corporate payments and collections the paradigm shift

For banks worldwide, payment and collection solution services are an increasingly important source of revenue and driver of loyalty among corporate customers. For corporate offices and SMEs, expectations around the efficiency and convenience of payments are growing really fast, especially after the advancement in the retail segment. For example, an online app makes it possible to complete the purchase of grocery items in a matter of a few minutes whereas it could take days, or even weeks, to complete the paperwork behind procuring menial stationery items for a corporate office. This gap has invited the need to restructure the corporate payment operations. The banks are now investing in newer payment technologies owing to the demand of evolution in the corporate payments landscape.

Present Challenges In The Corporate Payments System

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The corporate payment and collection sector has to overcome several challenges namely fragmented banking products, paper-based and rigid processes, lack of transparency in payments, and overseas transaction, in order to achieve objectives.  Most banks still communicate with corporate clients via separate business lines which results in a relationship based on silos. Silo-based and fragmented processing involves capturing payments data in different forms and databases, leading to errors & discrepancies.

Outdated paper-based payment processes are still widespread in the reconciliation of purchase orders, goods received notes, bank accounts, accounts receivable, accounts payable, and customer contracts. Many of the organizations require manual checks to verify the authenticity of clients. All these physical processes are time-consuming and cost ineffective. Cross-border payments pose a challenge of tracking the transaction and acknowledging the receipt of payment. There is also the risk of entering an incorrect account number and currency evaluation, let alone the cost incurred in this whole process.

Current Trends In Corporate banking

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Matching customer expectations – A rapid shift in retail and consumer market owing to real-time payments, because of the services like UPI and e-wallets, has left the corporate payments far behind. Banks now need to close the gap between corporate expectations and the reality they are currently living. Corporate offices today seek greater speed and efficiency through automation and digitalization. To satisfy this demand, banks are responding with sophisticated banking applications for mobiles and tablets.

24×7 real-time services – Banks’ corporate payment services are developing the ability to empower customers for real-time payment information round the clock. Meaning, services offering up to date payment status, corporate internet banking, tracking and context, all available 24×7.

Ease of International trading – These days, more and more organizations are dealing internationally than ever before. Hence, corporate customers are seeking multi-currency real-time services and other services such as account balances and real-time status updates. In response to this demand, banks are coming up with services such as instant SMS & email alerts with notification on corporate portals.

Mobile banking solutions – One of the areas where the retail segment outmaneuvers corporates has to be mobile payment. Banks are now making corporate mobile solutions available in areas such as reconciliation, cash management, customer administration, trade services, and operational support.

Digitizing financial instruments – Payments via check are the most regular in a business transaction and also one of the last to go digital, until now. The recent regulatory changes have allowed banks to use digitized scans of checks in place of the actual physical instrument.

How Virtual Accounting helps

Virtual accounting is a tool to automate collection and reconciliation. When it comes to account reconciliation, most corporates struggle due to lack of sufficient information resulting in inaccurate cash position and increased day sales outstanding. To deal with this, banks are providing their customers with ‘virtual accounts’. virtual accounts are essentially the “subaccounts” of a main physical bank account held in a Virtual Account Management (VAM) system.  The main account can hold as many virtual accounts as the customer requires, enabling funds to be allocated without the need to segregate them physically. For a current account maintained in a bank’s ledger, a VAM solution mirrors the account into ‘shadow accounts’. Corporates can then open a series of multi-level account hierarchies under this shadow account enabling POBO COBO functions through them.

Mindgate is a corporate payment and collections solution provider for banks and corporates. – Collect by Mindgate is a PCI-DSS (Payment Card Industry Data Security Standard ) certified corporate payment & collections platform, which aggregates the channels, core system, and other payment methods to offer multi-platform & simultaneous presence to the corporates and its customers. e-Collect allows you to accept payments made via a variety of online and offline methods. Using e-Collect, you can create any number of virtual accounts for your customers for transferring funds (via NEFT, RTGS, IMPS, etc.) to an account linked directly to your bank account. A new account can be created for each customer, allowing you to easily track payments made by them, as e-Collect will notify you of each payment made to any of your accounts, thus, handling the complexity of reconciling these payments on your behalf.