The push to digitize payments has its roots in the 1970s, starting with the automated clearing house – the first real attempt to create a fully automated digital payment system.
Fast forward a few decades, and it may seem like progress has been glacial. After all, more than half of all B2B payments are still made with paper checks, said Tom Harel, CTO and co-founder of B2B payments automation platform Routable.
Of course, the pandemic has accelerated the transition to automated payer-recipient interactions. Harel warned that we may never be completely rid of the paper check, which has at least some advantages (you don’t need to know much about the recipient, after all – just their name, address and a few other details).
In the era of dispersed workforces, it’s becoming increasingly beneficial to use advanced technologies — especially payment application programming interfaces (APIs) — to streamline month-end close.
In general, payment APIs help businesses transfer money, programmatically, instead of relying on humans to enter data and numbers or tackle checks.
Read more: Preparing high-volume B2B payments for an era of transparency and control
“The main benefits,” Harel said, “lie with a reduction in manual workflows that allow you to scale with a lower headcount.” Human interactions, he said, are giving way to apps that talk to each other, calculate needed cash flows, and enable the flows themselves. There’s also the benefit of increased accuracy (computers don’t usually make typos, after all).
The routable interface, he told PYMNTS, allows corporate customers to send and receive payments Venmo-style across all AP/AR departments, with just an email address in hand.
“You don’t need to contain and store all that payment information for your customers that might be sensitive,” he said. This extra layer of security, he said, can help [organizations] more fully embrace digital payments. Routable has estimated that by using its software, corporate customers can reduce manual payment tasks by 80%.
And, as he added, automation can help reduce the risk of fraud, where scammers and fraudsters can prey on human emotions and trick them into providing sensitive data and account details.
Keeping an eye on the mechanics of the payments themselves – as concept and as execution – Harel noted that every transaction has two sides: one party makes the payment; another receives it. But there is a bit of structural imbalance in the mix. Suppliers and customers on the accounts receivable (AR) side of the equation tend to have better infrastructure and better access to data – with more visibility into the payments themselves and why they are being paid.
“They also have access to better security,” he said of the AR department, “because there are no more pieces of paper or credit cards lying around the office. access to [personal information].”
Payment APIs, he said, can address inefficiencies that exist in the cash flow process — and for the AR department, in particular, there can be benefits for businesses that get paid on time or even earlier (payers benefit from discounts).
keep the money
He said the AP department could hold the cash for as long as possible without missing the deadline and incurring any fees.
Without automation, he said, “there is a slow exchange of information.” This information is bogged down in paper, PDFs, phone calls, and even faxes.
Batch payments have traditionally been a pain point, he said. Taking three invoices and meeting them with one payment, for example, has traditionally involved juggling accountants, reference numbers and various back office ledgers trying to make sense of it all.
See also: How automation reduces month-end headaches for the CFO
But with payment APIs and online digital connections between senders and receivers, he said, “there’s a nice stream of fund information where we can understand from our customers what they want select bills one, two and three and pay [with one payment].” Routable, he said, can automate these processes and map the data to companies’ accounting systems, helping to reconcile their books.
In the digital age, he said, for AR and AP teams, “being able to communicate effectively and quickly is critical to resolving issues.”