account and credit card from the get-go.

 

Start by having an honest discussion with regards to your individual money management and financial commitments before deciding to merge or co-manage your household finances while deciding if you want to fully merge all your finances. Detail all individual income, expenses, and all your financial commitments. The best way to achieve this would be to first take your individual budgets and combine them. This will tell you what you can and cannot afford as a couple. If one partner does not usually budget, this is a chance to start doing so as this will ensure that your household finances are under control.

 

Nelisiwe Ndlovu

Before you think about merging your finances, be open and honest about:

  • How much you earn – what is the income that you will bring home? What is the frequency of your income? Are you permanently employed or a contractor?
  • What are your current individual expenses and financial commitments? List your assets and your current debt.
  • Your individual financial goals and money management techniques – don’t worry if you might have not figured this out at the time of merging your finances – the important thing to do is to be open and honest so that you both build a stronger money foundation
  • Disclose your financial obligations, this becomes very tricky if left until too late and may cause unnecessary tension in the relationship
  • What are your goals as a couple – what is the purpose for merging your finances?

Married couples can formally or informally merge their finances as detailed above where household expenses are split between the couple (the split could be 50/50 or any fair split agreed upon by the couple, which could be based percentage-wise depending on one’s income). Some couples tackle finances by adopting the ‘pick a bill’ approach, where one couple pays the water and electricity while the other covers the food.

Being married does not mean necessarily that you need to have one joint account. You may also just want to open one joint account where you each deposit money to pay just your monthly household expenses.

 

The top five things to remember when merging finances as a couple:

 

  • Have the ability to manage your own finances before expecting another person to merge their finances with you.
  • Be mindful of your potential spouse/life partner’s money management behaviour and skills so that there are certain things you can address together before considering merging your finances
  • Always keep an open line of communication – honesty is the best policy
  • Set a money limit which you can each spend without having to consult each other
  • Don’t forget to change your wills and beneficiaries on pension or provident funds as required.

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