New CFO report reveals extent of challenges confronting treasury innovation

CFOs and treasurers are interested in automation and payment integration but there is little interest in looking at new technology simply for the sake of it, suggesting that banks and commercial payment providers have a way to go to illustrate the business benefits and collectively encourage CFOs and treasurers to take advantage of the growing array of digital payment tools that save both time and cost.

The second of a series of surveys carried out by Ixaris in collaboration with PaymentEye, reveals that embedded systems, attitudes and relationships together with risk awareness, limited resources and concern about the scalability of new solutions are some of the factors causing treasurers to remain reliant on their banks to introduce them to new innovations.

According to the second version of CFO Payment Pulse launched at The Open Payment Track Test in London, a mere 8% of CFOs want to increase their outsourcing or collaboration with payment suppliers.

This hints at one of the challenges that potential business-to-business technology providers must overcome: the sense of inertia that can overwhelm harried treasury departments. As Bob Novaria, partner at Treasury Alliance Group and the former treasurer at BP America put it: “Many treasurers work on the basis that if it ain’t broke, why fix it? They won’t spend money until they have to.”

This sentiment was echoed by David Blair, managing director at Acarate Consulting, who pointed out: Treasurers want to see that everyone else is doing it first: they are not a very experimental bunch. There are however the exceptions.”

Returning to the survey, we can see illustrations of this attitude in action. For example, when asked how their use of cheques, credit transfers, direct debits and commercial cards (including virtual cards) would change in 2017, ‘stay the same’ was by far the most common answer overall. Of the four possible options in four separate categories, it accounted for just under half of all responses. Even the predicted plummet in cheques couldn’t dislodge ‘stay the same’ from the top spot.

There is an inherent conservatism here that is not necessarily specific to payments and related technology, but which certainly influences take-up among corporate customers.

Nonetheless, there are signs that the opportunities for innovative suppliers of payment services are growing. Anecdotal evidence from Ixaris suggests that there is almost always someone within the finance team who is keen to find ways of doing things differently to the way that banks offer. They may not be the loudest voices as yet, but these individuals are playing a critical role in moving payments culture forward.

Then there is the desire to reduce costs. This reflects the reality of treasury life where certain functions remain unreasonably and unnecessarily expensive. The margins of incumbent suppliers for cross-border payments and foreign exchange, for example, mean that these areas are ripe for challenge from newer and nimbler providers.

The rush of innovators in the consumer or retail space has led to companies like Zoom in the US and Transferwise in Europe taking on the traditional currency providers.

Yoni Arbel, who leads the treasury products team at Transferwise, acknowledges that CFOs with small teams don’t have time to properly research solutions on top of creating the new infrastructure to move to new suppliers. He points out, however: “In the next two years we will see a lot more businesses using our services. Challenger banks are already collaborating with us and it will not be long before first-tier banks realise that they will lose business if they don’t use Transferwise for their customers.”

Smart CFOs are looking at the retail sector for inspiration and potential cross-over. This more positive interpretation is also reflected in the quantitative results from the survey.

Looking at what incentivises treasurers and CFOs to adopt new payment technology, there is some interest in reducing dependency on existing institutions. Although some way behind process automation and cost reduction, this was the third most common driver for adopting new payment technologies among larger companies. Smaller companies are slightly more reluctant to look for new ways of managing their external relationships and are hamstrung by lack of resources needed for implementation.

As the responses to the survey show, driving the change in commercial payments will require significant cross-industry collaboration. An effort that will need to combine the drive of fintechs with the engine of the banking sector to encourage CFOs to take full advantage of the array of digital payment tools now available to them.

The move towards an open banking ethos, the advent of PSD2 in Europe and impetus from retail consumers for a better customer experience are further catalysts for change in commercial payments.

For the full report download CFO Payment Pulse v2.

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