Although payments systems have been around for centuries, building a reliable, modern and scalable system is rife with challenges, Shruthi Murthy, head of engineering at Modern Treasury, told PYMNTS in an interview.
No matter the location, no matter the payments modality — digital or offline — these systems have focused on three “Fs.” They need to be fast, fraud-free, and have low fees when it comes to the transactions themselves.
And, certainly, existing payment methods have room for improvement, especially in terms of fraud and speed of action. A check is a piece of paper, and people know how to print fake ones. Credit cards and bank transfers are not real-time payments in nature — settlement takes days. Wire transfers are a bit faster, but the fees are higher. International transfers can take even longer.
“The faster the speed of transfer, the higher the fees,” Murthy told PYMNTS, adding that “all of these payment systems are disconnected and have very different specifications for implementation.”
Systemic errors are hard to track and manage, and preventing fraud comes with a monetary cost, built in to protect consumers and merchants alike from bad actors.
Nowhere is the complexity more apparent than with B2B payments, where Murthy noted that the sheer volume of commercial transactions worldwide is staggering — with transaction amounts easily surging into millions of dollars. There’s a lack of standardized interfaces too — stymying money movement up and down supply chains, among vendors, partners and other B2B parties.
Now, she said, there are any number of B2B and payments use cases that require the use of programmable money movement, from ordering food online to applying for loans online. And eCommerce and online insurance firms, to name just a few, require some form of B2B or B2C money mobility.
Given the transaction volumes that businesses manage, it becomes expensive to use the card rails. It’s become common for businesses to build bank integrations and payment operations in house. Those efforts tend to cobble together automated operations and manual processes that manage multiple vendors and partners, software and no end of spreadsheets.
“They employ hundreds or even thousands of engineers and finance controllers to build payment processing automation and manual operations,” Murthy said.
The fact that data moves over bank rails with secure file transfer protocols and raw text files slows down the process, although the data is critical, centered on originating and receiving accounts and payments instructions.
Then back-office teams and finance professionals must make sense of the payments themselves.
It’s become imperative, then, for business to have access to a well-connected set of payments infrastructure that will allow them to make payments and track them automatically.
She noted that platforms such as Modern Treasury — with standardized application programming interfaces (APIs) — can help businesses integrate quickly to their banks and move money reliably. Off-the-shelf APIs help set up a “translation layer” between bank protocols and high-tech money movement infrastructure, increasing throughput speed while reducing cost and complexity.
Improving payments functions can also anticipate and address the exceptions — and errors — that so often occur in payments. If one link in the payments chain is broken, if a system is down, the transaction cannot proceed. On the business side, an account with insufficient funds, for example, can impede the whole process, or a duplicate payment can drain corporate coffers.
Against that backdrop, “building a case management system and approvals rules engine is extremely important,” Murthy told PYMNTS. The platform model can collate the number of payments day over day that succeed and the number that fail, and it can detect any anomalies.
“We can run fraud checks on payment orders before or after the payment and take necessary action,” leveraging advanced technologies to automate those activities, she said. The end result is one that gets us ever closer to those “three Fs.” That payments be fast, as fraud-free as possible, with low fees.
“These are the goals that any money movement system should have, and with the right payments solutions in place, they are all achievable,” Murthy said.
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