September 19, 2018
The call has been answered and Real-Time Payments (RTP) is upon us. Many financial industry players are rolling out new systems and functionality making transactions quicker and easier for consumers and businesses alike. As these systems become reality, consumers will have efficient ways to manage funds and control the timing of payments, and businesses will experience easier reconciliation and treasury management processes. Now that the industry has delivered the technology, businesses must prepare themselves to use it.
RTP systems affect the reconciliation cycle at every step, so it is important that businesses look at their entire AR process and make changes to prepare. A basic reconciliation cycle for a business would look something like:
The Bill Presentment and Consumer Payment steps are covered by fintech companies (like Transactis) whose technology supports real-time bill retrieval, consumer notifications and providing consumers with ability to trigger variety of payment types through multiple channels. Payment Processing is covered on the backend by gateways, processors and financial institutions – the players that have built new payment rails bringing RTP to reality.
It’s up to each business to ready itself for the remainder of the cycle and how it will be affected by RTP. Here’s a breakdown of important questions and considerations to keep in mind during RTP preparations:
Does the ERP system support integration for both outgoing (billing) and incoming (payments) channels?
ERP systems, in part, assist with the Billing Organization and AR Reconciliation steps of the billing cycle. RTP allows the money and data associated with a payment to transfer from consumer to business instantaneously. For the business, the benefit comes from its ERP system recognizing the data associated with the payment, organizing it, and connecting it with the correct billing account.
If the ERP system does not support integrations for both outgoing and incoming channels, the benefit of RTP is lost.
Are there appropriate resources to support RTP integration?
Even though RTP systems are available doesn’t mean businesses can magically utilize them. It requires technical preparations and operational changes for businesses to have accesses to these faster payment rails. Be sure to allocate enough time for the integration process, as well as designate IT resources to support the change.
Is business ready to significantly change current business processes?
Traditional business process for billing include systems like batch processing – essentially collecting a large group of payments and processing them all at the same time, designated by cutoff times. RTP would allow each payment to be processed individually. Businesses need to determine how their current processes will be impacted by the change from batch to individual processing.
Cutoff times also need to be considered – does the business want to end payments at a designated time each day, or allow payments to be made 24/7? How would this impact reconciliation?
For RTP to work as designed on the large scale, the entire reconciliation process has to change – beginning and ending with businesses themselves. If businesses are not able to record these real-time transactions and export/import real-time data they will not be able to benefit from new technologies. Success rides on the preparations of businesses to accept RTP – and now’s the time to get started.
Eugene Borodavchenko is Senior Vice President, Technical Implementations Solutioning at Transactis, utilizing his years of expierence in IT & Development to support businesses implement exceptional electronic billing and payments solutions.