Citizens pushes real-time billing as a fix for supply chains

While instant invoicing and real-time payments have gained some traction as a way for large billers such as utilities to help consumers manage balances, Citizens is betting corporate clients can also benefit from the same liquidity to offset the uncertainty in supply chains.

"The need for real-time processes for businesses has become more apparent," said Matt Richardson, head of the treasury solutions division at Citizens Commercial Banking in Boston. The unit of Citizens Financial plans to go live with request-for-pay (RfP) via its accessOptima treasury management system during the first half of this year, covering both business-to-business and business-to-consumer transactions.

The deployment comes as banks start to pair RfP with The Clearing House's RTP rail, creating a combination of instant billing and real-time payments. The use cases thus far have focused on overdraft protection for consumers, but there are also potential business uses such as addressing the lack of predictability in supply payments.

"There's benefits in having precision in payments. That's never been more important than it is now," Richardson said. "That's attracting corporates to real-time payments and billing. It can be a benefit for banks to position themselves for this future."

Financial institutions and technology companies have offered products to address the supply chain crunch that has accompanied the pandemic. BNY Mellon, for example, has used its membership in the bank-supported trade finance consortium Marco Polo to build cross-border payments and financial products for business clients; while the payment technology company Rapyd recently acquired Neat, a vendor that plugs into businesses globally to support international supply chain transactions.

Citizens is also trying to address the changes to staffing that accompanied the pandemic. As businesses moved staff away from centralized offices in the pandemic's early stages, B2B transactions became less reliant on paper-based invoicing and payment collection. Even as employees return to offices, Citizens contends the move to digital is permanent. Business clients also want to spend less time on treasury management, which would require the timing of billing and payments to be more closely matched, according to Richardson.

"Given the staffing shortages and supply chain problems, the whole idea of having a physical location and mailing paper checks has been illustrated as an unsustainable model," Richardson said.

The bank recently reported results from a survey of 260 executives that found high demand for real-time payments, with 85% of respondents saying that offering real-time payments was the most important factor when evaluating a bank. Another 81% said real-time payments would be transformative to their firm's payment processes; 56% have adopted RTP or are in the process of doing so. And 59% said they would reallocate time "wasted" on treasury management on business strategy if they had the option.

Research from London-based Icon Solutions found 73% of executives from 50 corporations said real-time billing's top benefit for businesses is reduced cost of reconciliation, with 63% saying Request for Pay provides better visibility into cash flow and 56% saying it can reduce overall treasury expense. Another 71% cited RfP as a way to reduce dependency on payment cards.

Despite the demand, adoption of RtP among banks has been slow, which Louise Shorthouse, senior Payments Consultant at Icon, attributes to a low number of options for corporate clients.

Only 18% of banks and payment companies Icon surveyed offer Request for Pay services today and only 27% plan to within the next 12 months, according to Icon. A primary hurdle is banks viewing RfP as a "nice to have" as opposed to a must-have, making it difficult to dedicate financial resources for bank technology upgrades, Shorthouse said in an email.

But banks may be more willing to adopt real-time payments and Request for Pay if they see their closest rivals offer those services.

"The survey shows that companies are paying attention and see the value of RTP, and will look to partner with a bank that offers it," Citizens' Richardson said.

A handful of banks, including JPMorgan Chase, PNC Financial Services Group, BNY Mellon and U.S. Bancorp, have adopted real-time billing, while about 200 banks have adopted real-time payments.

The current bank account coverage for real-time payments in the U.S. is about 60%, Richardson said, adding that participation from bank technology vendors Jack Henry and Fiserv in both RfP and RTP should boost that coverage to about 75% in the next two to three months. "The Clearing House has done a good job working with the core providers, and that will add thousands of banks to the market," Richardson said.

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While the last decade was all about mobile payments and the consumer, the next decade is all about building new payment fabric for businesses, embedding technology into payment flows, and building programmable payments, said Meng Liu, a Beijing-based analyst at Forrester who leads research on B2B payments.

"Corporates as well as small and medium-sized businesses will pay to alleviate friction from arcane processes and legacy B2B payments, to initiate payments as a service within enterprise resource planning solutions, or to present payment buttons within invoices to simplify reconciliation," Liu said.

Real-time payment is one way to address these pain points. Other options include application programming interfaces that can link corporations to digital payments through a web connection; and artificial intelligence, account aggregation and virtual card issuance, Liu said, adding real-time billing is still in its early stages as part of the mix, but does offer value.

"Flexible and real-time payment methods, and an ability to enter into dialog regarding payment, are powerful features. But wider adoption and strategic vision is needed to cement the value of the service," Liu said.