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Dollar Strengthens Amid Japan Uncertainty and U.S. Election Anticipation

trucking global trade dollar

Dollar Strengthens Amid Japan Uncertainty and U.S. Election Anticipation

The U.S. dollar reached a three-month high against the yen on Tuesday, supported by Japan’s political instability and a series of upcoming economic events, including next week’s U.S. election. While the dollar showed little movement against most other major currencies, market participants are closely watching for new economic data and political developments to determine future trends.

Read also: BRICS Nations Embrace Economic Independence, Sideline U.S. Dollar in Global Trade

Political Upheaval Weakens Yen

The yen has come under pressure following Japan’s ruling coalition losing its parliamentary majority in recent elections, creating uncertainty around both political direction and monetary policy. The Bank of Japan (BOJ) is expected to announce its monetary policy decision on Thursday, with analysts anticipating no change in interest rates.

The dollar rose 0.1% on the day to 153.365 yen, continuing a trend that could result in the dollar’s largest monthly gain in over two years.

U.S. Data Boosts Dollar Outlook

Recent U.S. data highlights a mixed economic picture. Job openings hit a 3.5-year low in September, signaling a cooling labor market, while October’s consumer confidence climbed to a nine-month high, reflecting improved perceptions of job availability.

Helen Given, associate director of trading at Monex USA, noted the labor market’s gradual slowdown but expects limited downside for the dollar given the upcoming election and Federal Reserve meeting.

Market expectations of a Republican victory, with Donald Trump leading over Democratic rival Kamala Harris, have also contributed to the dollar’s strength, along with rising Treasury yields. The dollar index has gained 3.6% in October, on track for its best monthly performance since April 2022.

Key Economic Data Ahead

This week’s economic reports, including the Fed’s preferred inflation measure—the core personal consumption expenditures (PCE) index—and several jobs reports, will be closely monitored for signs of policy direction. However, Citi’s head of G10 FX strategy, Dan Tobon, cautions that the dollar may experience choppy trading until after the election.

Sterling Firms Ahead of U.K. Budget

Sterling edged up 0.2% to 1.2997 as investors await the Labour government’s first budget. Finance Minister Rachel Reeves and Prime Minister Keir Starmer are emphasizing the need for tough fiscal measures to manage the public finances while maintaining market confidence following the 2022 bond market crisis.

The Office for Budget Responsibility’s forecasts will be critical in shaping investor sentiment toward the government’s spending and tax plans.

Yuan Steady Despite Debt News

The Chinese yuan held steady offshore at 7.151 per dollar, with little reaction to reports that Beijing is considering issuing over $1.4 trillion in new debt to support the economy. The Standing Committee of the National People’s Congress is expected to approve the fiscal package, which includes 6 trillion yuan from special sovereign bonds, during meetings scheduled from November 4-8.

With political and economic uncertainties mounting globally, traders are bracing for volatile currency markets ahead of key policy decisions and election outcomes.

global trade AML software

How to Choose the Right AML Software for Banks? 

Discover key factors for selecting the best AML software for banks. Learn how to protect your institution from fines and regulatory penalties with effective tools for compliance and risk management.

In the last decade, from 2013 to 2023, more than 16,000 entities have been penalized by regulatory bodies worldwide. Building business relationships with sanctioned people, non-compliance with AML laws, money laundering, Drug trafficking, and other financial fraud were the main causes of these fines and penalties.  

Despite fines and penalties in a huge number, still more than 90% of money laundering crimes go undetected. Is it criminals’ cleverness or the AML software cannot detect these crimes in real-time?

Whatever the reason, advanced, accurate, and efficient AML software for banking sectors can detect every suspicious transaction in real-time. Therefore, selecting the right AML solution for banks is necessary.  

 Are there any protocols that every bank and financial institution must follow while choosing the AML compliance software for their organizations?

In this blog, we will highlight the most important features and elements FIs must check while choosing the AML monitoring software for the banking sector.  

Understanding AML Software for the Banking Sector

Knowing who your customer is and monitoring every transaction in real-time has always been a top priority for banking sectors to make sure they are complying with the AML regulations. AML software for banks is a helping hand for financial institutions in detecting, monitoring, and combating money laundering and other financial crimes. incorporating automatics software also helps them maintain compliance, manage risk, and avoid any regulatory bodies and reputational damage.

 5 Key Considerations to Guide You in Selecting the Right AML Compliance Software

For any business staying compliance is important. However, when it comes to the banking sectors, it becomes compulsory to implement the advanced AML solution for banks to make sure no suspicious transactions go undetected. Therefore, choosing the right AML tools is very much of important.

1. Comprehensive Functionality

Look for every possible functionality you are looking for or want to automate to mitigate the chances of financial crimes. the top features that every AML software must have include transaction monitoring, customer due diligence, sanction screening, case management, and reporting automatically to the relevant authorities.   

Another feature that Banks must look for is the latest technology the tool uses like AI and ML to improve detection accuracy, can easily detect money laundering techniques, and is able to improve detection efficiency with zero false positive rates.

 2. Customization and Scalability

As every business has unique challenges and business infrastructure so has the usage of AML software. So, make sure the AML software comes with a customizable solution and fits your institution’s specific needs. The needs of any business could be measured by your organization’s size, customer base, and how unique the risk profile is.  

Ensure that the software is capable of accommodating growth in transaction volume, customer number, and continuous regulatory changes without any additional resources and costs for the institutions.  

 3. Ease of Integration

Ease of use, in other words, user user-friendly and the system that easily and smoothly integrates with your existing systems is what makes any AML software an efficient tool. it includes the core banking systems, payment gateways, and customer database to avoid any data loss to ensure that follows a unified compliance strategy.   

Another thing the financial institutions must look for is to ensure that the AML software supports Application Programming Interfaces (APIs) and can handle various data formats. Because these features allow for efficient data exchange and interoperability.

 4. User Experience and Support

Another major functionality banks should look for is that the software should be easy to use for compliance officers. Though compliance officers get training yet user friendly software minimizes the need for extensive training and reduces the risk of false positive and false negative errors. This will help financial institutions to Evaluate the level of customer support including the onboarding process, and ongoing technical support to ensure any issues are quickly resolved and do not make any hurdle in customer service.

 5. Regulatory Compliance and Updates

Regulatory bodies have to update their compliance program due to the unique techniques used by criminals to launder money and provide assistance to terrorists. Therefore, while choosing the AML software for banks make sure the tool complies with all current local and international AML regulations and the provider updates their tool as per the AML requirements.

The software should also be able to provide you with robust auditing and reporting functionalities that meet the requirements of regulatory bodies.

Summing It UP

Understanding the unique requirements of your business is very important in finding the best and most efficient AML solutions. However, selecting the right tool could be difficult and time-consuming, what should a business do in such circumstances? Is there any recommendation? Though there are hundreds of tools that claim to provide updated and efficient AML solutions for banks, AML software for banks that not only monitors, detects, and reports suspicious transactions in real-time with zero false positive rates and reduces your compliance cost almost by half.

From Execution to Insight: How Fintech is Shaping the Future of Accounts Payable churn global trade market

Why Strategic Churn Is Good for Your Bottom Line 

If you have a subscription-based business, a concept that may seem counterintuitive at first glance is strategic churn. Losing hard-won customers is something that we try to avoid at all costs. Yet, for many savvy subscription leaders, strategic churn, or the intentional loss of poor-fit subscribers who drag down overall customer satisfaction, gross margins, and product development velocity, has become a crucial strategy for increasing the bottom line and ensuring long-term viability in a market that’s undergone a whiplash-level pivot from growth at all costs to growing efficiently.

Read also: Revolutionizing Fintech: The Integration of AI in ERP Systems

According to recent data from Chargebee’s 2024 State of Subscriptions and Revenue Growth report, a staggering 73% of subscription businesses are raising prices in 2024—a significant uptick from the previous year’s 62%. What’s more intriguing is the willingness of these businesses to accept substantial churn rates of 20% or more of their customer base in pursuit of greater profitability and sustainability. But done right, this strategy of increasing prices, ideally in conjunction with releasing product and service enhancements that appeal to the core loyalists who are willing to pay more for a more valuable service, helps separate the wheat from the chaff. 

Higher paying customers drive higher annual recurring revenue (ARR) per customer, higher customer lifetime value (CLV), and are stickier with more predictable retention rates. Alternatively, price-sensitive customers who are less willing to pay are often those who submit a disproportionately high number of support cases, request expensive returns or process chargebacks, are more prone to posting negative reviews online, and have a higher propensity to voluntarily cancel (“strategic churn”).

In my recent discussions with B2B and B2C subscription growth leaders, we’ve discussed the rationale behind embracing strategic churn at length. Across industries, from SaaS platforms to content streaming services, the consensus is clear: sacrificing short-term numbers for long-term gains is a strategic opportunity.

Let’s look at why strategic churn is emerging as a powerful tactic for subscription companies to optimize customer lifetime value (CLTV), drive net revenue retention (NRR), and achieve positive cash flow, all while fostering deeper relationships with their most valuable customers.

Prioritizing value over volume

One of the fundamental principles driving strategic churn is the recognition that not all customers are created equal. While acquiring new customers is essential for growth, retaining those who value your product or service is equally—if not more—important. By focusing on quality over quantity, subscription companies can tailor their offerings to cater to the needs of their most loyal and high-value customers.

Some butter is better than no butter

Butternut Box, a leading UK-based fresh dog food subscription box, recently experienced strategic churn when it decided to make a calculated bet on raising prices in three step-up phases between 2022 and 2023. The decision to raise prices was motivated by a variety of factors ranging from a 30-40% increase in the cost of lamb and beef to supply chain challenges due to new factory construction and the need to become profitable as a company. It used the pricing changes to shift into a value-based pricing model from its previous cost-plus model and worked with third-party pricing consultants to run surveys to develop psychological price barriers. The company then rolled out its pricing increases in phases, beginning with new customers and continuing with existing customers. 

Butternut Box carefully monitored its churn during this time. It implemented targeted campaigns aimed at customers who were dissatisfied with the new prices, offering personalized win-back messages and adjusting plans to retain them. This included tools to review and adjust their subscriptions, such as removing additional products or switching to surcharge recipes. Additionally, Butternut Box improved the pause/cancel experience by allowing customers to modify their plans online instead of calling. The philosophy that “some butter is better than no butter” guided them to offer flexible options to retain customers who were considering downgrading rather than canceling entirely. Incredibly, neither acquisition rates nor CPAs suffered through the change.

The results? Butternut Box significantly increased Customer Lifetime Value (CLTV) while maintaining stable gross retention and exponentially improved its CAC: LTV ratio. Butternut Box proves that even in customer-obsessed businesses like itself, strategic churn results in a more sustainable business, which is better for customers.

Switching to usage-based pricing was a win for Livestorm

 

Another interesting example is Livestorm, a B2B SaaS vendor. Livestorm was among the first in the video conferencing industry to switch pricing from license-based to usage-based. Livestorm managed to transition most of its customers from 70% paying fixed monthly fees to 80% paying for usage in less than a year. What’s extraordinary is that it doubled its average revenue per account and tripled its lifetime value. Along the way, a meaningful proportion of the legacy customers opted against shifting to usage pricing (strategic churn) – freeing up Livestorm to accelerate development and better serve its more valuable customers – while overall revenue increased.

Embracing the strategic churn journey

Embracing strategic churn requires a shift in mindset—from focusing solely on short-term sales acquisition rates to prioritizing long-term sustainability and customer lifetime value. It’s about understanding that not every customer is meant to stay forever and letting go of those who no longer align with your strategic objectives. 80% of consumers are more likely to purchase a new subscription that allows them to cancel online (2021 State of Retention Industry). Remember, by making it easy for customers to cancel and offering a positive experience, you increase the likelihood of them returning. This could happen if they realize the value of your product or service, if you introduce new features they desire, or if their circumstances change.

By proactively managing churn and nurturing relationships with high-value customers, you can unlock new opportunities for growth, innovation, and market leadership. In an era of relentless disruption and fierce competition, embracing strategic churn and subscriptions can be a powerful revenue growth tactic. 

Conclusion

Strategic churn represents an opportunity for growth you may not have considered until now. By raising prices and/or adjusting your model, you can improve your product appeal more quickly to your most committed customers. By prioritizing value over volume, embracing customer-centricity, and learning from real-life success stories, you can harness the power of strategic churn to drive sustainable growth, increase profitability, and chart a course toward long-term success.

About the author:

Guy Marion, Chargebee’s Chief Marketing Officer, leverages over 15 years of strategic marketing and leadership to drive SaaS growth. Before joining Chargebee, Marion was CEO and Founder of Brightback, now Chargebee Retention. At Chargebee, he spearheads the go-to-market strategy, increases brand awareness, and drives customer acquisition. In his free time, he enjoys spending time with his family, boating on the San Francisco Bay, and contributing to the startup ecosystem.

Chargebee is the leading Revenue Growth Management (RGM) platform for subscription businesses. 

 

retail banking frontline

Staffing Shortages are a Competitive Risk for Banking Institutions, Educating Frontline Staff can Provide an Edge

If the pandemic has taught us anything, it is that we can’t function without our frontline workforce. But the next time you walk into your local bank branch and see a lineup of four tellers serving customers, know that one of those tellers won’t be working there this time next year. The annual turnover rate for frontline bank employees has risen to 23.4%. Coupled with pandemic-induced staffing shortages across industries, including banking, customer service at bank branches and financial service call centers is subsequently at a nadir. To delight customers, banks need to recruit and retain frontline talent by providing real, substantive learning opportunities tied to career advancement.

As we stand now, customers across our country are paying attention to this shortfall in customer service. A wide-ranging survey of 229,000 banking customers from Rivel, a data-driven consultancy, notes that the number of households that believe their primary banking institution is not responsive to their needs has risen by an astonishing 212%. Branch closures, happening at double the rate compared to before the pandemic, are now moving banking institutions further from their customers than ever before.

While the connection between depreciated employee bases and customer service is no surprise, the consequences to brick and mortar banking might be dire. Staffing shortages that lead to poor customer service in 2023 pose a significant risk to banking institutions which are facing pronounced competitive pressures from FinTech rivals. A key competitive differentiator for financial services companies has always been the ability to provide unrivaled, personalized care to customers with a diverse workforce that looks like the communities the bank serves. When customers no longer feel like their bank knows them and their needs, FinTech firms are poised to press the perception that they provide similar services at lower prices.

So how do banks compete with the tech sector’s increasing encroachments on established institutions? They can double down on what has always set them apart: their people.

Lowering the turnover rate for frontline staff and upskilling team members to be ambassadors of the benefits of experienced banking institutions can resuscitate customer experiences. As can attracting a diverse and inclusive workforce that can make meaningful connections, forged in mutual lived experience, with their customers. Fortunately, the pandemic has placed renewed focus on the people functions of companies and the CHROs who lead them. Attracting, retaining, and training diverse talent is possible and the financial services companies that excel in this will fend off FinTech’s attacks and in doing so, rise above others in the industry.

What FinTech companies generally fail to realize about employee benefits is that employees don’t place significant value on unlimited paid time off (which people don’t feel like they can actually use) and cold brew coffee on tap. Employees do place value on a company’s commitment to a worker’s career aspirations – and financial services institutions can outperform here. Due to their sheer size, a frontline worker can aspire to a long and fruitful career at a banking institution, but this is possible only if the bank creates career pathways for them.

For instance, Desert Financial offers employees 100% tuition paid up front for skill-building courses and undergraduate degrees, and up to $10,500 tuition coverage per calendar year for graduate degrees or graduate certificates. Investing in workers and tying educational attainment to career growth demonstrates a tangible commitment on behalf of the employer to the employee, leading to a reciprocal commitment. This is how high-performing staff, those who are homegrown, can and will create a powerfully positive customer service experience, whether at a teller window or in a call center.

A culture of continuous learning is not aspirational, it’s simply smart business. Recent surveys have shown that 68% of workers would stay with an employer if the employer offered opportunities for learning and upskilling.

The remedy for 25% frontline turnover and a reduction in bank branches is to double down on investing in the team members who directly interact with customers: the frontline.

software

Role of Best HR Software in the Banking Industry for 2023 

Implementation of HR software in the banking industry streamlines their operations. As HR software is the only source for all the information of the workforce. HRIS helps to make use of the workforce effectively.

The banking industry employs many people, which makes it essential to have a separate Human Resource department. The HR department of a bank is responsible for the workforce’s smooth functioning, ensuring that the payrolls are disbursed on time, the taxes are paid, and meeting all other requirements of a bank’s workforce.

Moreover, the HR department is also responsible for the smooth and efficient functioning of a bank’s employees. Thus, HR management forms an essential part of a bank’s management, so many financial institutions are opting to introduce a software-based HR Software. This simplifies the entire process of managing an extensive workforce and ensures that the bank’s overall proficiency improves significantly. Some of the crucial features of the HR software of the banking industry are as follows:

Acquisition of New Talent:

In recent years the banking industry has seen significant growth. This means there is a greater requirement for recruiting new talent, training them, providing them with on-board business training, and preparing them to become a part of a growing industrial sector. With the help of a software-based human resource information system, you can simplify this entire process and recruit new talent with ease. Additionally, you can also ensure that new employees can easily integrate with the sector. The banking industry has a different customer handling process compared to other industrial sectors.

Moreover, banking products like loans, credit score, and other financial services are complex and require a certain level of expertise to understand and offer to customers. The recruits must be well versed in the individual features of the products. This is important when they try to explain to customers why they think the particular products are ideal for the clients of your bank. Hence, your employees must be prepared to help the customers understand and select the best product. You need to provide the recruits with specific training regarding customer handling.

You need to plan various training programs, schedule visits, and provide them with time management systems. Suppose you opt for a software-based HR management system. In that case, you can reduce the burden on your bank’s human resource development department and, at the same time, ensure that the recruitment and training of the new talent are completed proficiently.

Simplifies Business Planning

When you use a Payroll Software or software-based HR management system, your objective is to simplify numerous business decisions that you have to take regularly. Like any other business organization, there are numerous business decisions that the management and the HR department have to take in a bank. Some of the essential roles that the HR software can play in the banking industry in simplifying the business decision are as follows:

– A significant part of payroll management is related to the timely payment of tax. Usually, the HR department is responsible for payroll disbursement and payment of associated taxes. If you use a software-based system for payroll management, you can be assured that the disbursement of payroll and payment of taxes will be on time. If you make it software-based, you reduce the margin for human error and ensure that you do not miss out on taxes. This will also ensure that you do not have to pay the penalty for non-payment of taxes.

– A significant aspect of business management is scheduling tasks, which is also done by the HR department. If you use a Leave Management system, it will simplify the HR department’s scheduling of tasks. For example, if individual team members are on leave, they will automatically get scheduled with other members. All the HR department has to ensure is that the rescheduling of tasks has been done correctly. This simplifies the entire process of managing the bank’s day-to-day business activities and ensures that no work is delayed.

– When you use the software-based management system, the HR department is better integrated with the other bank branches. It can become proactively involved in business decisions, and you do not need to involve the HR department specifically. From scheduling or tasks to management of the workforce, all can be done with available integrated HR software.

Thus, HR software can make it easier for the bank to take business decisions and associate with the HR department. The entire process can be completed smoothly without any hassle, and the bank’s management can be done more proficiently.

Helping to Improve the Quality of the Workforce

The HR department of your bank is responsible for training the workforce and ensuring that they remain updated about the market’s ongoing trends. Developing specific training modules, setting up training sessions, and ensuring that the workforce can comfortably complete the training are all responsibilities of the HR department.

The banking industry is highly competitive and requires efficient HR processes to stay ahead in the market. Best HR software plays a crucial role in streamlining HR processes, ensuring compliance, and improving employee engagement. Here are some ways in which best HR software can benefit the banking industry in 2023:

  1. Recruitment and Onboarding: Best HR software can streamline the recruitment process by automating job postings, resume screening, and scheduling interviews. It can also simplify the onboarding process by providing new hires with access to relevant information, forms, and training materials.
  2. Performance Management: Best HR software can help banks set clear goals and objectives for employees, track their progress, and provide feedback in real-time. It can also facilitate performance evaluations and identify areas for improvement.
  3. Compliance: The banking industry is highly regulated, and HR departments need to ensure compliance with laws and regulations. Best HR software can help manage compliance by providing necessary training, tracking compliance requirements, and generating compliance reports.
  4. Employee Engagement: Best HR software can help banks improve employee engagement by providing employees with access to self-service portals, performance feedback, recognition programs, and other tools that encourage communication and collaboration.
  5. Analytics and Reporting: Best HR software can provide banks with valuable insights into their HR processes, such as employee turnover rates, time-to-fill positions, and training effectiveness. These insights can help banks make informed decisions about their workforce and improve their HR strategies.

Overall, the best HR software can help banks improve their HR processes, ensure compliance, and increase employee engagement, which can ultimately lead to a more productive and successful workforce.

All of these can be simplified with the help of a software-based HR management system. It will simplify the scheduling of training sessions, help the HR department identify suitable modules, and ensure that the training sessions are correctly completed. The best HR Management software India ensures that it streamlines most business activities and helps the HR department to improve the overall proficiency of the workforce. This is essential to ensure that the banking activities are completed maintaining the highest standards.

The HR software that you install will help you evaluate your employees’ performance and help them out to improve their performance. The banking sector is a labor-intensive industry, and hence, it is essential to keep supporting and improving the workforce. Thus, with HR software, you can provide your employees with adequate support, simplify business decisions, and improve your bank’s efficiency.

carve-outs

Carve-outs are Attractive for M&A, but Complications can Decrease Value

Before the COVID-19 pandemic brought mergers and acquisitions to a standstill, dealmakers increasingly turned to carve-out deals –the sale or divestiture of a business unit or division from a company. Our research shows carve-outs have increased by 200% since 2016, demonstrating the attractiveness of these deals.Our research shows carve-outs have increased by 200% since 2016, demonstrating the attractiveness of these deals.

But carve-outs are far from straightforward, especially across borders. The more jurisdictions involved, the higher the degree of complexity firms must navigate. (Complexity, in this case, refers to the headaches and distractions that arise when complying with new regulations, language barriers, borders, currencies, and laws.)

The increased complexity of a carve-out creates both opportunity and risk for buyers. On the one hand, not many firms have the expertise or resources to re-incorporate a business from a parent structure, meaning the few companies able to do this have a natural advantage. On the other hand, the execution risk is increased significantly, and value can be quickly lost from carve-outs if not executed correctly.

A recent survey by TMF Group found that 34% of senior executives from private equity firms with buy-side experience and 27% from corporations said their most recent cross-border carve-out failed to deliver on expectations, with 24% and 19%, respectively, saying costly overruns significantly impacted the deals. If a deal is delayed by more than four months as a result of business entanglements across jurisdictions, the average resulting cost overrun comes to about 16%.

Consider how one financial executive in India described an overrun deal: “We hadn’t expected it to be seamless, but we weren’t prepared for the effect on costs, and we had to make some hasty financial decisions to get the deal over the line.”

If a transaction takes place across jurisdictions, the complexity of those deals increases once local regulations come into play. Examples of regulations that, though innocuous, can significantly delay the deal-making process include:

-In some markets, it can take up to 60 days to open a bank account

-In others, business licenses are required before the new entity can register for VAT, while the company may need a local fiscal representative or director

-Some markets, such as the U.S., carry significant differences between states for regulations pertaining to licenses, tax registrations, and employment regulations

If these complexities aren’t accounted for at the start of the deal-making process, the monetary value of the deal can decrease, as evidenced by the 1 in 5 deals that create millions of dollars in extra costs. Take it from a head of finance at a Finnish corporation: “Complying with the domestic requirements, such as legal, accounting, and taxation, were the most difficult aspects for us to manage…rather than solving complex operational issues, we were more concerned with getting the company ready for various compliance items.”

Conversely, having a presence in the country in which a deal is conducted increases the likelihood of a deal going well. Those with a limited or no presence in the target’s country were more likely to have disappointing outcomes, with 38% of respondents who had limited or no presence at all in the carve-outs jurisdiction noting their most recent carveout had been mostly unsuccessful in terms of reaching its strategic goals.

There is, of course, the question of when deal activity will return to a pre-COVID-19 pace. It’s a question of when, not if, because private equity firms are sitting on large cash piles, interest rates are historically low and companies are distressed. Companies facing a cash flow crunch may be more likely to sell off non-core assets than consider an outright sale of the entire business. The environment is ripe for carve-outs in the near future, although valuations may look a lot different than six months ago.

____________________________________________________________

Randy Worzala is Head of Business Development – North America at TMF Group, a multinational professional services firm based in Amsterdam, providing accounting, tax, HR and payroll services to international businesses. The company has around 7,000 employees in 80 countries.

payment

How to Make Important Adjustments to Your Payment Strategy

The first couple of weeks of sheltering in place regulations saw finance and accounts payable organizations scrambling to set up remote operations and get payments out the door. Most were able to accomplish these goals quite well. Now we’ve moved into the next step–establishing efficient workflows and productive practices. It’s still challenging, however. Companies have to find ways to keep people safe while executing paper-based processes that keep their teams office-bound. For example, many companies still have to go into the office to pick up mail, circulate invoices for approval, and prepare checks for mailing.

They also must consider the best way to move forward and develop strategies for managing their teams through economic uncertainty. The Conference Board, a non-partisan economic think tank, recently sketched out three possible scenarios. Their best-case scenario predicts a 3.6% decline in US GDP for 2020, while the worst case would see a 7.4% decline. In other words, nobody knows what the next six to 12 months are going to look like.

That means AP needs to focus on conserving cash while keeping operations moving. They can expect more calls from suppliers since Accounts Receivable teams typically ramp up their efforts in tough times. They need to prioritize payments and capture early pay discounts. Procurement is going to reach out to try and renegotiate prices or terms. Treasury is going to be very interested in the timing of payments and managing working capital. It’s on the AP team’s shoulders to make sure they’re engaging with these teams and coordinating efforts.

At the same time, they’ve got to consider the efficiency and the productivity of their own team as we continue to work remotely. Among other things, that means coming up with a strategy for shifting to electronic payments at scale.

Many organizations have had this goal for a long time, but, depending on the research you look at, around 40 percent of business payments still issue by check. This number is down from a decade ago, but still problematic in a remote work environment. So why don’t businesses pay more of their suppliers electronically? Well, as everyone who rushed to shift suppliers to ACH payments when shelter at home orders took effect has learned, you can’t just flip a switch and move all your suppliers.

It’s easy enough to find a bank to handle ACH transactions for you. It also sounds a lot cheaper upfront than checks—if you only look at transaction processing costs, which are usually well below $1.

But with ACH, you have to enable your suppliers one by one, and then store and update their data securely. That becomes a fixed cost because there’s a constant churn of suppliers and their bank data–changes usually around once every four years per supplier. You should also expect to manage exceptions that arise with ACH file submissions and more nuanced supplier questions.

Thinking ACH is cheap or straightforward is one of the biggest misconceptions holding companies back from paying electronically. That’s not to say you shouldn’t make ACH payments. That said, they should be part of a holistic strategy that addresses the entire payments workflow, encompassing all forms of payment, including international wire payments.

What does that look like?

Card first

If you’re going to reach out to suppliers to enable them for electronic payments, you should first ask them to accept payment by credit card.

Virtual cards–sometimes known as single-use ghost accounts or SUGAs–are not as well-known as they should be in finance and accounting circles. Still, they can be an incredibly valuable part of your payment strategy. Unlike P-cards or company-issued credit cards, virtual cards exist to pay suppliers easily. Each card has a unique number that can only be used by the assigned recipient in the designated amount. That provides AP with substantial control and makes it one of the most secure, fraud-proof payment methods. You also should expect to receive rebates to offset some of your AP costs.

The main challenges are enablement and outreach, which don’t require significant effort on the part of AP teams since virtual card payment and remittance are relatively straightforward for suppliers. All that’s left is to structure your rebate program to support your team’s efforts and then some.

ACH for most

If a supplier declines to accept card, which often happens due to the interchange fee, your second request should be to enable them for ACH. Most vendors will say yes to this; in fact, they’d prefer it to check. Just be sure you have a realistic appreciation of the true ACH payment operating costs, including enablement and data management, as well as fraud support.

Check for holdouts

While the number is dwindling, there are some suppliers with a ride-or-die mentality who won’t accept anything but checks. For these suppliers, an outsourced payment provider can do a print check from an electronic file, so your team doesn’t have to handle all the paper.

Your payment strategy should include automating the payment workflow. Fintech ePayment providers wrap these disparate workflows into one interface so that all AP has to do is click “pay.” Then their payments will issue to their suppliers in the method they elected to receive. Because these platforms are in the cloud, payments can be approved and scheduled remotely, with visibility for multiple team members.

Heightened fraud protection

Your payment strategy should also include fraud protection. The pandemic, the move to remote work, and challenging economic conditions have created a perfect storm for a rise in all types of crime, including payment fraud. It’s essential to have strong internal controls, especially now that sensitive information is residing in your teams’ homes and on their personal networks. Preventing theft is a key component of cash management.

It used to be that organizations mainly worried about check fraud, and that’s still a problem, but it’s reduced quite a bit thanks to controls such as Positive Pay, Positive Payee, and watermarks on checks. So far, there aren’t similar controls for ACH. As businesses have gravitated towards ACH solutions, such payments have become more of a target for fraudsters. That’s a problem because the funds move faster, making it much harder to recover a fraudulent ACH.

Business Email Compromise (BEC) schemes are the most common type of attack. These involve fraudsters masquerading as suppliers, company executives, or other high-ranking personnel, requesting that funds route to a new, fraudulent bank account. We’re already seeing that the pandemic has provided BEC scammers with new material to convince an overwhelmed AP to comply with these requests.

To protect your team, you need a partner who can support your enablement and fraud protection goals, so your team can stay focused on cash management.

Finance and AP have long intended to go electronic, but the transition has been slow. It’s not just the flip of a switch or the sudden addition of a new payment type. Very few businesses realize how strategic the shift is until after they’ve committed to an update. Many companies that don’t plan accordingly have had to revert to check payments when they realized the actual cost and effort it takes to switch suppliers over. Rather than trying to attack a single pain point, you have to address the whole process from top to bottom.

Now we are going to see an acceleration of this shift with the remote workforce and challenging economic conditions. There is a new imperative, and there is also new technology. Interestingly enough, a lot of the fintechs providing B2B payments technology got their start during the great recession, when the financial system collapsed, and cloud technology was being born. These are now mature companies, ready to “cross the chasm” and transition their partners to 100 percent electronic payments.

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Derek Halpern is the SVP of Sales for Nvoicepay. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space. Derek’s previous positions include VP of Sales at Billtrust, an AR automation technology company, and Sales Director at TranZero, a payments company. Previously, Derek co-founded a company called ProService Software, which was sold to Solomon Software. Derek became the Western Region Sales Manager for Solomon following the acquisition. Derek earned a BS in Business Management from Pepperdine University.

Josh Cyphers is the Vice President of Product & Strategy for Nvoicepay. 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 was a Senior Manager and Consultant at Microsoft, Vice President of Finance at Visa, and Business Planning and Analysis Manager at Nike. Josh is a lapsed CPA, and has a BS in Economics from Eastern Oregon University.

AR

How to Create an Enduring Workflow for AR

Please note: Vocabulary in the payment automation world varies. While customers (i.e., clients, buyers) and their suppliers (i.e., vendors, beneficiaries, sellers) are both considered customers to payment automation companies like Nvoicepay, this article will use the terms “customer” and “supplier” to distinguish between them.

Imagine having to switch out old railroad tracks while a rusted steam engine thunders across. Adopting modern electronic payments runs about as smoothly for banks.

When you think about how old banks are in the U.S., it’s an understandable plight. They’ve been running on the same tracks since the first bank’s founding. Additional features, like wire payments and credit cards, were added over time as a complement to the old system. But the rise of nimbler financial technology (fintech) companies has lit a fire under them. Now they face the challenge of converting their processes to electronic means without disturbing their clients’ day-to-day business.

In a way, fintechs have it easy. Their very nature makes competing against banks a breeze, primarily because banks were built to last, and fintechs were built to adapt. They can easily shift gears to meet demand and immediate needs. Meanwhile, banks are frequently caught up in bureaucratic processes that make it virtually impossible to react quickly to problems.

Financial and fintech industries feel the contrast most often when tackling payment security—specifically when it comes to cards. Even though check payments incur 25% more fraud instances than card payments, according to the 2019 AFP Payment Fraud and Control Survey, many companies hesitate to make the switch to more electronic means.

Kim Lockett—the Director of Supplier Services at Nvoicepay, a FLEETCOR company—offers a glimpse into why companies are hesitating to shift gears: “Fraud is not a new issue to companies,” she states. “But what we’ve learned is that fear of change overrides the fear of potential fraud loss, even among companies who have already incurred those losses.”

With almost 30 years of experience in payments and financial services, Lockett possesses a holistic perspective on supplier expectations for seamlessly receiving payments, with payment fraud protection listed as one of the highest priorities. She’s heard all the horror stories, from a small business whose checks were stolen out of their mailbox and cashed, to a company whose employee tried to use business deposit information to clear her personal checks.

That’s not to say that errors and fraud don’t occur for card payments as well. But they occur significantly less and are much easier and faster to resolve than check, ACH, and wire payment issues.

What’s the Holdup?

In the last decade, fintech companies have improved the tracks on which many accounts receivable (AR) teams function. From providing lower processing costs for card payments to offering user-friendly portals for reliable payment retrieval, fintechs transform painful AR workflows into a functional process.

Meanwhile, banks have just begun to offer pseudo-solutions that appear to be tech-friendly but still run on old tracks. An excellent example of this is lockbox technology, where banks mitigate the processing of check payments and their data for their larger customers by taking on the work themselves. This sort of offering likely extended the life of check payments. Still, it didn’t eradicate the underlying problem: that even though work has been lifted directly from their customer’s shoulders, someone at the bank still has to process checks and submit data for manual reconciliation. The process is hardly automated, and the advent of payment processing technology has all but made the entire process impractical.

Embracing the Future

Of course, the best way to avoid check issues is to avoid checks. These days, electronic payment methods offer higher levels of security. But if electronic options like virtual card numbers are such a fantastic option, why are so many companies avoiding them?

Lockett states: “In general, I think companies are afraid of handling credit card numbers because they feel there is risk involved.”

It’s not the dangers of check payments, but misconceptions about electronic payments that cause companies to refrain from accepting them. Many AR teams rationalize that they’d rather respond to the inevitable check fraud cases they understand than walk unprepared into the relatively unknown territory of card fraud.

When checks are stolen and cashed, there’s very little that can be done. At the end of the day, someone will be out that money. Other electronic payment types like ACH and wire are significantly safer, but can still experience fraud, especially internal instances, such as when a company’s employee submits their personal bank account information to receive company payments. Whether these issues are reversible is dependent on each unique scenario.

Card payments, particularly the virtual card numbers provided by fintech companies, are typically protected by two-factor authentication. Whether this means that AR is supplied with a login to access secure details or a portion of a card number, the information is much more difficult for bad actors to access, securing the payment process and reducing the risk of fraud.

In the end, not every company will have the capacity to accept card payments, so leaving alternate options open like check and ACH truly boils down to how much individual payment providers value customer service.

Taking Suppliers Along for the Automation Journey

In many cases, banks have rushed to cater to customer’s needs, leaving suppliers in the dust when it comes to follow-through on electronic payments. Despite these efforts to change, most larger banks still follow their old tracks, and their customers and suppliers experience the same lack of customer service they always did.

With over 10 years of support development behind them, fintechs have expanded their offerings to suppliers, catering to their specific needs, whether they require something as simple as customizable file formats or a more significant request like payment aggregation. Fintechs that follow through with supplier support are truly delivering on their promise of offering an end-to-end solution. They are building tracks that support the advanced bullet trains that companies have become.

“Ten years ago, companies were reluctant to add virtual card payments to their list of accepted payment types,” says Lockett. “Education, experience, and word-of-mouth have established virtual card payments as a mainstream and relevant way to conduct business.”

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Alyssa Callahan is the Content Strategist at Nvoicepay, a FLEETCOR company. She has five years of experience in the B2B payment industry, specializing in cross-border B2B payment processes.

trade finance

Industry Advocacy Required to Enable Trade Finance Market Access and Growth

In a whitepaper released last year, the International Chamber of Commerce (ICC) urged the trade finance industry to work together to ensure that regulation does not hinder the availability of trade finance. Olivier Paul, Director, Finance for Development at ICC, explains how a fair regulatory environment across regions is key to the industry’s growth.

In the wake of the financial crisis of 2007, regulation and compliance requirements have had the unintended consequence of negatively impacting trade finance provision. As banks adapt to ever greater compliance and regulatory requirements, they seek to minimize risk by reducing their number of correspondent banking relationships. This phenomenon, known as “de-risking”, especially affects small and medium-sized enterprises (SME) in emerging markets that need financing the most.

Accessing adequate trade finance is already tough for SMEs, who often lack the collateral, documented history of past transactions and knowledge of the financial instruments available to them. This has led to a US$1.5 trillion gap between the demand and supply of trade finance – or gap – as SMEs find themselves most neglected by financiers.

In its report, Banking regulation and the campaign to mitigate the unintended consequences for trade finance, the International Chamber of Commerce (ICC) outlines how some post-crisis banking regulation has unintentionally led to the widening of this trade finance gap. The report argues that industry advocacy is necessary to ensure fairer treatment of trade finance, as several examples already demonstrate.

Unintended Consequences and Successful Advocacy

Despite well-meaning capital and liquidity requirements contributing to the resilience of the financial system, they have also limited banks’ ability to invest in cross-border relationships, leading to concerns relating to the treatment of trade finance instruments across regions.

For example, the Basel Committee on Banking Supervision (BCBS) introduced the third installment of the Basel Accords – a set of international banking regulation recommendations – in 2010. However, the BCBS does not have the authority to enforce its recommendations, leaving national – or supranational – institutions to write the recommendations into law.

What’s more, these recommendations allow significant room for interpretation, allowing each jurisdiction to adapt them accordingly. This results in inconsistencies across jurisdictions, leaving emerging market banks subject to the resulting ambiguity.

In particular, the Net Stable Funding Ratio (NSFR) for financial instruments supporting trade finance caused concern among many industry practitioners. The European Commission and Council, as well as the European Banking Authority, recommended that NSFR have a variable rate of 5%-15% depending on the maturity of the transaction. In many jurisdictions outside the European Union, however, the NSFR rate is either flat – at a maximum level of 5% – or non-existent.

This represented a clear disadvantage, and one affecting the whole market. As such, the industry-led by ICC – advocated for a fairer treatment of NSFR ratios for trade finance. This resulted in a significant reduction in the spectrum of rates which now stand at 5% for a transaction maturity of under six months, 7.5% for a transaction maturity of under a year, and 10% for maturity of over 12 months.

Early Start

To ensure the highest success rate, it is essential that discussions between industry members and regulatory authorities take place at the earliest stages of the decision-making process. With regulatory adoption and implementation processes taking up to a decade in some cases, the industry must work together with regulators and maintain a proactive approach to promoting fair regulatory treatment of trade finance.

The document outlining the finalization of the Basel III framework was published in 2017 but will only be enforced between 2022 and 2027. Action is needed today if the industry’s voice is to be heard and acted on.

Banks have already identified several areas relating to trade finance – such as the treatment of unconditionally cancellable commitments, the minimum durations to calculate risk-weighted assets and the treatment of subsidiaries in large groups – where discussion is needed. Over the next few years, banks and industry bodies will need to engage with these topics, as national regulators translate the finalization package into national legislation.

Next steps

Some 80% of international trade flows involve the recourse to a financial instrument, according to the World Trade Organization. To encourage the use of trade finance worldwide – and ensure the widest market access especially for SMEs – harmonization of regulations will be required.

Much work has already been done to promote the fair treatment of trade finance within banking regulations. However, regulations will not adapt unless all stakeholders voice their concerns. It is up to the entire industry – and ICC, as the largest and most authoritative voice in trade finance – to be at the forefront of this work.