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Blockchain Technology: What Is it and How Does It Work?

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Blockchain Technology: What Is it and How Does It Work?

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What is Blockchain Technology?

Transactional records are stored in Blockchain technology which is known as the term “blocks”, of the public in multiple databases, which are known as “chains”. They are connected in a network through peer-to-peer nodes. “Digital ledger” is what this storage is typically referred to.

Each transaction is authorized by a digital signature from the owner, which safeguards and authenticates the transaction from tampering. So the information that the “digital ledger” contains is very secure.

Simply put, the digital ledger is just like a Google Spreadsheet that is shared with several computers in a network, where the transactional records are based on purchases that happened. The interesting fact is that everyone can see this data, but no one can’t corrupt it.

Blockchain Technology: Explained

Let’s suppose that you are transferring money to your friends and family from your bank account to theirs. You would have to log in to online banking and then transfer the amount you wish to the other person, all this by using their account number. When the transaction is finished, your bank updates the transaction records. It seems fairly simple, right? But there are potential issues that most people neglect.

These transactions could be tampered with. A lot of people who know the truth are wary of using these transactions. That’s why there have been more and more third-party payment apps. But this is the main reason why blockchain was created.

It’s true that Blockchain, technologically, is a digital ledger that is receiving a lot of attention recently. But what are the other reasons why it has become so popular?  Let’s try to understand the whole concept.

Keeping a record of data transactions is very important for the business. Most of the time, this information is passed through third-party brokers like lawyers increasing time, the cost for the businesses. or brokers, or it is handled in-house. But fortunately for everyone, Blockchain avoids this long process and helps to make the transactions very quickly, saving money and time.

Most people assume Bitcoin and Blockchain can be used interchangeably, but that is not the case in reality. Blockchain is a technology that supports different applications that are related to industries like supply chain, manufacturing, finance, and more. Bitcoin uses Blockchain technology in order to be more secure.

With many advantages, Blockchain is an emerging technology, in an increasingly digital world:

Highly Secure: To conduct fraud-free transactions, it uses digital signatures, making it impossible to change the data and corrupt it.

Decentralized System: You would need the approval of regulatory authorities like banks or the government for transactions, but with Blockchain, transactions are done with the consensus that is mutual between users. This results in safer, smoother, and faster transactions.:

How does Blockchain Technology Work?

Recently, it is possible that you might have noticed that Blockchain technology is being integrated by a lot of businesses. But we need to understand, how does this technology work? Is this a simple addition or a significant change? The advancements of Blockchain have the potential to be revolutionary in the future, but as for now, they are very young. Let’s begging to explain this technology:

Three leading technologies are combined for forming Blockchain

1. Cryptographic Key

2. Peer-to-peer Network with leading technologies.

Cryptography keys – consists of two keys. One of them being the Public Key and the other Private Key. These keys make sure that the transactions are successful between all the parties included. Every individual possesses these two keys. They help to secure digital identity references which is the most important aspect of Blockchain technology. Digital Signature is what is what this identity is referred to.

A peer-to-peer network is merged with the digital signature, a huge number of people who act as authorities, use digital signatures to reach an agreement among other issues on transactions. When the deal is finalized, by a mathematical verification it gets verified, which does result in a successful and safer transaction between two network-connected parties.

The Process of Transaction

The way it confirms and authorizes the transactions is one of blockchain technology’s best features. For instance, if two people wish to perform a transaction with a public key and private key, respectively, the first individual party should attach the transaction information to the public key of the second individual. This information is gathered into a block.

This block does contain a timestamp, a digital signature, and other relevant and important information. It should be noted that the block does not include any of the identities of the parts included. Block is later transmitted across all of the network nodes, and when the right person uses his private key, the transaction gets completed. For the transaction, a digital wallet is needed.

A Bitcoin wallet is a software program in which Bitcoins are stored. Bitcoin wallets facilitate the sending and receiving of Bitcoins and give ownership of the Bitcoin balance to the user. Besides that, wallet, Ethereum Wallet is also very popular.

How Blockchain works:

Hash Encryptions: This technology uses hash encryptions in order to secure the data, using mainly the SHA256 algorithm to secure the information. The receiver’s address, the transaction, the address of the sender, and his/her private key details are all transmitted via the SHA256 algorithm. This encrypted information is called hash inception and is transmitted all over the world, and after the verification, it is added to Blockchain. This algorithm makes it impossible to hack the information.

Mining: The process of adding transactional detail to present digital/public ledger, in Blockchain Technology is called “mining”. Even though it is associated most with Bitcoin, it is used to refer to other Blockchain technologies as well. What mining does is generates the hash of a block transaction, which is very tough to forge, ensuring the safety of the whole Blockchain, and it does all that without needing a central system.

Conclusion

Blockchain Technologies can be set up to operate in different ways, by using different mechanisms for the transactions, which is seen only by individuals who are authorized to, and everyone else is denied. The most well-known example of this technology is Bitcoin. It just shows how huge this technology has become. Blockchain founders are always researching other applications in order to expand the level of technology and influence of Blockchain. It seems that blockchain will rule the future world of the digital world.

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Archives, Banking, Global Trade Daily

Virtually Fraud-Proof: Why Now is the Time to Grow Your Virtual Card Program

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One of the business stories coming out of the last year is the dramatic growth of electronic supplier payments. In Q4, Nacha, National Automated Clearinghouse, reported a 15 percent year-over-year increase in B2B ACH payments. The unfortunate sidebar to that story is the rise in ACH payment fraud. In all likelihood, we’ll see a corresponding 15 percent increase in B2B ACH fraud— possibly more, since remote working restrictions left many organizations vulnerable to attack.

As organizations work to improve their defenses against ACH fraud, they should also ramp up their use of virtual cards as much as possible since that is the most secure way to pay suppliers. Supplier objections to fees have always acted as the barrier between the status quo and advanced payment options. With the way the B2B payments landscape is changing, and in light of rising fraud, it may be worth revisiting those conversations with suppliers. Or, for some companies, possibly initiating that conversation for the very first time.

Not the Same as Plastic

Despite its decade-long presence, I still meet a good percentage of people who have never heard of virtual cards—or if they have, they don’t know how they work. Many companies today use a plastic card to pay their suppliers. Alternatively, they use purchasing cards when they purchase supplies. Those physical cards often get lost or stolen. The number can also be stolen even without possessing the actual card.

Virtual cards use the same networks as plastic cards, but they offer several layers of protection that make them fraud-resistant. They are sometimes called single-use cards because the 16-digit number provided can only be used once. That alone is significant. It’s simply not as attractive to fraudsters to steal single-use information. It’s far more appealing to get a regular card number or hack into a supplier system to divert ACH payments. Those are scalable, repeatable types of fraud, if you will.

When it comes to single-use cards, the card number is associated with an amount and a merchant ID number. Each piece of information must match the details provided for transactions to go through. This strict requirement makes single-use virtual cards very difficult to take advantage of.

Really, the most susceptible virtual card risk is employee misuse. You can even eliminate that risk by using virtual cards through a payment services provider—they usually have an indemnification process in place.

Fast, Guaranteed Funds

The big fraud protection benefit is obviously on the buying side, with the buyer receiving a rebate, which helps to defray AP costs. But what about benefits on the supplier side?

Prior to joining Nvoicepay, I sold into accounts receivable. The big concern there is to collect and reconcile payments as quickly as possible. Virtual cards can help on both counts. Virtual card funds reach their designated accounts in 24 hours from the time the payment is approved while checks and ACHs can take up to 10 and two days, respectfully. There’s value in being able to offer AR teams quick payments.

What’s more, these are guaranteed funds. Once they run the card, the funds are theirs. This isn’t always the case for ACH and check payments, which can fail or bounce. Wire payments are the only other payment type that is guaranteed, but they’re expensive to issue and time-consuming to set up, which is why they’re not usually used domestically.

When it comes to reconciliation, plastic cards are hard to reconcile at scale, but virtual cards can be wrapped into a technology solution like the one I used to sell, which automates those processes.

A More Nuanced View

When it comes to fees, there’s still a misconception that accepting virtual card is expensive for suppliers. I do think 2020 acted as a tipping point where suppliers are looking at fees in a more nuanced way. Fast, guaranteed funds are nothing to sneeze at in an environment where many of their customers might be struggling.

Suppose you scale your program and set up a portal for suppliers to receive virtual card payments. In that case, you can receive level two and level three discounted processing. That can often significantly minimize your fees. I’ve seen instances where fees went from 2.5 percent to 1 percent.

Volume and payment size are components of those discounts—if you make large volume payments, you might get a better overall rate and better rates on smaller payments. But access to data is another component. The additional data associated with virtual cards helps issuers mitigate fraud risk. Other data is transmitted with the payment—data that can be used for economic analysis and even for marketing.

It appears that in 2020, COVID-19 did more to move companies off checks and onto electronic supplier payments than all the sales and change management efforts of the preceding decade combined. While the initial response was to adopt ACH payments, companies maturing their electronic payment programs will find virtual card a strategic component that promotes fraud protection and supplier support.

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Kristin Cardinali is Vice President of Regional Sales at Nvoicepay, a FLEETCOR company. Her experience in sales and sales leadership spans 16 years, and includes positions held with companies like Capital One and Billtrust. With Nvoicepay, she delivers scalable payment solutions to mid-market and enterprise companies. Kristin has received several accolades, including Sales Rep of the Year & Quarter, and multiple President’s Awards.

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Blockchain: Everything You Need to Know

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Blockchain has transformed the way information can be shared on the internet because the data can’t be modified or deleted. Blockchain is also the foundation technology that manages the transaction entries for bitcoin.

Blockchain technology hasn’t yet been universally adopted, but it can be used to reduce expenses, speed up transactions, and improve safety for financial institutions, health care providers, companies, and more. It has the potential to dramatically change the way we do business by offering a trusted system for exchanging information.

Bitcoin is probably the most widely known application of blockchain, however, we can call that just the beginning.

But What Is Blockchain?

From the way the Blockchain stores transaction data – the name came in. Blockchain and bitcoin were first introduced in 2008.

Blockchain technology might as well be called a “book” that contains a list of transactions that should be viewed by a group of people of a network. This way, every member of the network or group has a copy of the book. Each page of this book could be called a “block” of data, and “hash” is what you could call a whole page of that book. “Hash” is a unique number. So, the “chain” links all the pages of transactions together.

But Bitcoin currency and Blockchain technology are two different things. The first one is a type of digital currency that is still uncontrolled – and those transactions are maintained by blockchain technology.

But How Does Blockchain Work?

-Every copy of the blockchain is the same or must be the same – that means members have the same information.

-New information can be added if all the network members agree that the block that is shared is valid. ‘Consensus mechanism’ is what this is often called.

-Once a new copy of the blockchain is added, all the members can see whether it matches with the old copy. If it happens that the old blocks don’t match, the current members won’t accept the new copy.

The members constantly process transactions into new sections of data. When a new section is filled, each member in the network has to verify if the block is valid by using a mathematical formula. Only when all the members agree that a certain block is valid via a consensus mechanism, then the new block is added to the chain. This process, which by the way is very complex, is the reason why blockchain transactions cannot be changed.

This complex process is the reason why blockchain transactions can’t be changed.

Blockchain technology prevents what is called “double-spending”. This is one of the reasons why it is used by most cryptocurrencies, and especially Bitcoin. No one can keep a bitcoin once they have spent it; The hackers can’t change the data blocks – as the transaction can’t be changed too.

To make data more useful, Blockchain works with protocols. The protocols are used to automate the transactions, like payments and invoices.

To reduce transactions possible errors and processing time is used a tool called ‘Smart Contracts’. That means lower costs and higher profits.

Types of Blockchain 

There is one important thing for public blockchains: anyone can join the network and can process their transactions anonymously. So, the data will be visible to all members of a public blockchain.

Using the ‘miners’ mechanism is the thing that characterizes members of a public blockchain network. The so-called miners are members who constantly validate data blocks on the public networks. They are always competing with each other to validate data blocks.

Public networks are used for cryptocurrency because transactions are direct between individuals without needing a financial bank. But since the transactions are anonymous, they are a subject of attracting criminal activity.

Once they have validated the transactions, Blockchain miners are awarded in bitcoin of another relevant cryptocurrency.

On the other hand, a private blockchain requires members to be identified. Credentials are what they need in order to validate data blocks and submit transactions. Data might be limited by a private blockchain. But this only will occur to some users and at times it could give access to other members. Private blockchains are proven to be more suitable for an individual business.

Can Blockchains Be Hacked?

Since every member has a copy of transactions, it’s proven that Blockchains are very difficult to hack, but they are still not completely secure.

To create false transactions and having them accepted – hackers should have access to multiple members – that is why is so difficult to hack.

One thing that is considered a flaw: protocols. Hackers can potentially use a weakness in the way protocols are operating, and ‘hack’ the system, but still, it is very difficult.

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Archives, Banking, Global Trade Daily

The Impact of Blockchain Technology and COVID-19 on the Global Banking Industry

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Over the past few years, the transformation and digitalization of the banking and financial sector have been among the most-discussed topics. Most industries have adopted blockchain technology and it’s slowly making its way towards the global banking industry. It can be said that the future of the global banking world could be shaped by the emergence of blockchain technology.

Blockchain technology, also known as the Distributed Ledger Technology (DLT), is being peddled as the next-big-thing after the creation of the internet. The major benefit of this technology is that it provides a way for untrusted parties to come to an agreement on the state of a database, without any need of a middleman. One area where blockchain technology is likely to have a major impact is the banking & financial sector. Though the technology has disrupted the banking industry, it has also benefitted it. According to a report published by Research Dive, the global blockchain market is expected to greatly benefit the banking and financial sector in upcoming years, mainly because banking & financial service providers are increasingly utilizing blockchain applications in payment procedures to secure transfers and offer international exchanges at lower costs.

Impact of Blockchain Technology on Banking Industry

Blockchain technology in the banking industry has the potential to outshine the need for manual processes involved in the banking fund transfer system and assure clients a safer way of fund transfer. Although blockchain technology is currently not well accepted in the banking industry, the idea is slowly changing. This is mainly because blockchain technology has shown success in many industries and it has the potential to provide numerous benefits to the banking and financial sector. Listed below are some reasons how blockchain technology is impacting the banking industry.

1. Saving on Transaction Costs

Blockchain technology has the capability to enable banks to save a lot of money in terms of transaction costs. Blockchain is offering the option of fund transfers from one region to another without any paperwork and extra costs that banks apply. This has been the source of the upsurge of blockchain implementation by various banks since the savings on transaction cost can result in profits of millions.

2. Fraud Reduction

The heavy jump-in into blockchain technology in the banking industry can be because of the increasing rate at which normal transactions are being exposed to fraudulent activities. Blockchain technology has the capability of reducing fraudulent activities through the removal of intermediaries. Money laundering is one of the most fraudulent activities that happen within the transaction system where intermediaries, such as the stock exchange, play a major role. Blockchain technology is projected to have a great impact on the banking industry where it will also protect banks against fraud and cyber-attacks on bank databases.

3. The New Millennial Customers

Current and future generations are expected to rely heavily on technology compared to millennials. At present, the young generation of clients is growing in a well-networked environment with enough knowledge of online transactions and crowdsourced funding. This has made the banking industry adjust to Fintech in order to deal with millennials. With blockchain technology in banking and financial sector, millennials will be able to perform their business transactions easily.

4. Trade Finance

Trade finance activities mainly compose of paperwork transactions in the banking industry, such as billing and factoring with some international transfers in imports and exports. This area is witnessed to be most efficient when transactions are done with blockchain technology. The movement of trading and financial transactions all around the world can be quickly accelerated using blockchain technology under the smart contracts that overpowers the role of documentation and digitizes the transactions.

Impact of COVID-19 on Banking Industry

The lockdown imposed by various governments across the globe to prevent the spread of the COVID-19 has halted economic activity across many sectors. The banking sector is majorly affected but in an indirect way. While banking services do not rely on direct consumer contact and can be provided remotely, the connection of the sector with the real economy as provider of payment, credit, savings, and risk management services extends the adverse effect of the COVID-19 pandemic to banks and other financial institutions. Listed below are some negative effects of COVID-19 crisis on the banking sector.

1. Revenue Loss

Firstly, firms that have stopped working miss out on revenues, and thus these firms might not be able to repay loans. Likewise, households with members who are furloughed have less income or lost their jobs during the COVID-19 crisis might not be able to repay their loans. This has ultimately resulted in lost revenue and losses and has negatively affected banking capital and profits. And as rapid recovery becomes less likely, banks can presume further losses that will result in the need for additional provisions and will further destabilize their profitability & capital position.

2. Lost Value of Bonds and Trades

Secondly, banks are negatively affected during the COVID-19 crisis as bonds & other traded financial investments have lost value, which has resulted in further losses for banks. Also, there might be some losses from open derivative positions where the derivative has moved in unpredicted directions due to the crisis.

3. Increasing Demand for Credit

The banking industry has faced increasing demand for credit during the pandemic, as particular firms require an additional cash flow to meet costs in unprecedented times of reduced or no revenues. In some cases, this rising demand has presented itself in the drawdown of credit lines by borrowers.

4. Lower Non-interest Revenues

Lastly, the banking industry has faced lower non-interest revenues mainly due to lower demand for their different services during the crisis. For instance, there are fewer transactions and payments to be done with lower economic activity, and lesser security issues by corporates cuts down the fee income for investment banks.

However, blockchain technology can be adopted by and rescue the banking industry during the COVID-19 crisis. According to the World Economic Forum, although at very least, blockchain could tortuously help to mitigate the COVID-19 pandemic’s impact by refining the visibility of supply chains that have been hugely disrupted. The sharp increase in the number of employees accessing enterprise data and systems remotely will amplify concerns of data security, confidentiality, and privacy, creating a need for vigorous authentication and access control. This can be possible with blockchain, as the technology can protect data from being tampered with or stolen. Banks invested in blockchain technology can now leverage it to secure data & applications on their network.

Moreover, banks that find it difficult to provide financing on their own in the unprecedented times can participate in a blockchain technology-based shared lending network. Banks also have an option to use their blockchain trade finance platform in order to provide remote or distant advisory services to corporate customers that need assistance with meeting their current loan obligations, or other sources of financing.

A Step Forward with Blockchain Technology

Blockchain technology is steadily advancing into the world of payments to change the transaction environment. It has reshaped the financial services by:

-Driving efficiency and removing incorruptibility by establishing new financial processes & services infrastructure.

-Enabling the inflow of liquid cash and allowing participants to convert fiat currencies to support foreign exchange through smart contacts.

-Instigating cross-border payments in real-time

Blockchain technology has made small payments reasonable, taking the required labor out of the process, which makes broker intervention pointless with shrinking processing time. In the trade finance market, blockchain technology can boost the efficiency of import/export by streamlining access to documents related to trade, quicker settlement, and better capital efficiency.

The Bottom Line

The banking industry is one of the major sectors that is going to be impacted by blockchain technology. This technology will continue to impact the banking industry due to the increase in innovation in the IoT, which is revolutionizing many industrial sectors. Blockchain seems to open up new opportunities for cost reduction. It can vividly improve the customer journey and facilitate a more secure form of data transaction & identity. However, solving all the regulatory and technological hurdles required to fully realize the potential of the blockchain technology in banking industry seems only to be a matter of time.

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Abhinav Chandrayan has worked in the Writing industry for 2 years, gaining experience in Media & Advertising and Market Research Industry. As a seasoned writer, he is passionate about advancing his writing skills by reading and working on versatile domains. In addition to writing, he is also involved in filmmaking, where his film has won the Gold Film of the Year Award in the year 2016 at India Film Project. Outside of the office, Abhinav enjoys traveling, sports, and exploring different movie niches.

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Safety First: How to Handle Supplier Banking Data

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2020 was an eventful year for business payments. We saw expansive leaps in digitization, accompanied by new challenges. Remote work forced accounts payable departments to pay more suppliers electronically, primarily by ACH or direct deposit. In many cases, companies began making ACH payments before they could adequately secure remote networks and environments and without new protocols and procedures to ensure the secure handling of supplier bank account information. The rush to pay suppliers electronically in the new remote environment exposed them to various fraud schemes, targeting ACH payments. While ACH fraud was already on the rise, cybercriminals exploited the pandemic and the rapid shift away from paper check with greater voracity than ever.

Knowing the increased risk with ACH payments is critical when you receive requests to change bank account information. According to our internal data, these requests are common, with suppliers changing bank accounts roughly every four years. But change requests are also the most common avenue for fraud, specifically VEC (Vendor Email Compromise). In this type of attack, criminals hack into supplier systems, monitor invoice flow, identify a potential weak spot among the supplier’s customers and then reach out to someone in accounts payable to request a bank account update. Often, they time this sort of change just ahead of a large payment.  If successful, they route the payment to an account they’ve set up only to close it once they receive the funds.

AP teams stay vigilant when they receive requests to change banking information. But really, they always need to handle bank account data securely. If this data is intercepted, it gives fraudsters fuel to make their schemes more credible. IT departments need to secure company networks and environments. AP departments need to have stringent, repeatable processes for collecting, validating, and storing the information.

Collecting the data

Start with identifying the information you need to store. In addition to the routing, account numbers, and other remittance information, you may want to add security questions or other uniquely identifying information.

This information should never be transmitted via email, which is extremely unsafe. It’s shocking how open people are with the information they share using that communication method. There’s a lot of naivete surrounding the notion of business email compromise, or BEC. The FBI documented over $26 billion in reported losses from BECs between June 2016 and July 2019. According to the 2020 AFP Payments and Fraud Control Survey Report, BEC schemes were the most common type of fraud attack last year, with 75 percent of organizations experiencing an attack and 54 percent reporting financial losses.

With such attacks on the rise, banking data really should be sent via a secure portal or encrypted email. It’s tempting—especially at the beginning of a new supplier relationship—to want to extend trust and make enabling them for payment fast and easy. Don’t do it. Safety comes first. Make it clear to your supplier that you’re doing this to protect their company and yours. They should understand and appreciate that—it’s a yellow flag if you encounter pushback on that request. While it’s uncommon for Vendor Email Compromise (a subset of BECs) to occur during initial onboarding, requests to make exceptions to processes (especially if combined with a sense of urgency) are hallmarks of phishing or fraud attempts. Make sure your team is well trained, so alarm bells go off in that scenario.

It’s not just during the supplier enablement process that this information needs to be protected. Suppliers routinely send invoices that include bank routing and account information via email. Again, this is well-intentioned—the aim is to make it easier for the customer to pay them, but it’s also risky. Using a secure portal is the best solution.

When accepting sensitive information over the phone, be sure to have phone validation procedures in place to ensure the person you’re talking to is an authorized representative of the supplier.

Validating and securing

When you’re setting up a relationship with the supplier for the first time, AP should work with procurement to validate all the contract information. They may also want to use a third-party tool or service provider that connects into banking networks to validate and authenticate account identity and ownership. There are many such tools on the market.

If you’re switching an existing supplier from check to ACH, you may already have some visibility into their banking data as another way you can cross-check their information before making changes.

Once validated, information must be securely stored. Where housed on paper, companies should implement a level of physical protection such as locked in a file cabinet, but we know files are often kept in a folder on someone’s desk or—in the age of remote work—someone’s car or home. Many companies keep supplier data in spreadsheets. If someone were to intercept that information, it would be in peril.

When storing supplier banking information in an ERP system, ensure access is tightly controlled through strict permissions workflows and frequent audits of current user activity.

As traditionally check-heavy companies rush to meet the demands of electronic payments, they may miss critical steps necessary to safeguard supplier banking data and should partner with their IT, Security and Compliance teams to build a robust system of access, monitoring, and review. Outsourcing the responsibility to a payment provider is another consideration to make where resources and skillset are limited.

With the pace of change and new security threats upon us, focus on worse-case scenarios may leave you feeling helpless and overwhelmed. Preparation is key to successfully managing change. Identifying these scenarios will help you predict and prepare for the challenges and pitfalls ahead as you safely transform your accounts payable flow.

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Angela Anastasakis is the SVP of Operations and Customer Success for Nvoicepay, a FLEETCOR Company.   She has more than 30 years of leadership experience in operations and product support. At Nvoicepay, Angela has been instrumental in leading Operations through rapid growth, while maintaining their 98% support satisfaction rating through outstanding service.

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Here are the Top ERP Transformations That Support Buyers

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B2B companies are currently up to their necks in “digital transformation.” They’re moving at a rapid clip to enhance the customer experience through technologies that automate processes, focusing on marketing, sales, and e-commerce. While this was percolating before COVID-19, it’s now encompassing and tied into the overall business strategies for 2021 and beyond. On the back end, ERP providers and their VARs are scrambling to keep up. Maybe, just maybe, it’s time to take a step back and look at this through a different lens.

As recently as last week, software providers such as Infor and SAP, along with industry leaders like MDM and NAW, have all published white papers or held forums on the “what” and “when” of digital transformation elements. Strategy, roadmap, commitment, and continual investment are the keys to staying ahead of the curve. What we have not heard is, “How are my customers going to fund these projects” or “which project has the most immediate of financial impacts to my business” and most importantly, which project has the lightest internal lift, easiest to deliver, and doesn’t require change management to drive adoption from internal customers.

As the brain and central nervous system for a business, ERP systems are very complex and can be challenging to maintain, especially older legacy systems. Most ERP solutions and resellers create additional revenue streams by providing customers with value-added technology, integrations, and professional services. That’s especially true right now when new systems are increasingly harder to sell.

From the buyer perspective, implementing a new ERP is like open-heart surgery. Similarly, new technology projects are feared as a drain on internal resources, and who wants to part with cash in uncertain times? The risk appears too great in the current market climate, while the need to upgrade, enhance, and automate is absolutely paramount. In short, they want an attractive, simplified facelift of functionality to the ERP that improves their agility in virtually serving customers.

The focus is primarily on the external customer and often neglects areas within their customers’ business where change is not perceived as immediately necessary.

As the brain and central nervous system for a business, ERP systems are very complex and can be challenging to maintain, especially legacy systems. Most ERP solutions and resellers create additional revenue streams by providing customers with value-added technology, integrations, and professional services. That’s especially true right now, when new systems are increasingly harder to sell.

The focus is primarily on the external customer and often neglects the business area where change is perceived as immediately necessary.

Supporting their customers’ digital transformation efforts has stretched many ERP companies too thin for them to take on major integrations. If their professional services organizations aren’t already tapped out by working on e-commerce, they’re doing projects such as CPQ (configure, price, quote), mobile order entry, or other customer-facing applications.

Partnerships are a proven strategy for obtaining solutions without having to buy them build them internally. By partnering with industry-leading businesses with a back-end operational focus, ERP providers can offer add-ons that complement their newly digitized front-end processes, deliver them more rapidly, and to a democratized customer base. With that in mind, here are three relatively easy back-office automation plays that ERP providers should consider right now:

1. Order management automation.

Automating order management is a no brainer in the “order to cash process.” As businesses build eComm into their revenue organizations, they still need to accommodate all customers and their preferred transacting business methods. While expanding online order acceptance, any manual processes will consume resources and present error risks for businesses that grandfather in older processes like accepting orders via fax. That said, the result is a smooth and versatile system that speeds up back-office processes without causing undue strain on internal teams.

2. Accounts receivable automation.

Accounts receivable automation pairs well with e-commerce upgrades. Customers may already accept payments online. However, for those who still need to invoice, accounts receivable automation can support efficient workflow creation. Such a move could improve cashflow and shorten DSO (days sales outstanding). However, it may require them to rethink how they submit invoices to their customers: via EDI, paper, PDFs, or CD-ROMs, which, believe it or not, are still in use. AR automation requires standardizing and automating invoice transmission. That could require some change management and internal resources on the part of the ERP provider, working in conjunction with the technology provider to get customers set up.

3. Payment automation.

All businesses are already making payments to suppliers, maybe some of them through an ERP module, but there’s still likely significant manual work involved. Best-of-breed payment automation solutions take four payment modes—check, ACH, card, and wire—and put them into one streamlined interface. When using this type of system, the buyer decides which invoices they want to pay—and they don’t even need to keep track of how each supplier wants to be paid. The payment service provider handles all the supplier enablement, and the software intelligently directs funds to approved suppliers in their preferred method. The concept of payment automation adoption is now over a decade old. In that time, payment automation providers have perfected the implementation process only to take a few weeks and minimal internal effort to get started. That means it can happen concurrently with front-end projects. The time and money saved (and potential rebates earned) by utilizing such a system enables businesses to allocate excess funds for other transformation projects.

Overall, digital transformation acceleration is a positive thing for ERP providers and partners. Their customers, who are in an “innovate or die” situation, are open to more outside-the-box solutions than before and are leaning on their ERP providers as a result. Finding high-tech hi-touch solutions. They have the opportunity to make a mark on their customer’s future success and garner recognition for their work.

At the same time, they have to adopt innovation themselves. Every day, one ERP or another is coming out with a new module or integration. The day of the monolithic tech stack is gone. Customers want to pick and choose what works best for their business. To retain their customers, ERP providers have to connect to as many different solutions as possible.

Right now, the back office is the best focus for improvements. Partner up and offer connected solutions, like automated order management, accounts receivable, and payments. If you’re looking for a place to start, I recommend automating payments first. That type of scenario creates a win-win situation because you create another revenue stream right out of the gate, and your customers generate a profit from something that just used to be a drag on their bottom line. The revenue saved or generated from that initiative can pay forward into other automation options, creating a simplified system that pays your efforts forward.

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Matt Mindrum is VP of Strategic Partnerships with Nvoicepay, a FLEETCOR company. For more than 20 years, Matt has delivered impactful solutions to businesses with a consultative approach on operational efficiency, sales enablement, and strategic partnerships. His expertise spans from low- and mid-market to Fortune 500 companies. He has a strong background in technology, manufacturing, and wholesale distribution.

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Archives, Banking, Global Trade Daily

What is Happening in the B2B Payment World in 2021?

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2020 was such an unexpected year. Even if you saw the pandemic coming, I doubt anyone would have guessed in March that we’d still be talking about it in 2021. Or grasped how much it would change pretty much everything. With that mindset, it almost seems ironic to make predictions. Still, some clear trends in B2B payments have emerged from the year’s events and are likely to unfold in the next twelve months. These are some of the trends that I see taking the driver’s seat in payment automation this year:

Checks Payments are Losing their Luster

The payment automation business case has largely focused on cost savings and AP efficiency. COVID-19 and remote work bolstered that business case—for safety purposes, many companies still hesitate to send employees to the office to cut checks. But what we’re hearing even more is that their suppliers don’t want to receive checks, and they’re asking buyers to start making payments by ACH. With suppliers adopting digital payments at a more significant rate, it feels like we’ve reached the tipping point where checks are becoming obsolete on a broader scale.

ACH Pain Hits Home

As organizations pay more suppliers by ACH credit, they realize the true cost of ACH payments and the risks around them. At $.25-.50 per transaction, ACH looks cheap, but when you consider the time, expense, and liability of supplier enablement, the real cost ends somewhere between $1.40 and $3.79—similar to what it costs to process a check. And that doesn’t include the cost of fraud prevention. ACH payment fraud is on the rise—particularly Vendor Email Compromise (VEC) schemes, where scammers pose as vendors and convince AP teams to send ACHs to fraudulent bank accounts.

Most enterprises have mature controls around check processes, and banks offer controls via Positive Pay and Positive Payee. However, those controls don’t always exist for ACH, and banks often struggle to offer fraud protection for this payment type simply because check fraud was the main focus for so long. But now ACH fraud is rising, and the risk is greater than with checks because the ACH payment process is worlds faster. It’s almost impossible to recover stolen funds if you don’t recognize the problem before the funds reach the bad actors. All these challenges are likely to push more organizations toward outsourcing their payment process to alleviate their overworked teams.

Digital Transformation Ripple Effects

We’re likely to see businesses sorting through some ripple effects in 2021. Organizations had to move forward urgently, and there wasn’t time to plan for some of the changes that would normally take time to implement.

There may also be impacts on external stakeholders. I think we’ll see similar ripple effects from rapid, tactical digitization across departments and industries. That will lead to a second, more strategic wave of transformation and automation with solution providers addressing emerging needs.

Electronic Data Speeds AR Processes

One of the hidden reasons checks held onto their popularity for so long is that they’re easy for AR to reconcile. The funds and data appear simultaneously, with the remittance data right on the check stub. From there, AR knows exactly how to apply the funds against their invoices. If they have a lockbox service with their bank, they don’t even have to key in the check details.

Until recently, that simplicity didn’t translate to ACH payments. AP staff would see ACH deposits in their account, but they wouldn’t necessarily be told how to apply them, because the data didn’t travel with the payment. NACHA (National Automated Clearing House Association) and the RTP (Real-Time Payments) network have improved ACH remittance data transfer. Although the number of fields and characters are limited, it’s a big step in the right direction.

Digitization Unlocks Supply Chain Financing

When it comes to supply chain financing, the U.S. is behind the times when compared to Europe, which has had electronic invoicing in place for a while. There’s a massive opportunity in the U.S. to create more fluidity and working capital for suppliers and buyers alike by using data to accomplish a faster and more dynamic kind of underwriting.

Smarter systems with access to the whole data stream—from PO issuing to payment transacting—can support pre-approved discount and financing options. This wasn’t possible in a paper-based environment, but we’ll see more of these offerings as businesses digitize their data.

A Transactional Social Network for Business

It’s becoming old-fashioned to think of buyers and suppliers—and AP and AR—as separate and independent organizations. Every AP team has a corresponding AR team. All companies are both buyers and suppliers. By looking at all connections between them, you start to see the huge social network of finance professionals behind the constant exchange of funds, POs, invoices, contracts, and other documents. However, for all the highly sensitive data, businesses are not equipped to handle these as securely as they should.

Some financial companies are using the B2B social networking concept to build proto versions of a “Facebook for Business” into their product. Still, we have yet to see any with broader functionality or mass adoption.

Whether a collection of technology firms share their vast network, or a single company creates and markets the right solution, the market is ready for a new business standard. Somebody is going to create a platform that brings businesses out of the virtual Dark Age and into a Renaissance—and it will be very successful when they do.

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Josh Cyphers is the President of Nvoicepay, a FLEETCOR Company.  For the past 20 years, Josh has managed successful growth for a variety of companies, from start-ups to Fortune 100 companies.  Prior to Nvoicepay, Josh held leadership roles at Microsoft, Nike, Fiserv, and several growth-stage technology companies.  Josh is a lapsed CPA and has a BS in Economics from Eastern Oregon University.

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What is the New Normal for Businesses and AP?

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What do the oracles say about society’s return to normalcy? Bill Gates is pinning his hopes on a semi-normal return to life in the spring of 2021, provided we rapidly adopt the vaccine. Dr. Fauci’s more conservative estimate suggests that we’ll enjoy movie theater experiences, indoor dining, and regular school attendance by late fall.  But the experts’ jockeying of vaccine rollout timelines and predictions of how soon we can reschedule that twice-canceled family vacation leave one fundamental question unanswered:

What aspects of normalcy are actually worth returning to? 

The pandemic’s clarifying challenges to businesses were not thoroughly negative. Post-pandemic businesses have adapted by interfacing with technology to get the same tasks done with less redundancy and bulk. Daily operations have stripped down to bare essentials, some bearing costs to the customer, but many renewed in their devotion to make a more human connection with those they serve. Data security issues took a tremendous and necessary spotlight as a historic number of the U.S. workforce scrambled to telecommute.

Covid-19 shattered all illusions about how quickly any industry, company, or market can change. 

There’s no crystal ball to consult when it comes to making big changes with very little advance notice. Data by McKinsey indicates how businesses stayed lean and financially solvent through the initial shutdowns and subsequent quarantine measures. According to McKinsey & Company, businesses that transformed their processes in 2020 nodded to agility as the key ingredient of their success. In the business sense, “agility” is defined by smaller teams that are built to work with rapid efficiency in place of traditional business models with several tiers of leadership per business unit. McKinsey tracked 25 companies across 7 business sectors in their handling of the COVID-19 crisis.

Here is the resounding sentiment of what they found:

Through our research, one characteristic stood out for companies that outperformed their peers: companies that ranked higher on managing the impact of the COVID-19 crisis were also those with agile practices more deeply embedded in their enterprise operating models. That is, they were mature agile organizations that had implemented the most extensive changes to enterprise-wide processes before the pandemic.

The benefits of agility were measured in overall customer satisfaction, employee engagement, and operational performance. They found that swifter decision-making, less time determining priorities, and faster and more flexible response processes lent themselves to the business’ overall success. In other words, being agile made everything easier.

Nimble, clear-communicating teams enabled with good technology outpaced their slower, bureaucratic counterparts.

A clarion call from a pandemic-tested economy is this: the bustling office setting is becoming increasingly outdated. A small, remote team working closely is capable of outpacing any team that sits less than six feet apart–and with less overhead costs.  This is a matter of understanding the amazing flexibility of a business operations model. With technology, we now have the ability to decentralize while staying connected. Sounds paradoxical, but then again, so did social distancing.

While change is good, identifying the right kind of change is essential. Here are three guiding principles:

1. Keep Your Business Unit Nimble With an Agile Mindset

Examples of an agile mindset include giving up meeting-heavy schedules and manual workloads and renewing decision-making agency in small teams. Even if the organization at large is still insistent on doing things the old way, your business unit can lead to small changes with great effect.  What’s not working with your current accounting operations model in accounting, IT, or even on the executive level? Can you digitize any of your backlogged manual tasks to alleviate the stress on your team and improve supplier relations?

But don’t mistake agility for speed. Speed is fast but can be blind. Agility is about delighting both the customer and those who serve them in the delivery of a seamless and elevated process.

2. Add Collaboration Tools as a Lifeline Resource for Your Team

The 2021 workforce demands exceptional collaboration tools. As projections still hang in the air of remote work persisting into the better part of 2021, it is essential that good communication infrastructure is in place to sustain team morale. Longevity is about more than just crossing the finish line, but lifting burdens of redundancy and frustration. As willpower to stay connected wanes and team needs inevitably change, it is essential that touchpoints are added between managers and employees to prevent burnout and ensure team goals are attainable and appropriate. Ask your team what heaving lifting they need assistance with and keep an eye toward any solution that may bolster cross-functionality and productivity within your team.

3. Retrofit for the Employee of the Future

Whether or not we retain the same jobs we had at the outset of 2020, job demands will have changed. Safety and wellness concerns have skyrocketed in the eyes of the consumer while values like convenience or ease of access have diminished in proportion to the limitations imposed on our lives.  Product models will need adjustment. New verticals that businesses once sought to launch into may have dried up, leaving sales teams to pursue other avenues.

Providing the workforce with more analytical tools, businesses can add value to employee roles by grounding decision-making in data points and allowing for greater transparency to daily tasks. Through new technology, the elimination of legacy technology, needless redundant tasks, and paper touchpoints, the workforce can rest more securely in the face of unanticipated threats to their employability.

Our technology, operating models, and accepted biases of ‘how things are’ must all change when presented with the data on how things can be done differently.

Change is no longer a back-of-the-handbook contingency plan. Grit and ingenuity hold the silver lining to a resoundingly difficult year. Perhaps reversing to the way things were is a farce. The next normal will provide us gradations of clarity as waves of vaccinations roll out and restrictions ease in the late months of 2021. Yet what we do with the clear opportunities already here is a truer prediction of future business success.

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Lauren Ruef has collaborated with Nvoicepay, a FLEETCOR Company to write about financial technology since 2016. Nvoicepay optimizes each payment made, streamlines payment processes, and generates new sources of revenue, enabling customers to pay 100% of their invoices electronically, while realizing the financial benefits of payment optimization.

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Uncover New Opportunities from a Return on Experience

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The pandemic, though terrible, has given us much-needed time to pause, reflect, and perhaps make some changes to the way we live our lives. We have a chance to reevaluate what is really important to us. What brings us happiness? What drains our energy? What experiences add meaning to our days? Which ones take it away? We have an opportunity to face this challenge in a way that makes us better people.

Businesses are on a parallel path. With the diminishing of old norms comes the possibility of reimagining our old processes. That has brought about an acceleration of technology adoption across virtually every industry. Still, there’s another storyline emerging as well—the rise of what Heather E. McGowan calls The Human Capital Era. McGowan believes that the workforce has exhibited incredible resilience and creativity during the pandemic. They’re “an asset to develop rather than a cost to contain.”

I’m all for it.

Everyone knows the term “return on investment”—or “ROI”—meaning you get more monetary value out of something than what you put into it. But money is not the only measure of value. As we take stock of our business and personal lives, I think we should re-establish a lesser-recognized concept: return on experience.

Return on experience is significantly more objective than a return on investment since the measurement varies by opinion rather than hard numbers.

For example, we all have gone out to have dinner and found that the bill was more expensive than expected. Maybe the food was just so-so, you had a long wait time, or the server was brusque. Whatever the reason, it just wasn’t a great experience. But you might gladly pay twice as much for dinner where the food is delicious, or the service is kind and attentive. That’s what I think of as return on experience—getting value beyond what money can buy.

We embrace this concept more easily in our personal lives, where there’s less accountability for how we spend our money. For example, pre-COVID, I enjoyed traveling with my wife and two kids. Those trips were expensive, even after accounting for the hotel points and airline miles I’d collected. But the memories will stay with us forever, long after the cost has been absorbed and forgotten.

When you think about your business and your accounts payable team, what is the return on experience from antiquated methods like processing checks? What is the opportunity for growth? One person can’t cut or sign checks much better than another. There’s a limit to the impact you can have by stuffing checks in envelopes every week. It’s the opposite of a good experience.

Incorporating automation in your back office is a good way to tackle ROI and ROE simultaneously. When you have removed mindless tasks from your AP team’s plates, they are free to spend their energy on more interesting, strategic, and valuable tasks. I think that’s an initiative that’s well-aligned with the Human Capital Era.

As we re-examine our lives and our businesses, let’s remember what it means to evaluate something in the first place: to judge or calculate the quality, importance, amount, or value of something. And in that calculation, consider the return on experience in terms of your business, beyond money. It’s about setting yourself and your employees up to live and work in a high-quality environment—one that encourages personal and professional development.

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Derek Halpern is Senior Vice President of Sales for Nvoicepay, a FLEETCOR Company. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space. 

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SentiLink Shares What Businesses Should Know About Synthetic Fraud in Exclusive Q&A

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In the following Q&A, we learn all things synthetic fraud, from risk mitigation to what businesses can do now to effectively combat this new challenge for global businesses.

What is synthetic fraud and how does it differ from fraud?

Synthetic fraud is a type of fraud where a falsified or manipulated identity is used to open consumer and business financial services accounts. It’s very different from ID theft because there’s no victim that comes forward to claim their identity has been stolen. As a result, synthetic identities go undetected for years. So, not only does synthetic fraud cost banks and lenders billions of dollars a year in losses, but these identities facilitate all sorts of criminal activities.

How is Sentilink revealing the risks of synthetic fraud (Through a report, through research, through other means)?

SentiLink offers several solutions that credit unions prevent synthetic fraud.

Synthetic Scores: SentiLink’s Synthetic Scores product indicates the likelihood that an identity is synthetic. Synthetic Scores are made available to clients via API or a user-friendly Dashboard.

Manifest – Manifest is the identity data leveraged by the machine learning algorithm that generates SentiLink’s Synthetic Scores. This dataset includes information from the credit bureau, utility records, the death master file, as well as phone and email data.  SentiLink enriches this identity data and makes it available in the Manifest product via API and the Dashboard. Clients can incorporate Manifest in their proprietary models or utilize the data to investigate individual cases via the Dashboard.

eCBSV – For the first time ever, it’s possible to validate Social Security numbers with the Social Security Administration’s database of SSNs in real-time using eCBSV. With applicant consent, financial institutions can send their applicants’ names, dates of birth, and SSNs to SentiLink via API and receive a match or no-match response within milliseconds. This service enables lenders who have historically required SSA-89 forms, such as mortgage lenders, to shave days off the loan origination process.

Why is synthetic fraud more of a risk to credit unions rather than to other establishments? 

To be clear, synthetic fraud is a risk to all financial institutions. But, some credit unions may think that the membership requirements to join are a deterrent to synthetic fraud. But, we’ve seen that fraudsters are able to become members and get loans from credit unions.

What could credit unions be doing that would help them lessen the risk of synthetic fraud?

There are several things credit unions can do:

Education is the first step. The Federal Reserve wrote 3 white papers on synthetic fraud that are very informative.

Pay special attention to the Social Security number of applicants applying. If the SSN was issued in a state where the applicant doesn’t have address history, this is a potential red flag. If the SSN was issued in a year that’s different than the date of birth, this is a potential red flag. It doesn’t necessarily mean a synthetic identity is being used to apply, but these are scenarios that potentially warrant additional verification. Validating the SSN using an SSA-89 form or eCBSV is a smart approach.

Labeling losses according to the type of fraud is also important. Knowing whether a loss was due to ID theft, synthetic fraud, and other types of fraud will enable a credit union to measure losses due to each type of fraud and learn how to recognize similar identities when they apply.

What are the 7 synthetic identities and how does it work/identify?

Perhaps I should clarify the statement, “1 in 7 synthetic identities has a credit line from a credit union.” SentiLink has tagged over 100,000 synthetic identities. We have a subset of these identities where we can see what financial institutions gave these fake consumers a loan. Our analysis showed that 1 in 7 of these synthetic identities had a loan from a credit union. The point we were trying to make is that credit unions are at risk for synthetic fraud just like other banks, fintechs, and lenders.

What do you mean by “tradeline from a credit union with balances 2/5X higher?

We looked at the loan size that credit unions issued to these synthetic identities and compared them to the loan size that they gave to non-synthetic identities and found that the balances issued to synthetic identities were significantly higher. So, the credit unions lost a lot more money when issuing loans to synthetic identities. This is another reason why credit unions should work to identify synthetic identities before they become members, so they don’t experience these losses.

What are the risks to a credit union in regard to synthetic fraud?

The risks are losses and compliance. As mentioned above, synthetic identities cause significant losses to financial institutions. But, there is also the regulatory requirement to Know Your Customer. KYC solutions can’t detect synthetic identities, and as regulators become more aware of this issue, their expectations around what constitutes appropriate KYC measures is likely to change. If credit unions are issuing loans to synthetic identities, they aren’t conducting appropriate due diligence to know their customer. Their ability to comply with KYC requirements will suffer if they don’t address synthetic fraud.

What are the warning signs that credit unions should pay attention to?

Certainly, upticks in losses can be a sign of increased synthetic fraud. But, also things like the same address being used frequently to apply for loans can be a sign that a group of fraudsters is attacking a credit union.

What do you see as the future of credit unions in relation to this type of fraud?

Synthetic fraud is going to be an issue for credit unions for the foreseeable future. Unlike id theft where fraudsters steal an identity and have to quickly take out a loan, take the money and move on, synthetic identities can be used over and over again for a very long period of time. And, synthetic identities are easy to create so it’s something credit unions are going to have to learn about in order to detect and stop them from impacting their business.

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Sarah Hoisington is head of Marketing at SentiLink, a fraud protection tech firm helping financial institutions and government agencies.