Corporate payments and the impact of fintech on how we pay

Disruption is a common denominator among factors driving business growth and innovation today. Yet, disruption also creates opportunity, and the fintech sector has demonstrated agility and a pace of invention over the past several years that has helped many other industries adapt to change. B2B digital payment processing is one area of priority in the current wave of corporate digital transformation, and, according to a recent study, has resulted in higher customer satisfaction and value for many of the businesses embracing it. 

Fintech is creating business value through digital disruption

COVID accelerated many economic, societal, political, and technological shifts for businesses in all industries and across all geographies. More than anything else, the pandemic highlighted the need for agility and demonstrated how companies that can adapt to the increasingly urgent shifts in supply chains, consumer preference, and employee satisfaction are able to build muscle and stay resilient in the face of future disruptions. 

The pace of change we’ve been experiencing in the last several years is greater than at any other time in recent memory. “Companies underwent two years’ worth of digital transformation in a matter of months,” observed Microsoft CEO Satya Nadella early in the COVID crisis.

B2B digital payments, and the technologies that make them possible, are among the many business processes that have been automated as a result of this massive wave of business transformation. The widespread adoption of remote working, for example, exposed the inertia of companies who still relied on paper processes, which in some cases have become not just inefficient but largely impossible to maintain. According to “Digital Payments Tipping Point,” a joint study from WEX and The Economist Group, companies that have pursued payments innovation, by contrast, appear to be adapting more easily to the new normal of work-from-home.

In fact, although the overall business transformation is still unfolding, this report found that it appears to have served these businesses well: more than half (56%) of respondents reported their companies are financially stronger than they were before the crisis. As the report explores, the challenge for leaders now is to maintain this momentum of innovation and be better prepared for future crises.

The role fintech plays in global commerce today

Fintech innovation is making a big difference to this move to modernization in modern business. According to the WEX/Economist study, the top priorities respondents are pursuing are e-billing and e-invoicing, real-time fraud detection, and reducing fees by optimizing payment terms and processing times. 

While reduced costs are cited as the biggest benefit of electronic payments in a study from the Institute of Finance & Management on the Future of Accounts Payable: Digital, Profitable, Strategic, other benefits of paying suppliers electronically include faster cycle times, improved accuracy, less fraud, enhanced visibility, improved supplier relationships, and opportunities to earn cash-back rebates.

With the need to move financial data securely and simplify financial services to ever-broadening audiences, fintech has become essential to businesses well outside financial institutions, as well as to consumers. In fact, continued innovation in this segment is now something of an expectation to investors, consumers, and business leaders. 

Merriam-Webster defines “fintech” – the word is a combination of “financial” and “technology”– as “products and companies that employ newly developed digital and online technologies in the banking and financial services industries.” A note follows indicating that it’s one of the hottest categories for venture capital.

Simply put, “fintech” helps businesses better manage their financial operations. Successful and lasting fintech companies simplify financial processes, provide direct and/or mobile access to data and systems, and speed the resolution of complex transactions between multiple parties. It plays a critical role in enabling companies to securely expand globally. 

Fintech solutions continue to disrupt many industries

Fintech covers a broad array of solutions. There are fintech companies focused on lending, payments, cryptocurrency, international money transfers, personal finance, equity finance, consumer banking, and insurance. Some of these categories are very broad by themselves. The payments category, for example, includes the kinds of solutions WEX offers for purposes as diverse as fleet management, health benefits administration, travel industry payments, and corporate financial management. More and more, businesses are looking to their existing fintech relationships, like procurement and supply chain management systems, to offer in-platform payment options.  

Key attributes of a fintech company

Many investors and analysts believe that technology for data processing speed is only part of the fintech story.  The market also demands agility of ideation, decision-making, process management, and even overall corporate structure. 

Innovation, speed to market, growth, agile teams, and rushing toward disruption rather than away from it…these are the kinds of attributes that are associated with fintech. Today, these qualities are found in both decades-old industry pioneers and startups, as well as traditional banks and technology providers. 

Fintech is a technology that makes financial services more efficient

For a fintech solution to be valuable, many interconnected components must be true.  You need a “fin” part that has some critical impact on the financial management of a business.  You also need a “tech” part, where the data processing and electronic communication technology adds security, speed, and efficiency. The solution sets are complex and involve confidential information. 

The COVID-19 pandemic has boosted the prominence of some fintech offerings and pushed them to expand their capabilities quickly. Certainly, small and mid-sized businesses are now more familiar with and more likely to embrace the transparency, technology, and flexibility of fintech payment solutions.  It is hoped that improved resilience in financial stability will set more small businesses up to avoid costly complications from future disruptions. 

The future of fintech

We are in the midst of a radical transformation of how financial payments are processed, worldwide, in literally every industry sector. Consumers are increasingly more comfortable with alternate, digital payment methods, as are small business owners and CFOs.  As a result, banks and traditional financial services companies are looking for ways to retain market share by adapting their services to a rapidly changing landscape.  Banks will need to continue to innovate, either by competing or partnering with fintech leaders, in order to keep customers.

The accelerated pace of change over the last several years may not be sustainable for all companies.  WEX and The Economist’s “Digital Payments Tipping Point” study found that “the speed with which many companies have adapted to the pandemic may have taken even their own executives by surprise.” However, that doesn’t mean executives are happy to stand still on continued digital innovation. The report found that more executives say that a top strategic priority as the economy recovers is “modernizing technology platforms/infrastructure for end customers” (42%). Almost as popular, 39% of respondents cite “implementing new technologies/data analytics” as a priority.

One of the fastest-growing sectors to date, fintech is likely to remain of high interest to investors for decades. 

While many fintech brands operate in the background of large and small business transactions, they are quietly keeping the entire business ecosystem running. Most succeed because they are more nimble, and provide faster or better service. While the general public may not know these smaller companies, they are building brand recognition in the fintech sector and with investors. 

Learn more about how WEX payment solutions can be tailored to your business so you can accelerate and streamline operations while creating lasting growth and success for your organization.

Editorial note: This article was originally published on October 20, 2021, and has been updated for this publication.

Sources:  

• Microsoft
• Digital Payments Tipping Point study (summary)
• Merriam-Webster
• Capital.com
• New York Times:  Attention Shoppers: The Internet is Open  
• The Institute of Finance and Management’s (IOFM) 2018 Future of Accounts Payable Study