How API-Driven Payments and Receivables Can Change Your Business

By Susan French, SVP and head of product, BBVA Open Platform

One thing every business has in common is the need to manage incoming and outgoing funds. Whether it’s paying employees or suppliers or accepting customer payments and other receivables, for many enterprises the processing of accounts payable and receivable remains inefficient, time-consuming and ultimately costly – even in our digital-first, modern world.

The outdated and outmoded process of issuing and sending paper checks is particularly problematic. It takes far too much time, is vulnerable to fraud and unnecessarily expensive. It is estimated that in North America alone, the economy could save anywhere from $1.2 billion to $2.4 billion simply by moving away from paper checks in favor of electronic payments for funds disbursements. Even more impressive, 90% of those savings would be realized by the payers themselves (Visa and Aite Group).

The global pandemic has made the time and money spent on processing payments and receivables even more burdensome. Now, more than ever, it is mission-critical for companies to have precise control of their daily cash flow, better working capital management and the ability to maintain the health of their supply chain. A reliance on cash and checks is no longer sustainable, not when so many businesses have all or most staff working remotely, and the demand for safe, contactless transactions are a top priority.

A straightforward solution for companies to mitigate these problems, reduce costs and significantly improve business operations is to digitize the payments and receivables process. Making the switch to automated, API-driven payments allows companies to manage both their outbound payments – whether as a one-time payment or on a recurring basis – and their inbound receivables more quickly, cheaply and efficiently.

Increasingly, consumers expect this. According to the January 2020 PYMNTS Disbursements Tracker®, 90% of US consumers prefer digital payments over checks and 65% say it’s important to be able to receive instant payments from businesses that owe them money. Meanwhile, 86% of small businesses say that instant payments are important to better manage their cash flow struggles and 81% said they are willing to pay a fee to receive them.

Despite enthusiasm from both consumers and businesses, the number of companies making digital disbursements in the US, while growing fast, still represents a small fraction of the total market. Legacy payment methods remain dominant, with 70% of the total dollar value of funds disbursements issued using first-generation electronic payment methods or paper checks.

So what will it take to get more companies onboard? Organizations first need to understand the key benefits of API-driven enterprise disbursements and then consider how best to incorporate it.

Benefits to API-driven enterprise disbursements

Banking as a Service is a powerful vehicle for innovation. It enables companies across a wide range of different industries to seamlessly integrate banking and payment services into their own applications, all under their own brand. Embedded banking and payments functionality is crucial to helping companies and consumers thrive as customer expectations continue to evolve.

Companies that make any kind of disbursement could be huge beneficiaries, whether they are settling customer insurance or legal claims; providing customer returns, rebates, credits or loyalty rewards; paying gig workers; reimbursing employees for benefits and expenses; or paying suppliers. They can use payments APIs integrated into their own applications to disburse these bulk payments, either via ACH to bank accounts or by instantly pushing the payment to the payee’s debit or prepaid card. This optimizes internal operations in a myriad of ways:

• Making disbursements faster and cheaper;
  

  Susan French

• Allowing companies to create far superior customer experiences;
• Attracting new customers and increasing the engagement of existing ones;
• And adding new business lines to further boost the bottom line.

Ultimately, API-driven payments and receivables allow companies to control their daily cash flow, resulting in enhanced working capital management and happy payees.

Making API-Driven Accounting a Reality

To make this a reality for many enterprises, there needs to be an easy way to integrate API-driven payments and receivables into the existing ERP systems that control business operations. By integrating API-driven transactions directly into accounts payable and receivable software, as well as invoicing, payroll, claims and rebate systems, companies can save valuable time, money and enhance their bottom line, even before any payment is sent.

Instant payments allow companies to have a much closer digital interaction with their customers. For example, a car owner can submit an insurance claim online, the adjuster pushes a button to approve it and the payment goes out immediately. Companies would no longer have to create a file full of checks and ACH transactions to be sent and wait for their ERP system to run a batch process to generate those disbursements.

This presents a real opportunity for third-party ERP software providers. Incorporating API-driven payments and receivables into third-party ERP software would enable businesses who use it to adapt their businesses to their new pandemic reality and it would attract new enterprise customers looking for a more flexible approach.

Ultimately, API-driven payments and receivables are a win-win for enterprises and their software providers to reduce costs, save time, enhance working capital, secure supply chains and to attract and retain customers during a challenging time. Enterprises that migrate to API-driven payments solutions now to meet their customers’ demands today will be even better placed to serve their customers of tomorrow.