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How a Nice-to-Have Became a Must-Have

For most midsize companies, digitalizing their payments system is a necessity—not a luxury.

In a flash, the global pandemic has turned what once were considered pie-in-the-sky innovations for midsize businesses into essential survival tools.

Payment technologies are a prime example.

Most midsize businesses were at least considering upgrading their payments system to remain competitive and keep pace with evolving consumer and business preferences toward cashless and online options. But the extended pandemic has pushed more consumer and B2B commerce to digital channels and rendered cash and other paper payment methods impractical in many cases.

These challenges have forced companies to ditch their paper invoices in favor of fast-tracking digitalization of their treasury and payment functions. In fact, a 2020 McKinsey & Co. survey found that companies pushed up “the digitalization of their customer and supply-chain interactions and of their internal operations by three to four years.”

Digitalization has accelerated at a rapid pace among midsize consumer and B2B companies, says Victoria Albovias, Head of Corporate Treasury Consulting with J.P. Morgan’s Commercial Bank, which has a payments business that combines the firm’s treasury, trade, card and merchant service capabilities.

“It started on the consumer side, but then it has very quickly made its way up to the business side,” she says. “Businesses are focused on, ‘How do we make the payment experience more seamless and frictionless for the people who use it, whether it’s a consumer or the accounts-payable clerk?’”

The road to digitalization

The move toward digitalization is a big change from several years ago, when large companies with huge IT and accounting departments were the only businesses offering both consumers and business customers payment method flexibility. Today, the options include various cashless transactions, payments by mobile applications, digital wallets, fintech platforms, cryptocurrencies, loyalty program points and loading QR codes.

Now, the vast majority of small and midsize businesses are digitalizing at least some aspects of their accounts receivable and accounts payable operations—in large part because they view them as essential to having good relationships with their customers and vendors, according to The Strategic Role of the CFO Playbook, a recent study of chief financial officers.

Terry Hill, J.P. Morgan’s Managing Director in Middle Market Banking and Specialized Industries who leads their practice focused Emerging Middle Market businesses, says midsize firms are aware of growing digital expectations among customers, employees, suppliers and vendors alike. In a world where it seems like almost everyone has their smartphone in hand at all times, the options to pay online or through apps are increasingly becoming mandatory.

“These are tools that consumers and everyone else expects you to have,” says Hill. “Some people are saying, ‘If you don’t have that, we can’t work together.’ So, if you’re not there yet [with digitalization], you’re missing the opportunity to work with people—or to work with people in a really efficient way.”

Nevertheless, many midsize companies reported several barriers to digitalization, according to the PYMNTS study, including a need for infrastructure support (55.3%); digital competencies among staff (42.7%); and problems integrating across functions (38.5%).

Security is also a big concern. In 2020, 74% of organizations were targets of payment scams, according to the 2020 AFP Payments Fraud and Control Survey. Adopting electronic payment solutions can help minimize the likelihood of payments fraud, says Hill.

“It’s hard to overstate the importance of the safety and security of transactions,” he says. “We work a lot with our clients to make sure they understand the risks; then they can help guard against them. All these digital tools have the opportunity to provide safeguards.”

Payment solutions have proliferated

Many solutions now exist for midsize businesses looking to digitalize their payment and treasury systems. J.P. Morgan—the first bank to offer real-time payments across USD, GBP and EUR currencies—provides a comprehensive suite of tools that are scalable and customizable to an organization’s needs and goals. These solutions help optimize cash flow visibility, improve working capital, reduce treasury operating costs and strengthen fraud protection.

Among these services, J.P. Morgan offers Chase Connect—which allows businesses to manage multiple accounts and control cash flow from a single dashboard—and the J.P. Morgan Access digital banking platform. Both streamline cash management activities and enable companies to optimize their global payment systems.

In October 2021, J.P. Morgan announced the launch of Digital Bill Payment, powered by Paymentus, a leading provider of cloud-based bill payment technology and solutions. Digital Bill Payment equips businesses with a single, modern platform for customer engagement, bill presentment and payments. “This is part of efforts to help clients digitalize the entire receivables journey—via new innovations like request to pay and upcoming solutions aimed at automating the acceptance of virtual card payments,” stated a J.P. Morgan press release.

Ultimately, the scramble to digitalize will prove beneficial post-pandemic as the technology improves engagement with customers and vendors and provides insights that can help companies grow revenue, says Albovias.

“It’s a huge enabler for small and midsize businesses,” she says. “For some companies, it’s a necessity, but others are looking at these digital capabilities to really differentiate themselves. This is a really exciting time for payments and treasury.”