Mobile transactions. Multichannel experiences. Heightened data privacy awareness. As consumers’ changing preferences prompt community banks to deliver new technologies, here are some of the top trends to keep your eye on.
By Mary Yerkes
From contactless payments to the digitization of business-to-business (B2B) payments, trends in business payments are shifting to meet customer preferences, making this space one to watch for community banks. What developments will affect business payments in the short to medium term? Let’s look at a few of these trends, how community banks can determine if they’re right for them and how to get on board.
Customers’ expectations are changing, and businesses are adapting
The pandemic caused seismic shifts in how people work, shop and interact with their banks, and businesses are adapting to meet these needs.
As customer expectations and businesses continue to evolve, “businesses will need to invest in refining their digital experiences to meet the customers’ expectations at every point in their journey, beginning with payments,” according to the Global Payments 2022 Commerce and Payments Trends Report. Visa’s sixth Back to Business Global Study supports these findings, with 73% of small businesses surveyed stating that new forms of digital payments are fundamental to their growth.
What this means for your community bank depends largely on your customer base. However, certain trends, such as contactless payments, are gaining more traction than others. In fact, Visa reports that nearly 20% of all in-person credit or debit card transactions in the U.S. are now contactless. The company states that tapping a card at the point of sale is more common than Apple Pay or Google Pay services.
“We’ve seen a significant spike in contactless payments as a result of the pandemic,” says Tina Giorgio, president and CEO of ICBA Bancard. “I think the ability for community banks to offer that as a merchant solution is easy to achieve and will provide value to small business customers.”
Whether you’re looking to add mobile payments, QR payments, contactless payments or other forms of digital payments, it’s important to understand that there’s no one-size-fits-all solution. Still, a good place to start is by assessing your customers’ needs and aligning your digital payments strategy with your organization’s overarching business and payments plan.
Digitization of B2B payments
Although digitization of B2B payments has lagged behind business-to-consumer (B2C) payments, evidence continues to mount that companies are moving away from paper checks to digital payments. According to the Association of Financial Professionals 2022 Payments Cost Benchmarking Survey, 73% of organizations are transitioning their B2B payments from paper to electronic. And instant and faster payments options are top-of-mind choices for many community banks.
“Instant payments represent opportunities well beyond speed, because they offer an aspect to small businesses’ cash flow that helps them stay resilient,” says Deborah Matthews Phillips, senior vice president of payment and technology policy for ICBA and senior vice president of industry relations for ICBA Bancard. “Today, 26% of B2B payments are made by check. Transitioning some of these payments to instant payments and not having to deal with returns and other types of exception processing could help businesses gain efficiencies, streamline processes and potentially smooth out cash flow.”
Whether it’s receiving or sending money, instant and faster payments are becoming more of a priority to manage cash flow for small businesses, Giorgio points out. Community banks can take advantage of The Clearing House’s Real-Time Payments (RTP) Network, the Federal Reserve’s FedNow service when it launches next year or even Same Day ACH to help their small businesses move money faster. With the Fed’s move into the instant payments space with FedNow, instant and faster payments are quickly becoming table stakes.
Community banks interested in learning more about FedNow should check out the FedNow Explorer website, which the Fed created to educate financial institutions about the service and its implementation. The Clearing House offers similar resources for its RTP Network in its extensive document library, which you can find on its website.
End-to-end data privacy
Another important trend is a heightened focus on protecting customer data and privacy, according to Global Payments. But consumers beware: Not all players in the space provide the same level of protection.
“By their very nature, community banks and other financial institutions must collect sensitive, nonpublic, personally identifiable information [PII] about their customers to meet a customer’s needs for financial services,” says Joel Williquette, senior vice president of operational risk policy for ICBA. “However, information gathered by nonbanks is not held to the same standard as banks.”
To secure data, Williquette recommends that community banks turn to tried-and-true technologies like multifactor authentication (MFA) for their vendor, employee and customer access to financial and PII data. Strong MFA includes the use of authenticator apps, tokens, physical devices or another much more robust mechanism than simply validating access through email or a text message.
Keep in mind that consumers are often in the dark when it comes to the data protections their payments providers offer, so it’s up to you to educate your business customers.
Business payments strategy: Next steps
Understanding today’s business payment trends and knowing which ones to tackle can feel overwhelming. To jumpstart the process, start by analyzing your customer base and payments strategy using ICBA’s Bancard Digital Payments Strategy Guide. The resource, designed in partnership with Aite Group, helps community banks create a customized digital payments strategy.
You should also talk with your core processor and merchant services provider about their payments capabilities and offerings for your business customers. ICBA’s Preferred Service Provider directory is another helpful tool for finding solution providers dedicated to the community banking industry.
Mary Yerkes is a writer in North Carolina.