B2B Payments in Europe Show Similar Dynamics to US
Some of the sharpest prognosticators are forecasting dramatically improved business conditions for later this year, as long as companies can weather a potentially painful winter. A similar dynamic exists in the realm of B2B payments, according to survey results from Europe-based B2B corporate finance and A/R teams.
Last month, The Economist pointed to “tantalizing hints” that the pandemic and the two decades of tepid economic growth that preceded it “may soon give way to a new period of economic dynamism” driven by a resurgence in productivity growth. In a new report on 2021-and-beyond trends, McKinsey consultants contend that the rapid acceleration of digitization, pandemic-induced changes in purchasing behavior and other COVID-driven developments will boost productivity while letting businesses and society “look forward to shaping their futures rather than just grinding through the present.”
Ah, won’t that be welcome? “There’s no going back,” the McKinsey experts emphasizes. “The great acceleration in the use of technology, digitization and new forms of working is going to be sustained. Many executives reported that they moved 20 to 25 times faster than they thought possible on things like building supply-chain redundancies, improving data security and increasing the use of advanced technologies in operations.”
We witnessed similar levels of acceleration in the adoption of advanced payments technology and processes last year (as MSTS CEO Brandon Spear and other thought leaders have noted in Treasury & Risk magazine). Still, a number of widespread payments pain points require immediate attention.
Biggest A/R Challenges
Our survey of 200 Europe-based B2B corporate finance and A/R executives identify two high-level payments challenges that hinder the achievement of finance priorities:
- The limits of current supporting technology; and
- A/R teams that are “too stretched by current processes and tasks” – and obstacle that frequently arises when supporting technology is outdated and/or suboptimal.
These impediments, our survey findings also suggest, give rise to more specific pain points within payments processes.
Survey respondents identify the following activities (listed in order of decreasing pain) as their biggest A/R challenges:
- Managing disputes;
- Onboarding customers;
- Invoicing customers;
- Payment application; and
- Underwriting and extending credit.
The coming 12 months will be “the year of transition,” according to McKinsey. How soon that transition occurs in the payments realms will be determined by the efficacy of pain-remediation efforts throughout the A/R cycle.