We spoke with Pat Bermingham, CEO at Digital-Payments-as-a-Service specialist, Adflex, to discuss a technology that is levelling the playing field in B2B payments by delivering tangible benefits to both buyers and suppliers: Straight Through Processing (STP).

For any of our readers unfamiliar with Adflex, can you provide a short introduction?

Digital payments are overtaking cash and paper invoicing. They also provide significant opportunities for innovation and growth. Companies today need smoother digital payments to establish and maintain trusted supplier relationships, and at Adflex we spotted an opportunity to truly simplify B2B payments, making them straightforward and fast.

Adflex provides Digital-Payments-as-a-Service (DPaaS) to make it easier for companies to pay and be paid quickly. We recognised that technology integrations can be costly and time-consuming, which is why we’ve focused on enabling low-code development, making it easy to build, adapt and launch lean financial stacks with simple API kits. We believe better B2B payment processes should be available and scalable for all.

Can you explain what STP is and how it works?

Straight-through processing – or STP – is a way of speeding up transactions by automating manual processes, providing a more efficient and secure way to handle accounts payable (AP) processes.

The main difference between STP and traditional card payment methods is that STP is buyer-initiated rather than supplier-initiated. It flips the entire established B2B payment process on its head.

Traditional payment methods require the buyer to call their supplier, lodge a card or issue a virtual card by email, and the supplier would then process the transaction via their payment gateway. STP simplifies the B2B payment process significantly by allowing the buyer to send a payment directly to the supplier via a processor like Adflex. The instruction from the buyer can be file driven, or automated via API integration, and work in line with an existing card programme and various enterprise ERP systems such as SAP or NetSuite.

How is STP changing the way businesses pay for goods?

Since the pandemic, payments have undergone rapid and radical transformation. It’s accelerated the move towards automation, using cloud-based payment APIs and commercial virtual cards.

STP helps enable a more equitable balance between buyer and supplier, removing the need for additional processes on the supplier’s side, which have long been a barrier to them accepting card payments.

It provides merchants with the smoothest integration yet of automated payment processes by removing steps from the buying process that could otherwise delay the reconciliation of goods.

Why does this matter to a buyer?

Using STP, buyers can fully automate payments and reporting, gain greater control over cash flow, and improve supplier relationships through prompt payments (supporting compliance with the Prompt Payment Code).

Arguably the greatest benefit for buyers is the ability to realise process efficiencies and extend days payable outstanding (DPO) to maximise working capital.

Some buyers still have accounts payable teams calling suppliers regularly to provide card numbers. Not only does this take longer, but it also takes up valuable resource. By eliminating manual accounts payable processes, buyers can reallocate internal resources. To give you an example, Adflex has had some customers reduce operating costs by up to 60%.

How does it change things for suppliers?

Commercial cards have been around for years but have been hampered by security concerns, incompatibility with existing financial systems and supplier acceptance. Virtual cards – which can be rapidly created to secure new transactions – have helped allay these concerns and improve security. But until now commercial cards have existed only in a way that favoured the buyer. STP changes all that.

STP brings balance between buyers and suppliers by removing the need for additional processes on the supplier’s side to reduce the costs of acceptance and get paid faster.

Suppliers can get payments faster (reducing days sales outstanding, or DSO) and a reduction in bad debt and collection costs. Also, because STP ensures the supplier does not handle or process the card transaction, there is a reduction in PCI scope and processing fees. These benefits combined ensure a consistent and more pleasant payment experience while increasing efficiency and reducing costs.

Is there any reluctance from businesses to use STP?

One barrier digital payments have faced in the past is lengthy development time, which can lead to downtimes in acceptance, leading to lost sales, customer frustration at not being able to purchase something, and subsequent brand damage. So perhaps a more appropriate question might be, is STP easy to integrate into a payment setup?

Through APIs it is possible for STP to be integrated with enterprise ERP systems in just days. Similarly, it is possible to read files from other services used for BACS, EDI and cheque payments. This helps to overcome the caution that is often associated with overhauling payments systems and implementing new ones.

How would you advise a business to implement STP?

STP should be part of a business’ overall implementation strategy. My biggest piece of advice would be to ensure all parties (buyers and suppliers) work together, otherwise the implementation process can become complicated. It’s critical to be clear to all parties when communicating a new implementation strategy.

STP can be implemented for businesses new to using commercial cards, or for businesses looking to optimise an existing card programme regardless.  One-time virtual cards and tokenization technologies help ensure a high level of security, delivering trust for buyers and suppliers.

STP does not have limitations on the value or volume of transactions it can conduct, so it’s fair to say that it’s here to stay. We should expect it to be at the forefront of B2B payments for some time, as the business world continues to innovate and automate.