Payments Operations: 7 key tips & takeaways for 2022

Over the past decade, one of the most tangible changes in the payments sector has been the sheer volume of emerging fintech and challenger brands – in both the consumer and B2B spheres. 

In our recent webinar, Payments operations in 2022: Key challenges and the role of automation, our expert line-up discussed the main obstacles facing firms in an increasingly competitive and fast-evolving payments landscape. 

Attendees heard from AutoRek’s Global Payments Lead Nick Botha and Steve Murphy, Mercator’s Director of Commercial and Enterprise Payments Advisory Service. They examined how operational needs have changed over the past decade, the importance of financial controls and reconciliations, and the role of automation. 

Here are seven key takeaways from the event: 

1.  There are five main challenges facing payment operation teams 

The main challenges are: 

  1. Regulation 
  2. Scale 
  3. Optimisation 
  4. Competition 
  5. Cross-border payments 

The success of payments firms today will depend on their ability to enhance back-office processes to accommodate these challenges.  

2.  The payments sector is outpacing banking 

Traditional banks face fierce competition from their newer fintech counterparts. 

The payments sector outperformed the banking sector in total shareholder returns by about two times between 2011 and 2021. And more than six in 10 banking executives say they view non-traditional payments firms more competitively than traditional peers. 

PwC has predicted EU banks could lose up to a third of payments revenue to disruptors by 2025. 

But it’s not all bad news for banks. The rise in the number of fintech brands and payment methods will result in a corresponding rise in revenue available in the payments industry. 

3.  Collaboration is the norm 

While competition is a significant challenge for payments firms, there is one positive trend emerging in the US: the relationships between banks and their newer, tech-focused counterparts are becoming increasingly collaborative. 

Steve said: “The banks can’t necessarily deliver new product and updates as fast as fintechs, and fintechs in the B2B space can’t necessarily get access to the customers, treasury, and CFOs that banks do. So, working together seems to be a win-win.”

4.  Firms expect more regulations 

Payments firms across the UK and US are anticipating greater levels of regulation over the next two years.  

Nick and Steve discussed AutoRek’s latest payments survey, which found that 73% of US firms agreed with the following statement: “Over the next two years, I expect there to be more regulations for my payments firm to comply with.”

While fewer UK firms agreed with the statement, over half (53%) said they expect more regulations to be implemented in the next two years. 

5.  Larger firms are prioritising their middle and back offices 

Smaller firms are more likely to prioritise their front-office as they aim to acquire new customers.  

However, for larger firms with an established customer base, gaining new customers is less of a priority. 

While Nick says smaller firms might be able to “get away with” using Excel spreadsheets for some of their operational processes, they face significant challenges when volumes scale quickly.  

This is because spreadsheets are not a flexible solution and do not accommodate growth. 

6.  Reconciliations are more complex than firms think 

“It’s not just taking a transaction in a CSV format and matching it against what resides in the bank,” Nick said. “It’s very complex, and there’s a lot of different steps to it.”

For larger firms (500+ employees), the most labour-intensive steps in reconciliations are journal entries, attestation, and sign-off. For smaller firms (less than 500 employees), data transformation and enrichment are the most labour-intensive steps. 

7.  Spreadsheets are no longer fit for purpose in 2022 – and beyond 

Despite their ubiquity and low cost, Excel spreadsheets are not suitable for the modern payments landscape. 

“When there’s a lot more complexity, when there’s a lot more scale, spreadsheets are no longer fit for purpose,” Nick said. 

Using an automated tool, however, firms can expect to save time and redistribute resources to tasks that add value and increase profits. And, while automated reconciliation software is an investment, firms will soon achieve an ROI, saving them money in the long run. 

To discover more about AutoRek, explore our payments solution here