Creating better digital payments for businesses

Payments are a central focus in digital banking for retail customers. This is less the case when it comes to businesses.

Layne Kight from Deluxe is with us to share ideas on how banks and credit unions can create a better payments experience for their business customers.

A few takeaways from the conversation:

• The case for banking institutions developing a more digitalized payments structure is straightforward – that’s what business customers want.
• Banks often overlook easy wins just waiting to be collected because they’re focusing too much on the long-term big picture.
• Leveraging successes on the retail banking side is a worthwhile shortcut as they seek to better serve their business customers.

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INTERVIEW TRANSCRIPT

Layne Kight, senior product manager for digital payment solutions at Deluxe. Welcome to the BAI Banking Strategies podcast.

Thank you so much for having me. Really happy to be here with you today.

So Layne, for those listeners who may not be totally familiar with Deluxe, can you tell us a bit about the company and what you do?

Deluxe is a trusted payments and data company, and we’ve been around for more than a hundred years in the payment space. So our mission is to help businesses pay, get paid, and grow. We really are in the nature of working with financial institutions and with businesses to really help them streamline all of their cash processing, their receivables, their payables, their data, any information like that. We are in the business of being great partners to banks and those businesses as well. My job within Deluxe really stands on the digital receivable solutions. We think of any sort of collections application that involves digital, that is the world that I live in, that is the world that I play in, and that is the world that I love to be in.

Today we’re here to talk about the transition that businesses are making from payment processes that rely heavily on paper to ones that are built on digital capabilities. So Certainly some businesses are ahead of the pack in making this transition, but based on what you’re seeing in your day-to-day, where is the bulk of the pack?

It’s kind of a mixed bag. There are businesses that are really far down the path. There are some that are just beginning the journey. From what I see, I think many businesses, most businesses have started to take steps towards achieving that, whether that be starting with their payments, whether that be their technology infrastructure and moving things into the cloud that we hear about all the time. People have started and are making progress, but I think there is a long ways to go for many of the organizations. And I think a lot of it has to do with access to the technology, especially in the payment space, but it also has to do with a lot of legacy infrastructure that’s in place at many businesses and how they go about handling that and transitioning that into a more digital-friendly, electronic-friendly environment.

We all know that traditional banks and credit unions are in the midst of their own broad transition to a more digital future, and some are further along than others in getting there. So generally speaking, I’m wondering where banking institutions fit into the digital payments transition for their customers. Are they ready to do their part in this transition? And what kinds of opportunities might this present for them?

I think many banks are on the precipice of being ready for this digital transformation of sorts. As we start looking at some of the larger financial institutions, some of the bigger banks, a lot of them have made a lot of progress. But that is how it’s always been in the banking industry is that many of the larger financial institutions tend to lead the pack when it comes to revolutionary changes like this. And what we see is some of our friends in community bank and regional space are really starting to take a focus on how they effectuate these types of changes for their customers and how to make this a priority. As we’ve looked at it over the past five years, there was a focus on many different aspects of the business, such as the payable side of the house and the technology infrastructure side of the house, that I think a lot of the focus is starting to turn more to the digital collections applications or their receivable solutions. And I think many banks are at a place where they’re in a good spot to start delivering on this. But I also think there is still work to be done in evaluating how we really can make this a frictionless experience for a lot of the customers who are looking for those digital capabilities.

What’s the pitch that Deluxe and perhaps other players in the space as well make to prospective customers as to why having a more digitalized payments infrastructure makes sense for them?

The first one that all of us can really think of is customer satisfaction. A lot of what we do, especially in the digital space, is trying to meet consumers where they are in the process and helping our clients increase their odds of collection and their speed of collection on the receivable side of the house. But I also think that there is a lot of efficiency to be gained by switching to some of these digital solutions, whether that’s efficiencies within a financial institution’s back office, whether that is efficiency with their clients and what they are delivering. But I also think there’s been a big focus on top-line revenue in a lot of the banking institutions. And as we look more towards the future, and especially with where we are at in the economy and everything that is happening around us, there’s been a bigger shift away from just that pure top-line revenue to focusing in on a lot of the profitability and margin. And that is what these digital solutions really help to drive not only for the banks but for their clients as well. So they’re not only delivering on the client satisfaction, the efficiencies that can be gained with things, so you’ll hear lights out and efficient processing, but it really also helps drive the business and the foundations of things on the balance sheet by providing a lot of that margin expansion and profitability that banks are looking for in solutions that they offer today.

I would think that the cost efficiencies and the process efficiencies of going digital would be attractive to companies that want to keep their customers happy and at the same time streamline their operations in ways that benefit the bottom line. What are some of the things that are keeping these businesses from moving faster on this?

I think a lot of it is that many banks just don’t know where to start and the idea of having this digital revolution or digital transformation can be overwhelming. And many organizations don’t know where to start when they think about what to do and where to begin. And so having a really clearcut strategy that puts their clients at the forefront of what they’re looking to do is going to be critical moving forward. And on top of that, I think one of the hardest things, as all of our banking friends can attest to, finding the right partner can be a challenge. As we look at the fintech space, there are many, many players in the market who do many different avenues and many pieces of the puzzle that they might need to provide their clients with solutions. But oftentimes getting the right partner in place and having one that can be trusted and going through all of the due diligence, that is a big struggle for many of the banks.

Sometimes there’s a disconnect between where companies think they are in terms of instituting structural change and where they actually are. Based on your experience, do you see this kind of spread when it comes to going more digital with payables and receivables?

Absolutely, I do. It’s one of those that as you look across, oftentimes you can miss easy opportunities because banks might be focusing on and oftentimes tend to focus on the larger scale. When we think of things like APIs and having that available and looking at how our clients interact with us as financial institutions and we as your partner to many banks, we miss some of the foundational pieces of it. And examples come to mind of the ease of transitioning some of the paper checks to digital payments on the receivable side of the house and taking and figuring out where on the payable side of the house you have opportunities to move away from paper checks. And I think we’ve done a good job of that in the banking space. But I do think there are oftentimes easy opportunities, easy wins that we’re overlooking because we’re focused on a bigger picture and not really identifying what it is that our clients are really looking for and something that they really need. And having that client-first approach, taking that from that UX/UI design and really thinking about that and applying that to the strategy and concepts that banks have, I think that is going to be helpful to them in identifying where they do have those gaps between where they want to be and where they are today.

So Layne, now that we’ve kind of set the stage, we can start getting into some advice and potential remedies. Again, there’s a continuum that businesses fall along in transitioning to digital payments. Maybe a good way to go here is for me to maybe pick a few points along that continuum and you to offer your thoughts on what businesses in each position should be thinking about and doing to expedite their migration and also what their banking partners should be thinking and doing. Let’s start with those that maybe haven’t started digitalizing their payments or perhaps have only taken baby steps in that direction.

I think the first thing that any business needs to do, whether it’s the financial institution or the business themselves, is identify and define what they want their role to be in the process. I think that’s huge. And in development, you hear it talked about in terms of personas and user stories, but the same type of thing applies to how businesses are going to be effectuating strategies like this and banks at the same time. So as they’re getting ready to start this process, first and foremost define where they want to be, where they want to play in their spaces, in their verticals, in whatever they may be in. And then, two, really assess their client base. I think we take a lot of what we do in business from consumer trends. And looking at where their client base is, what they’re asking for, and putting them at the forefront of how they are creating their strategies around digital payments, around digital infrastructure, that is going to be the biggest piece of advice that I can give to any business that is just starting. Define where you want your role to be in the process, assess your client base, and figure out a good starting point to take those first steps. And if that is just simply offering online payment capabilities, transitioning some of your vendor payments from check to ACH, to virtual card to eCheck, whatever that is, really start small and identify where you might be able to have some really good wins on the front end and build from there.

OK, let’s move on to those that have decided that going digital makes sense for them and they intend to get there, but for whatever reason they’ve only made partial progress so far. What do they need to know or what steps should they be considering to pick up the pace on their transition and how can their banks help them?

I think the most important thing, and I’m going to start with the banks first, I think the most important thing that banks can do is be a consultative partner to their clients. And that’s something that I am huge on within my role within how I operate it, is trying to be that consultative guide. I think in previous, as commerce has expanded in the digital transformation and journey has expanded across all avenues of business, banks were in the game of selling products and solutions. And now banks need to be in the game of being consultative partners and helping businesses drive that strategy. Especially with where we are, there are going to be many businesses, like you said, that haven’t begun. But for those that are in the midst of their transformative journey, I would say look to the industry, look to the peers, but really keep their pulse on consumer trends. That is important to identify where the next steps are going to be happening, where the next evolution is going.

Finally, now we’re looking at a business that is well down the road to having a viable digital payment system in place. They’re not quite to the finish line, if there is such a thing as a finish line. Is there in fact a finish line? And if not, what should the priorities be for businesses and banks in this situation?

I think if there’s a finish line, I’m going to be out of a job. It’s one of those that the evolution is always going to happen and it doesn’t stop. In fact, what we’ve seen over the previous five to 10 years is that the pace of change is happening more and more and more quickly. And what we need to do and what banks need to continue to do and businesses need to continue to do is find ways to be nimble and quick. And for all of my banking friends out there, we say yes, but it’s a challenge. Finding ways to be more agile in development and agile in what we are doing outside of just the “agile framework,” but finding ways to move faster and adapt to new changes is absolutely imperative. We’ve seen over the past three years the call for banks to have things like open API catalogs, to have embedded banking. Those were concepts that were not even around even like five to 10 years ago necessarily. And in the past two to three, it’s almost a prerequisite, especially as businesses and banks look to sell and upmarket and things become more competitive. That is where things are heading. And if we have anyone that thinks they are at the finish line, I would invite them to turn around and see how many people behind them that are moving on that journey with them aren’t slowing down. The same as the trends businesses and what they are going to be asking for and their competitors aren’t going to be slowing down.

Layne, what you’ve been sharing with us is from the commercial banking perspective. Most, if not all of this is already on the retail side of banking. Wrap us up if you can. For banks looking to play a more active role in helping their business customers make that move from a payment system dependent on paper to one that’s digitally driven, what can they learn and apply from what they’re already doing with their retail accounts?

First and foremost, make it about the experience. Put the consumers first. Just as our retail friends have to do because that is the nature of their business, put yourself in the consumer first or the business, whoever is making that payment to your client, and create something that is designed to be as frictionless as possible. And take that. We’ve done that on the retail side of the bank. So make it about the experience, be nimble, be flexible. Learn how to learn is an important one. I think oftentimes we go to conferences, we go to different things and we walk in with all of these ideas and preconceived notions about what businesses want, but oftentimes we’re missing what they really want and need, which is putting their consumers, their clients at the heart of everything that they do. And so it’s taking that human approach and putting those humans at the center of the solutions and components and pieces that we are designing as a commercial bank to really take that next step and create something that is going to be impactful not only from a revenue and a client perspective, but something that is going to be impactful from the experience perspective.

Layne Kight, senior product manager for digital payment solutions at Deluxe. Many thanks again for joining us on the BAI Banking Strategies podcast.

Thank you so much for having me, Terry. I look forward to speaking with you again.