Now that the Federal Reserve’s Faster Payments Task Force has made its final report available, it is appropriate to reflect on what Faster Payments or Real-Time Payments will bring to corporate treasury departments. The vision in the US has been different than in other markets by the strong belief that Faster Payments can be realized by free market forces rather than government mandates and/or regulation. But the vision sounds similar: to realize a payment system that is “faster, ubiquitous, broadly inclusive, safe, highly secure and efficient by 2020.”
There are several elements in the Task Force’s vision that must sound promising to corporate treasurers. First, the faster payments system must bring benefits in the form of enhanced security and fraud prevention. This makes sense as one of the recurring challenges of treasurers is to increase internal controls and fraud prevention mechanisms. This came in as the number one requirement in previous FIS annual corporate payments reports. Building secure payments workflows is essential but real-time aspects will make them challenging.
Additionally, the Task Force’s vision is to deliver currently unmet benefits like efficient (and cheaper) cross-border payments, which are typically used by corporates as supply chains are increasingly globalized. Cheaper and faster international payments help with eliminating risk and creating increased cash visibility. Finally, the Task Force mentions something that must catch all treasurers’ attention: the delivery of real-time, “data-rich” payments that enable straight-through transaction processing from the point of invoice generation to final reconciliation. Automating these processes and executing them at a fraction of the cost and in real time will create “instantaneous cash visibility” for the treasurer.
What’s important in all of this is that corporate treasurers start to reflect on strategies that take the advent of real-time payments into account. While business processes do not have to change per se, the real-time aspect will create major changes in the cash management environment. Treasurers should think about these changes such as the “always-on” nature of payments (inbound and outbound), the disappearance of notions like cut-off time, the availability of funds, and the options to push customers to real-time collection instruments, as well as the impact on their payment factory, credit and collections and treasury management systems.