CASH MANAGEMENT: PAYMENTS A


mong the favourite stories of editors and marketing teams is ‘The Future of Payments’, with graphs showing


the steady but unstoppable growth in payment volumes, breathless reporting of the meteoric rise of marketing-savvy fintechs, and sci-fi forecasts about how consumers and businesses will behave in the future. Then came 2020. During the first half of the year, global payment revenues plummeted by around 22%, and despite a partial recovery during H2, a US$140bn decline in payments revenue wiped out gains achieved in each of the previous few years.1


But the payments story of 2020 – and equally 2021 – is not that of falling payment volumes. Rather, due to Covid-19, the future of payments as we envisaged it 18 months ago is already here. McKinsey’s Global Payments Report 2020, published in October last year, notes that “the crisis is compressing a half-decade’s worth of change into less than one year”. In May 2020 alone, US online consumer spending grew by 93% year-on-year.2


Consumer and


business payment preferences, customer engagement models and payment operating models have shifted to a degree barely imagined by even the most visionary future of payments reports.


The question for corporations, banks, fintechs and other payment stakeholders is what this means for them. The answers, however, need to come quickly, in order that each can position for a new, and likely different, future of payments from the one previously imagined. One answer may be the bank-led merchant solutions that are emerging, such as that from Deutsche Bank, which is scheduled for a Q2 2021 launch.


The pressure on payments For many corporations, the pandemic affected outgoing payments far less than incoming flows. Those that still used cheques in some markets could generally access an online banking system to switch to electronic payments, with both internal and payee objections quickly swept away by the shift to homeworking. While travel and entertainment expenses spend was decimated as business travel was cancelled, many companies shifted the unused credit limits on their card programmes towards purchasing cards for B2B spend.


The shift in incoming payments, however, has been far more significant given an acceleration in the digitalisation of business models (both B2B and business to consumer). Efficient merchant solutions – whether for cards, digital wallets, QR code-triggered transfers, or buy now pay later – have become a priority. For example, in 2020, 60% of point of sale transactions and 64% of e-commerce transactions in the Europe region were made by credit card, debit card or digital wallets (that are typically linked to cards).3


Today, with the


increase in contactless card limits, the rapid shifts in consumer preference towards digital payments is compelling corporations to find ways to manage the payment methods favoured by customers (see Figure 1). At the same time, they need to connect their online and offline businesses in a coherent way, and maintain both cash and working capital efficiency.


Year-on-year growth in online US consumer spending (May 2020)


93% (Mastercard SpendingPulse™)


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Resolving fragmentation and enhancing solutions A challenge for many companies today, particularly those that operate internationally, is the fragmentation in merchant solutions. Different payment services providers, card acquirers and platforms make it difficult to manage incoming flows in a consistent way, with a high cost of change as new payment methods emerge. Consequently, many companies are turning to their cash management banks for a more integrated, or omnichannel, approach.


Technology is key to banks’ success in driving a compelling merchant services proposition, notes Alexander Knothe, Director, Head of Client Solutions and FX Product, Deutsche Bank Corporate Bank. The bank is responding by creating a platform for e-commerce that connects digital business models with payment processors, banking services and other


Figure 1. Experiences of a European retailer: comments from Group Treasury


PRE-COVID-19: “The ability to accept the payment methods that our customers want to use in each market is a competitive issue, but we need to balance this with cost, speed of credit to our account and the working capital issue. Working with new payment services providers and integrating flows into our payments infrastructure could be slow and laborious, so the benefits of accepting a new payment method had to be significant.”


POST-COVID-19: “With a huge shift towards e-commerce, a trend that we expect to remain, our own attitudes towards payments acceptance and integration have changed as well. No longer are long, resource-intensive projects to incorporate new payment methods acceptable; rather, the ability to process, integrate and credit digital payments quickly and easily has become a priority. This is essential both to create the excellent consumer experience from which we derive competitive advantage, and to ensure efficient and cost-effective payments processing. Increasingly, therefore, we are looking to omnichannel payments processing to avoid fragmentation, support our real-time treasury ambitions and facilitate future developments in the payments environment.”


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