Receivables Strategies: How to Solve for Increasingly Complex Payment Types

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Advise - Major Projects
Assist - Outsourced Services
Research - Market Data
Inform - Industry Insights


Tuesday, September 19, 2023


2:00 PM – 3:00 PM EDT


This is an online event


Michael Reed, Deluxe
Craig Jeffery, Strategic Treasurer

Sponsored By

Deluxe Logo

Hosted By

Strategic Treasurer Logo


The entire pay-to-receive environment has become more complex over time as payment options increase. There are newer payment types, but the older ones are not going away. Companies must figure out how to get paid in this environment of “more and multiple” while gaining efficiencies and control. Automating receivables while adopting digital solutions more vigorously is vital. This session will also explore how closed loop networks work and how to navigate the range of changes. Open loop networks like FedNow and Real-Time Payments (RTP) will be included in this practical and fast-paced discussion. Your hosts come from Deluxe, a payment fintech, and Strategic Treasurer, a research and advisory firm.

If you encounter any issues with this webinar replay, please contact our team.


Announcer  00:09

Well, welcome everyone to today’s webinar titled Receivable Strategies:  How to Solve for Increasingly Complex Payment Types. This is Brian from Strategic Treasurer, and we’re pleased you could join us as we consider how to navigate the continually growing complexity of payment types in the pay to receive environment. But before I introduce today’s speakers, I have just a few quick announcements. Zoom offers several different ways for us to interact today. If you would like to post comments or questions viewable by all attendees, please use the chat icon in the toolbar. If you would like to ask your question to just the presenters, please use the q&a icon in the toolbar. You can ask your questions at any time during the presentation and we’ll try to get to as many as we can. But if we don’t get to your question, someone from our team will gladly follow up with you. It will also be a few polling questions throughout today’s webinar, where you’ll be able to select your response from a list of multiple choices, you will need to click the submit button on the polling questions to have your response recorded. If you are here for CPE credits, you will need to answer at least three polls today. And last, please ensure that your zoom display name includes both your first and last name, so we’ll know to whom we should send the credits. Our speakers for today are Michael Reed, division president of b2b payments and receivables at Deluxe. And Craig Jeffery, Founder and Managing Partner of Strategic Treasurer. Welcome Michael and Craig. And I’ll now turn the presentation over to you.


Craig Jeffery  02:04

Thanks so much, Brian. And welcome, everyone. I’ll hide my voice as a welcome. Thanks for spending some time with us. There’s so much for you to do. And the fact that you invest an hour of your time with us talking, discussing on some key topics and finance is certainly an encouragement and much appreciated. And, Mike, it’s it’s good to be on this webinar with you. I know we’ve shared the physical stage before I don’t know that we’ve done a webinar before have we?


Michael Reed  02:32

I don’t know that we, do we do, we might have done a b2b payments. Okay, webinar at one point in time, but it’s great as always, to be participating with you here. And thanks to everyone for joining and look forward to an interactive session with with the different avenues to get involved here and in this discussion. So looking forward to a great hour.


Craig Jeffery  02:59

Excellent. So what are we going to talk about today, we have our agenda on the screen for you to peruse quick, I’ll give you a little bit of a highlight this we’re gonna be talking about for the next 56 or so minutes. Payments, what’s the situation of payments? Well, there’s newer, faster payments, there’s additional options from traditional channels like card, and ACH and some of the newer payment rails that exist. So there’s faster payment types, there’s more types, there’s payment methods that provide more information. And this just brings about some additional complexity, we’ll spend a bit of time talking about payment systems, the closed loop versus the open loop system. So like a open loop would be something like FedNow, where there’s every bank in the platform can connect to it in the US, for example, cars run for the Fed. Whereas there’s closed loop systems, you may be familiar with things like Zell and some other options where you have to be a member of that network to be able to participate. money stays in that network. Or I’m sorry. I didn’t mean, I didn’t mean Zelle, I mean, some other ones like Venmo, where you have to be a member of the network. And then you could take the money out and venmo Venmo would be a closed loop. So with the open because it resolves to, to your bank account. Then we’d look at the efficiency what’s what’s important to efficiency. So while we see this movement from manual to electronic, there’s ways to gain efficiencies, reducing the number of steps, automating steps that exist, and being able to build scale, and have control and increase adoption. So there’s a couple of key topics there on the efficiency side that we’ll talk about. And then who do you partner with or payments, how do you go about evaluating them? So we’ll talk on some of the key areas of your partner commitment to the space to the products that you’re using. Look at the technology that you use, you want your partners to be current technology, not on legacy platforms. And from a product roadmap standpoint, I think everyone’s probably familiar with. You can’t build a reputation on what you’re going to do. You have to have proven success and building things making things work. So that historical roadmap, but also, how mature is that roadmap as you look for, like what’s planned? How will that add value to the overall process, I’ll spend a little bit of time talking about obstacles to improvement, obstacles to change, obstacles to automation. So we’ll look at issues like security, management, focus management buy in. And it tends to be a big, big challenge from a company’s not having enough resources it is involved in like every single project. And so getting their involvement, approval to help move things forward, is a continual challenge for many projects and other other solutions sets require less IT involvement, and so therefore, can move ahead a little bit more rapidly. On the key takeaways. The will Mike and I will talk about things like how do you handle complexity, automation, what’s what’s the right type of mindset or thinking, and then finally partnering. So that’s our that’s our agenda for today. And I’ll begin with this conundrum of payments. And we gave a little bit of a heads up on that. The point there is that while manual processes are decreasing, more payment types are being added. So the fact that more companies are automating parts of their outbound payments and inbound payments, there is an additional level of complexity and brought about by there’s more types of payments. And older payment types, or traditional payment types aren’t going away. It’s more, it’s not, we’re replacing payment type one, two, or three with payment, type four, five, and six, it’s we’re adding more. And so where’s the opportunity to gain efficiency, speed, speed of payments exists for some of the payment types. But speed, speed matters in certain applications. Certainly efficiencies always been top of the list. Same thing with adding controls the ability to protect your payment process, inbound and outbound. And so this idea that there’s more payment types that can solve more issues, also comes with, with the caveat or the concern, that there’s more payment types to support, and to manage. And so there’s the picture of the person spinning plates on the desk, because there’s more not less payment types. So I’ll bring Mike in here. Now on the payments landscape, there’s, you know, we think about payments, Mike, we think about our individual lives, consumers to businesses or consumers to other consumers or other individuals. We also think about business to business, businesses, paying businesses, there’s a lot to take in here. And in our individual experience can inform our corporate business, and our corporate business can inform her consumer mindset as well. And I’ll let you take it away from here. I know there’s a lot to touch on.


Michael Reed  08:28

I think starting on the right eye of the chart, you know, consumer, the way consumers pay businesses has really evolved over time, there’s been a lot of investment, we think mostly about going into a retail establishment and you know, taking out a credit card and, and making and making a payment. And there’s a variety of different ways in which consumers can do that. And most folks, because they engage in those ecosystems believe that all ecosystems work in a similar fashion as the past what that does, we’ve obviously introduced, you know, consumer to consumer or peer to peer payments now, more recently and prevalently. And, you know, this scenario there that most of the, those payments are instantaneous, they need to happen quickly. You know, they’re the example here of a single payer at at dinner is, is really a good example of one where somebody pays the bill. And then they need everybody to give them the give them the money that they that they need. So the payer wants to send the money quickly, and the recipient wants to receive it immediately. So that they don’t feel like they’re out while that engagement is happening. And generally those same types of scenarios are happening and in business as well. The only difference is that the incentive hasn’t necessarily been there in business to business payments to get to get the cont the immediacy of payment, understood and and out you know, gets a lot of invoice payments, as you see on the bottom left there where somebody is sending an invoice out and needs payments, so you have payment terms of net 30. Net 60. Net 90 days depending on what it might be. And so long as the invoice is satisfied in the time allotted, it doesn’t really matter how the payment goes. And so in those ecosystems, we’re still relying pretty heavily on paper based payments, we obviously do have the ability to pay off of an invoice using credit cards similar in that consumer experience. And now we’ve introduced the the, you know, with FedNow, and real time payments, the ability for businesses to pay each other real time. So we’ve now leveled the playing field and the fact that the consumer payments and the business payments, all have the same types of modalities. But we still have to build ecosystems around each one of each, each one of those landscapes, which we can talk more about here in a minute.


Craig Jeffery  10:59

Thanks, Mike. And, you know, as you look at some of the faster payment system, it does make sense to spend a little bit of time on closed and open loop just for some background. closed loop systems, you can see on the left Venmo Cash App, those are examples. sender and receiver have to have accounts with the provider, you have to have a Venmo account or cash app account, you can pay between parties, part of that is you get other people to sign up, they can sign up quickly, and they can receive payments, but the money sits within the app, if you were within that particular system, if you want to get money out into the banking domain, you have to do a cash out or whatever the particular term is for the particular system. On the consumer side, some of you probably your banks might support Xcel, where when you send money or receive money, it comes in and out of your bank accounts, your bank participates into the money, you don’t have to have a separate wallet for that. And so those are that’s, you know, the open type network. But on the business side, what are some examples of the open loop, so real time payments, or RTP? Through the clearing house, a new payment rail, same thing with FedNow, very, very new payment route. These are available to a massive range of banks. And there’s not a separate Wallet. So anybody who has a financial institution, that network can now make payments one to another depending on the rules and governed by some of the limits. So those are a couple of the key points there. Mike, was there anything? If there’s something you’d like to add here? Feel free to jump in? Or we’ll go right to the first poll question.


Michael Reed  12:46

I think the big difference between the closed loop and open loop is that in those closed loop environments, the type of payment and the risk and fraud controls are, are designed to protect the activities within the wallets themselves. So how does money get into the ecosystem? How do you transact within that ecosystem? And how do you move money out with these new open loop systems, it’s you now have to manage all of these different elements, because a payment could go business to business as the chart depicts consumer to consumer. And in many cases, they’re also working to send information at the same time or remittance. So the complexity of these open loop systems, especially now that they’re moving to the immediacy of money movement is dramatically increasing the complexity of all of the tools and systems that need for complexity is there now around all these different types of tools that you would need.


Craig Jeffery  13:49

Yeah, excellent. Mike, you know, that you were talking about that a triggered a few other thoughts, you know, the idea that consumer consumer payments, consumer experience with technology, oftentimes seems and oftentimes is ahead of what we experienced in the business world business domain. But there’s a significant difference to it. I don’t need segregation of duties. You know, when I’m paying someone for dinner, I don’t necessarily need to have a massive recon process because of timing differences. I owed $40. For dinner, I send $40. And we settle and resolve, I don’t need to have secondary approvals, or routing or link to POS systems are backend system, they tend to be just transaction. So there’s a significant level of additional complexity, and hence, you know, the need for other information to travel along with or to be re associated with the payments, that tends to be far more significant in the business world. So you said everyone’s saying, Where is the poll question here it is, should be on your screen, you might have to alt tab to find it. This poll question is you can select all that apply. Any ones that do apply, please click. So it’s about the organization. So the following describes us. And we’d like to see who’s who’s on from a complexity standpoint, we have over 100 bank accounts, we have over 2 billion in sales or annual turnover. We have over 10 banks in our payment and concentration structure. We’re in over 10 countries, or none of the above. So we just want to see how complex our audiences as we talk about these things, so as every goes to fill that out, after you fill it out, hit submit. And then we’ll talk about the results whenever they’re ready. Once you’ve submitted it, please, if you would like to see, if you’d like to see the results, we’ll send them to everybody. If we have 150 people type DLX in the chat, DLX or you can type poll, DLX stands for Deluxe. That’s the preferred chat code. If you type Paul, it’s acceptable to no extra credit for poll DLX, likely, same, same, same credit for DLX, or Deluxe, but then we’ll send that out we’ll include the results of the polls on these pages where it has the description. So replace that when the deck is sent out to you. So Mike, the results are in 30% of the respondents are none of the above. So moderate to minor complexity. But as you look across the top here, there’s looks like quite a few, quite a few companies have significant payment complexity. Any any comments?


Michael Reed  16:48

Well, you know, as we’ve been talking about the complexity, mostly around just the ecosystem itself, of how money can move, but you know, this really gets to a whole nother level of complexity, if you’re reconciling payments across a variety of different bank accounts across a variety of banks, and across a variety of countries. The exponential risk associated with with those types of transactions, depending on how you’re wanting to consolidate goes up dramatically. And the variables increases significantly, particularly with local payment methods and other markets while wallets you know, paying with QR codes and different things like you would do in in China, alternative payment methods in Europe. You know, we have credit, debit PIN debit here, you know, a lot of countries have gotten rid of checks nearly completely, we still have a lot of paper base payments here. So this good. This is a pretty complex group.


Craig Jeffery  17:52

Yeah, we didn’t even ask about how many payment types do you accept? Right. There’s, there’s a whole nother layer there. Yeah, excellent. Excellent information. Thanks. Thanks for your comments. Thanks, everybody, for responding to our first poll question. We’ll move that to the side. And Brian will keep track of did we hit the I think I said 150. So did we hit the 150 number. You know, just a quick intro, I’ll let I’ll let Mike cover this slide. This is two images, the left and the right hand side of a in some ways, it’s simplified. Left hand side shows various payment types coming in using multiple system eventually hitting the bank account. And then information either coming from the bank account, or from a separate system having to make its way to the accounts receivable system. And that’s, that’s really a fairly simplified chart on the left hand side. And conceptually, we’re showing the right hand side where essentially all of that information becomes managed. And there’s a, if you call it a ribbon system, or a processing system that provides, you know, a single file or a single channel, or a limited number of channels and information into the AR System, resolving or moving that complexity up. That’s the difference. So you can see like all the arrows going into AR on the left. And these are all simplified because of timing issues. You know, net and gross. Detail versus summary. There’s just a there’s a world of complexity there. That’s it’s too much to show on a page two, we’re trying to show a concept there but like, you know, there’s a lot of there’s a lot of relief needed in the error process and shifting the burden is a is a key strategy for companies. Maybe you can help us understand what what makes sense for most companies to do once they reach more than the smallest level of complexity.


Michael Reed  19:51

So most businesses, you know, think about things through the lens of you know, the things that are along the top and then you know how they reckon Stop payments once they come into the bank account. So most businesses would say they would want to meet their customers where they are and get paid in the way the customer wants to pay, which means they may want to pay, you know, with a credit card or debit card, you know, an ACH wire, however, however they’re wanting to pay or get paid. The challenge is that now you are starting to get these intermediary systems that sit in between like a wallet or a point of sale. Or even you know, the age old lockbox where you’re mailing in a piece of information, and you’re writing your credit card number on that information. And it’s still getting and it’s still getting paid. But the fundamental premise premise is, how do I want to meet my customers where they are, and I want to get, and I want them to be able to pay me in a way that is going to ensure that I get paid in the way that they want. That creates a real nightmare for the accounts receivables teams within these companies, particularly for those that are on the phone that are operating in a variety of different countries across a variety of different banks. And so all of this data, all of the money ultimately shows up as cash in a bank account, regardless of how it starts, whether it starts as a credit card or an ACH, it ends up as cash in the bank account. And all of these companies have to take that data that cash and reconcile it to their accounting system or their or their ERP their enterprise resource planning tool. And to do that, and they cannot really use the cash until they’ve they’ve done all of that work. And there are a lot of these payments. That, you know, it’s big teams of people that have to go in and kind of and do this reconciliation. And so with now artificial intelligence and machine learning type tools, were able to get a lot of these payments matched without the need for a human intervention, which has taken a big toll off of off of some of the accounts receivables teams, which is what this remittance system box is intended to depict of how do you take not just the payment information, but the detail that they may have received associated with it. So invoice information and that type of information and match it using using technology so that they ultimately have the data into their accounts receivable system. That still though, leaves a big chunk of payments that aren’t exactly what they expected. So if you imagine you received an invoice from somebody, and you it was for $100 and you mail $80 A system doesn’t know why you mailed $80. So there was an investigation that has to happen by the accounts receivables team, which this which now with the new advent of you know, of, you know, these types of remittance systems, they can do workflow management and help to do so Deluxe obviously does a lot in this area and has pretty sophisticated tools that help our customers get to a 98% match using artificial intelligence and machine learning. But we still have to manage that 2%. And if you think about the companies that are on this call that 2% can still be a lot of payments, particularly if it’s in multiple geographies across multiple brands of businesses across multiple payment types. And that investigation has to happen. So we have made a lot of advances in in, you know, in general around helping accounts receivables department get these payments, to reconcile. But with the advent now of RTP and FedNow. You know, it’s now the the money is moving instantaneously. And so you know, it’s just increasing the need for speed so to speak and skidding these remittance systems to to reconcile these payments faster.


Craig Jeffery  23:59

Yeah, you know, on the complexity side, for those who are, who live this every day, you see the complexity and realize how hard it is sometimes to reconcile checks coming in, let’s say to a lockbox, it’s a check comes in, let’s say 300 checks came in and maybe the lockbox area processes in groups of up to 50. And so there’s six groups, six deposits that hit the bank account, but there’s 300 separate details of on the cheque level and maybe they’re paying 3000 invoices. So there’s a level of detail that needs to get back to the receivable system to relieve the individual invoices and apply them to the to the overall customer that credit card, debit card and some of the faster payment types your are no no longer batch. It’s no longer Hey, there’s a daily cycle, but the card card activity may come in All day long, there may be cut off periods of time where calendar day is different from deposit date, there might be net and gross settlement, you know, RTP, FedNow, those things may happen all at all different hours and your cutoff times may vary. So it’s a, it’s an increasingly complex area that that needs to be resolved or, or piped down as, as Mike was explained. So it’s a world is more complex than theory sometimes. So. But let’s, let’s turn our attention back to her poll questions. This is our second poll question. And we know you guys are smart, and you have a double stacked poll question. There’s question one and two in the same frame. And you might need to pull the box down, make it a little bit taller to see it fit. The first is our biggest obstacles to making the change we need are. And the question is from limitations of ICS IT staff to closing lockbox locations or other. And then what tasks is the largest pain point in your AR process. So that goes from staff intensive work around a collection all the way down to invoice creation? In other words, I guess we didn’t leave an option for none. So we’re forcing you to pick pick something. So that would be awesome. And in the chat box, Brian has posted a link for LinkedIn for Deluxe, as well as one for strategic treasurer. Once you’ve submitted your poll response, please head over and follow the luxon, LinkedIn and follow strategic treasure on LinkedIn. That makes us really happy. It makes our marketing teams even happier. And it’s just a good way to stay connected with some messaging. So enough of the commercial about LinkedIn. And we’ll we’ll go back to our our poll responses. Brian told me we needed 32. I see Deluxe coming in lots of different ways. I still think we need about 15 coming in, in the chat box preferably versus the q&a. So we’ll see where those go. Right, Mike? The top the top issues for most areas tends to be IT staff or executive management. That’s what we’ve seen on some of the bigger surveys. We don’t have executive management priorities. But we’ve got limitations IT staff number one at 58%. And we’ve got a virtual tie. Both those numbers resolve around 46% lack of staff resources to enact changes and competing budget demands. As the number two any comments on any of those items are the biggest obstacles to making the change that’s needed.


Michael Reed  28:04

Well, I see those all as very complimentary items, because typically, the you know the to get the it worked on you have to have budget. And if you’re going to make changes in your environment like this, you usually need to have a change management program that goes along with it. That requires the subject matter experts within the organizations to participate. So if you don’t, you know, if you have a hard time with the funding, and you don’t get the IT staff lined up at the right time, and the subject matter experts necessary to help to apply the changes into the organizational structure don’t all align, you really have a hard time implementing these types of things, which is why a lot of companies are moving to outsource deals with companies where they will take they will ask these other companies to take on the responsibility of managing their accounts receivables processes, or using systems and tools that might be available at companies like Deluxe to, to automate processes on their behalf. So that I see all three of those things really is complimentary. And if any one it’s like a three legged stool, if any one of them isn’t there, then you’re you really aren’t kind of aren’t going to get very far. So it’s kind of a recipe for inactivity based on what we’re seeing here, and it’s indicative of what we’ve put our customers at mentioned to us about challenges in automating these processes.


Craig Jeffery  29:34

And the second question is about the largest pain point in your air process. Top Top one staff intensive work around collection collections is a big issue. The next two are forecasting and reporting and visibility. forecast has shown up in so many areas on the cash conversion cycle. receivables payables treasury, every areas tends to be focused on reporting visibility. Seems like Got a sister concern as well. As you look at this things like data and payment needs to be reassociate it all the way down to invoice creation, what seems to be the least the lowest level of pain associated with invoice creation. Any comments, advice or thoughts on this?


Michael Reed  30:22

Well, companies generally have a ton of data and based on the poll results that we saw here on that earlier question, you know, they if you’re, if they’re operating across a variety of different regions with a credit, Friday, the payment types and a variety of counts, they, you know, they have most of the most of the folks on this call have pretty sophisticated environments with a lot of data. And so if you’re spending all your time trying to reconcile those payments, and stay ahead to optimize for cash flow, you’re not able to really think about the data and the data that you have, and use that to drive to drive insights. So you know, we are seeing more and more demand for that type of service as well, where, you know, it’s not just about applying the payment, but it’s about helping them to understand the trends in their business and why payments are happening the way that they are, and from what, from what areas so that they can either add additional modalities, additional types of ways to pay, or maybe even wanting to reduce types of ways because they’re not necessarily seeing the bang for the buck. And it’s increasing their, the workload on their side to reconcile them. And then obviously, that just gets exponentially more complicated as you’re dealing with multiple geographies. So a lot of companies out there are are saying they have a lot of data. But they don’t have many, they don’t really have the time or the resources, or the budget to organize that data in a way to drive insights. So you know, that’s a big, that’s a big opportunity for companies like ours.


Craig Jeffery  32:01

Yeah. Excellent. Thanks. Thanks for the color commentary on that. Also, thank you, everybody who typed Deluxe into the chat box, we’re, we’re well over 150. And ready to go. So that the slide before you is about adding efficiency, from payer to receiver and just you know, as you look, just Michael explained some of this to you. But the physical and hybrid physical is like another is a code word for check, or physical items, versus digital. So the physical and hybrid world versus something that might be purely digital to some of the faster payment types example of like real time payments? Where do we find efficiency? How do we, how do we identify opportunities for efficiency on a comprehensive level, or the whole process, the end to end not just, I’m really efficient, if I’m paying, but I also need to be really efficient receiving and that requires a merger of interests between these two areas. So you know, the world of AR has a world of AP associated with it.


Michael Reed  33:14

Yeah, well, you know, there’s two things that I that stand out to me on on this slide, that I think most of the folks on the call might find interesting one is, there is a there’s a belief that because we are evolving our the types of payments, so the top, the top row depicts how a paper based payment would flow. The middle row depicts how like a card, credit card payment would flow. And the bottom is a real time payment. So we are finding efficiency in the way in which potentially we could send or receive money, the physical movement of money. But the processes that go in and around these payments are are not necessarily are not necessarily improving, as quick as or coming around as fast as the movement of money moving part. The other thing that stands out on this slide to me is we’re not eliminating anything. So we still have all of this still going on. It’s not like we we moved from physical to digital, and then to real time, and each one of these falls off as we add the next type. We’re just adding complexity all along the way. So as we as we think about complexity based on what our customers have been telling us, there’s the complexity of getting the money in the account. And then there’s the complexity associated with reconciling the payments once they’re in the account, which we talked about earlier. The big nuance, as you mentioned before, is that in the physical hybrid and digital environments, most of the data and information moves in batch, so it’s still not anywhere near real time. So the only the difference between digital and physical is in physical, you know, you’ve taken on a good or service and you’re saying, okay, you know, the checks in the mail. So you’re kind of, you know, you’re trusting that that meant that checks in the mail and the digital environment, you’re saying that wait a minute, I need to know that I’m gonna get paid. So the approval process of making sure the money is there and available to spend and that the recipient will get it, it’s, that’s all happened. But the money still moves in batch over, you know, over a day or so of time. In the bottom row with real time payments, the money moves instantaneously, as we talked about in, you know, one of the earlier slides, so all of the ecosystem around us has to move to real time. So this is the there’s a lot of complexity. Ironically, as we’ve moved to payment types has only increased, it has not decreased in any way, because we still have all of these things. And the burden has now shifted, not just from being able to manage all these batch processes, where files are moving back and forth, and money moves over time. Now everything has to be real time messages that could have been sent over the course of a day now needs to be sent sent immediately. So it’s going to put increasing pressure on the accounts receivables department to use to use tools like artificial intelligence, machine learning deep learning to gain the efficiency because the process itself isn’t going to yield a more efficient, a more efficient accounts receivables process.


Craig Jeffery  36:42

Now, Mike, the the idea that the value transfer, and the information that has to move between entities, in order to properly account for things is sometimes overlooked. If you take a look at only my moving value and my moving information, how are they? Are they coming together? Are they coming separate? And so that’s a that’s a key aspect of this end to end view is making sure both of those things fit together. I liked your comments on real time payments. I was at a conference the near cash exchange last week and one of the keynote speakers described like real time, real time payments or RTP. As a specific name, I think they were going for a term of instant payments or fast payments, whatever they were, they’re trying to come up with a term that wasn’t branded. But they said, We need to think of those not as instantaneous, but within about seven seconds. And I I kind of liked that seven second mindset versus overnight or next day or two days. Where payments move in that timeframe.


Michael Reed  37:49

Right. Yeah, that first line right is three to five days, that second line is 24 hours, the bottom line is seven seconds. It still feels pretty fast.


Craig Jeffery  37:59

Seven seconds. You can throw a ball up in the air and and catch it after the payments gone. You’re well I guess I guess that would be a little too quick. But yeah, you could certainly hold your breath for the last one. Awesome.


Michael Reed  38:16

Yeah, and you had mentioned in your last in the very beginning, when we were talking about Sal and Venmo and the dinner and you know, you you’re going to pay somebody $40 for your meal. You know, in that scenario, all that interaction is happening in real time. So you’re saying, Oh, I owe you $40? Just say $40? So if I give you $40 For settled with this, then yes. Okay, here’s your $40 businesses have to do all of that. Behind the scenes, because they’re not right there at the time to validate that, yes, I owe you $40. And if I give you the $40 that we’re good, right. And businesses have to figure all that out behind the scene. That’s why peer to peer payments have taken off quick more quickly than some of the.


Craig Jeffery  39:02

Delays or the latency issues are a challenge, right? If I if I have to put something on a to do list that I revisit tomorrow and do the day after I’m touching it three times if I done the item and never even gets on it to do is same thing with payments, right? It just moves there. But that’s not how business generally works. There’s a there’s a trade activity. You know, it’s it’s, we’re not meaning to be edgy by saying the fallacy of adoption. But this is the this is the concept of you know, in theory. In theory, you want to move from the physical items, physical checks to digital, you know, convert things to digital as early as possible or start. If payments and information start their journey digital, we’d like to continue that whole way. The fallacy is that, hey, I’ll just flip a single switch and every payment type will convert to one digital method everyone will send it to you Get, they’ll be ready on their back end system to provide the data or to receive the data and life will be perfect. And that’s like the you know that bad old SAR maybe not that old of phrases, you know, in, in theory, reality is just like theory. And reality theory is nothing like reality. And this is the messiness of converting from Legacy types, multiple types to more types, not necessarily getting rid of any but expanding. And so there’s a perception that it’s pretty easy. Let’s go digital. We saw a lot of conversion in the early months of COVID, where people weren’t in the office where they were converting, and multiple years of typical conversion to digital occurred within months. Yeah, Mike, maybe you can, you can take us. Take us on this, this journey in the fallacy of what does it take to move from physical to digital?


Michael Reed  40:59

Yeah, well, like you said, a lot of folks think you can just flip a switch. And we’ve conditioned ourselves to believe that way, because of the way consumer to business payments work, right? It feels like oh, I just think this credit card out and I tap or a debt buyer, I swipe and I get, and I get them, you know, and everything happens pretty quickly. The reality of the of the scenario for business to business payments is just different. I think most people would be surprised to know that 60% of payments happening business to business are still paper based. And you know, we here at the Lux subscriber, I subscribe to a product theory called the jobs theory, the jobs to be done. So we’ve been studying why people buy businesses are still more comfortable sending paper, when there are digital options that can solve all the problems that the paper can solve today, the challenge that we were finding is that the digital options it took it was a sum of the parts argument relative to the type of information so it wasn’t just about moving money, which is what the bottom chart depicts, we just need to move some money, I also need to tell you what the money is, for many times, I’m not paying you the amount of money that I that you’re expecting. So I need to explain that situation to you. And I don’t know that I’m ever going to pay you again. So I don’t really want to store in a digital format, ACH or wire, or credit card information, because there’s risk associated with that. So because of those three variables, there’s still an awful lot of paper moving around the country today between businesses. The other fallacy in the business to business payment is that speed isn’t the primary driver. So yes, you can you I could move you money in seven seconds. But if I’ve already gotten 60 day payment terms, does it matter that I’m paying you in seven seconds on day 60? Or can I just plan my payment and it’ll go and, you know, in the time period that it needs. So, you know, the Fed and others are coming up with the remittance type, open networks to move information. But we’re, you know, the switch to digit from physical to digital is a lot more than the money movement, which is why it’s taking a long time to, for the adoption curve to change in business to business and business to business payments we got we’ve got to do more than just move money.


Craig Jeffery  43:26

Excellent. So the three three core considerations about moving to efficiency, there’s certainly more of a three to talk about. Mike, I think we have it broken out. You’re doing the first two, I’ll cover the last one. So yeah, feel free to jump in.


Michael Reed  43:46

Yeah, there’s obviously you know, any number but I think that, you know, as we were kind of going through this ahead of time, we kind of landed on these, these three as being the the main ones, and, you know, adoption of technology and processes, as we even saw in the poll, that’s one of the biggest dependencies, you know, you have to have budget, you have to have a technology appetite to make the change and you have to have you have to have the subject matter expertise on the team to go and change the processes. The advantage of getting into it into a technology into an environment an open architecture technology environment, is that you start to get what we refer to here at Deluxes that network effect so like you can start to use multiple networks to start gathering information, you can move files easier, you can do the reconciliation, you can eat more easily, you can more easily move the you know the not just the money but the information necessary to to do the to do the task. The other is that workflow systems can now work between these systems. So if you have API’s open API I type environment that allows you to connect systems and connect with workflows, you now create a user interface or that allows you to do more things in a self service way. So that you’re not dependent or reliant on on others, on others to do it, and all of that all of that technology will allow and process improvement will allow you to, to move, you know, forward with your onboarding processes the way that you interface with with, with different businesses as you want to had that additional modality. Getting the data in a common data architecture also allows you to promote these types of capabilities and solutions, both internally and externally. So you can be easy to do better, you can be easy to do. Business, you’re easier to do business with with your customers, and your employees are happier, because they’re in a more digital environment. And you know, in their job satisfaction, job satisfaction associated with that is better not to mention the fact that you can start to drive insights and analytics, which we had mentioned earlier. Conversion is obviously the hardest part of this. And without the technology conversion isn’t possible. So you have to, you have to not just change your technology, but you have to move off of the manual processes, the inefficient processes, such that you such that you can then get to the automated technology. But if your workflows within your environment aren’t done in a way that technology can automate, then you’re kind of dead in the water on that, which is why you need the subject matter expertise in and around these programs to make sure that you’re thinking about how the data, the information, the money needs to flow such that you can get it into your accounts receivable systems. Or you can solve your customers problems by meeting them where they are and allowing them to pay you the way they want.


Craig Jeffery  47:02

Yeah, very good. And the last thing with the cerebral, the picture of the brain in the head, and we use the phrase increase understanding the finance process, the cash conversion cycle, one person’s AP is another person’s receivable system. And taking a broader view internally, and then view end to end within your organization, as well as a comprehensive view that includes your company and your trading partners companies is essential for moving to efficiency. The quote, I mean, if you guys have heard me speak before, on efficiency, one of my favorite quotes is, you know, optimizing part of the process sub optimizes the whole, because you’re optimizing just a couple steps, but you’re not taking into account everything. And so the view should certainly be how do we make things efficient within our organization, but the total view is necessary. If I may, P and I send stuff to Mike, and I haven’t included enough detail, that he can figure it out, he’s going to call me or have someone call me and say, What were you paying, you didn’t include the detail, I need to know how to post it. If you can’t figure it out directly or through AI, someone’s gonna have to answer that and so increase the understanding of the entire process matters. And the fact that there’s new types of payments, some of which are gonna be very rich with what information can be included, and how that gets managed, provides for some additional opportunities. So with that, I know we have we’ve gotten a lot of questions in the q&a box we’ll see if we can answer those in a minute. But our final poll question is double stacked as well. Both are multiple choice so select everything that applies what methods of payments Do you receive? Select everyone that applies. That’s for your company, of course which processes, umber two, are highly manual for your AR posting?  Check, wire transfer, ACH, same-day ACH, vcard, or RTP this will be interesting to see, you know, are the traditional ones more baked into a process that makes them more automated and or do the new ones lend themselves more to manually posting because they’re new and they haven’t been incorporated? Those are that’s some of the thinking behind those questions. So as you answer those, go ahead and submit them when you’re done. There is a there are some things post we have enough answers enough Deluxes in the chat box we’re well over 150 No need to put those in there everybody will see the answer and so that’ll be all the answers on the files that we send out. A couple questions that show up in the box we’ll take a few Mike I don’t know if you’re looking at those anyone’s you want to take some of these are their hearts. So do you believe FedNow replace existing federal wire system in the near future? for three to five years, I don’t think that will replace the Fedwire system. You know, it might might take a bite out of volumes, but I don’t see it going that way. How will FedNow increases DDA reach? Do we know? And if Citibank and Bank of America join FedNow? That might be a little speculation. So we’re gonna type in the box with that is where do you think RTP and FedNow will max out the percentage of DBAs that will be available RTP is about 65%. Now FedNow is considerably less last but just launched two months ago. Those that’s probably a little bit more than we can address in today’s call, but some some really good questions. Really appreciate those questions, John. Sorry, I only answered like, one of them the rest put off. All right, Mike. Any comments on the payment volume? So you know, RTP is pretty new, but two out of nine are indicating they’re receiving payments that way? Maybe not many, but they’re receiving it?


Michael Reed  51:03

Yeah, I think that, you know, of all of them on, you know, I think most everyone today accepts at least ACH or wire. And check, but that real time payments is really probably the the interesting poll question that had we thought about after seeing the result is I’d be curious to know how many are sending real time payments as opposed to receiving real time payments? I think I think a lot there’s a lot of there’s very, there’s not as much hesitation to receive the payment as there is to send the payment. You know, I, I’m pretty bullish on it over time. You know, right now I see the use case is primarily going after ACH volume, maybe wire volume. But it’s pretty, it’s pretty specifically aligned with use cases. So we’re seeing real time payments, pretty prevalent in the mortgage space. So you know, if you’re buying a house, or you’re needing to move money, you know, it’s pretty hard to get a cashier’s check anymore. Most banks don’t offer cashier’s checks, so you have to either wire or send them money. And there’s a lot of fraud in that space. If you have purchased a house, you know, even those of us that are in the industry, they scare you pretty good that you’re sending the money to the wrong place, like validate where it’s going. So you know, if you could if you can package in validation steps around a real time payment to validate, you’re going to the right place, and you’re sending the money and movement. Like that’s a really good use case, I think for real time payment. Payroll is another great use case for real time payment, particularly in the gig economy where you know, where folks are working, and they want to get paid immediately. So there are some really good use cases around around real time payment, I think we’ll continue to see innovation in around those spaces. And we’ll see how they spread more mainstream over time.


Craig Jeffery  52:59

Excellent. Thanks, everybody, for taking all the poll questions. There was three sections we had over. I think we had five separate individual poll questions. So you know, what do you think about when you make partnership decisions with, with a technology firm with a bank? With someone who’s providing these services? I’ll touch on a couple of them. I guess, the first, the first three, I’ll take the topic that would make sense of the commitment to the line of business. Are they committed to the line of businesses this core? Is this a peripheral is this, you know, a small percentage, and are they making investments in the business is that are important to them for the long term are vital. And that that is a big influencer to a service or solution that will add value over time to increase in value over time. And new payment types commodity investing, it’s managing the process. The second one is comprehensiveness. And we talked about end to end and to end to end and other words, look at both both areas. That’s the only way you can drive to efficiency and control. And to Mike’s point, Mike talked about a lot of data and using data as a powerful tool for everything from workflow processes, cash accounting processes, analyzing your business, all of those matters significantly. So there’s there’s an opportunity for value of data in the context of being comprehensive or looking at everything across the board, and then find the product roadmap, I talked about that before. It’s like how, how far out is the future? Is roadmap going? Is that addressing what’s changing? Where are the opportunities? How specific is it? Those are things that really give you a clue that you’re partnering with someone who’s making a difference in the areas that matter to you. I’ll turn it back over to you Mike.


Michael Reed  54:54

Yeah, I’ll take this quiz or this piece of the dialogue figure lens of as a customer of some somebody else, right? So we I run a platform service business. So we partner with a lot of folks to plug into our platform. And as I think about that, you know, the what’s, obviously it has to work and it has to fit. The key, the capabilities have to align to those that our customers are asking for, for me to take the time to plug it into my platform and make it available to others. But equally important is, you know, is this is the business that, that I’m working with kind of be a good representation of the brand and the customer experience that I’m looking for presenting in the market, because after all, it’s going to be plugged into my platform, and my platform is going to be used by my customers. And it’s the deluxe brand, that’s going to be the one that the customer sees, and the customer is going to expect us to deliver the capabilities in accordance with the with the contracts and the way in which we’ve agreed to operate with those customers. So all of these things are fairly important. The product roadmap, though, for me would be more about, you know, the discrete things that I need, because I’m usually plugging somebody else’s capabilities in to augment mine. So I just need fullness of the product roadmap relative to the specific use case I’m trying to solve for drive in the market. And that would go with, with experience as well, you know, can they this the strength and longevity and experience all tie back to the brand? Like, are they going to be there for me tomorrow? Are they going to be able to continue to provide the service? Do they have the experience to help me when I need support from them when my customers are asking? So the bottom two here are actually pretty important probably are, you know, at the top of the list for me relative to whether or not we would want to partner with somebody to plug into our platform.


Craig Jeffery  56:55

Excellent. So on this one, I’ll just I’ll just handle this slide real quickly. So I can spend a few minutes at the end on the takeaways. You know, Faster Payments require faster responses to fraud those matter? We already talked about management pie and how that’s one of the key areas as is it resourcing. So does it need to get involved heavily? Is there a way to using outsourcing services that dramatically limit the impact of the work that it has to do, and this movement to do processes that give you value moving to a process that gives you faster value more quickly matters significantly? So I’m sorry, we kind of ran through those really quickly, but wanted to give Mike give you some time, on the takeaways? And for the some of the final announcements, why don’t you take us through at least the first couple of takeaways?


Michael Reed  57:53

Yeah, you know, we, we’ve talked about this in a variety of different ways. But we were never, we’re not going to get around the complexity of these of you know, relative to these types of scenarios, we talked about that we’re not we aren’t eliminating any, we’re just adding to multiple geographies and multiple multinational companies are really dealing with a lot more complexity, just given the nature of those businesses and the way that they operate. But complexity is a fact it’s going to be with us. The only way around it is really to automate and finding ways to automate and you can’t automate without a platform first mindset and ensuring that your systems and your processes all align, and can are conducive to automation, which then gets to you got to think about it the right way.


Craig Jeffery  58:48

Yeah, so you know, thinking we discussed the end to end view, getting management buy in, limiting the amount of impact that you have on it, outsourcing matters. And then the partner standpoint, we talked about the roadmap, the past the robustness of the future. And certainly the commitment and the use of modern technology all fit into the how do I add value to my process now? And over time, how do I make an increase in value. With that, we’ll jump to the connect page. Really appreciate it, Mike, and we’ll turn it and everybody else for joining us and turn it back over to Brian Weeks for just a few quick announcements before the top of the hour hits.


Announcer  59:29

Thank you, everyone for joining us today. The CTP credits, today’s webinar slides, and a recording of today’s webinar will be sent to you within five business days. And to hear Michael and Craig discuss next generation payment trends, be sure to listen to the Treasury Update Podcast episode 255 by clicking the link in the chat box. Thank you and we hope you have a good rest of the day.

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