Time is money: Intelligent Payment Routing saves businesses both 

January 31, 2022

While some business activities should always be handled by human power, experience tells us that many are best left for computers. Intelligent Payment Routing isn’t just a clever name – it’s the logical choice for modern money movement.

 

Corporate treasurers, payments and money movement professionals make a living of knowing the value of time and money, then aligning processes and technology in order to maximize that value. Opportunities to increase value across treasury management activities can range from the very obvious (like moving away from paper-based processes) to the esoteric (like manual account validation breakdowns causing payments failure); but, for mid-market to corporate and commercial enterprises with high transaction volumes, solutions to these challenges must be more efficient in themselves than the sum of their features.

Intelligent Payment Routing (IPR) technology is one example of an accounts payable solution that maximizes value by combining its features with their benefits. With the ability to deploy high-precision technology, end-to-end, along each step in the invoice-to-payment process, IPR, or “smart payments” could be the smartest AP innovation on the shelf today.

 

What is Intelligent Payment Routing technology?

Simply stated, IPR is a software application that partners pre-defined rules with all available data to understand requests (“pay a bill”) and recommend the “best” way to grant the request within established parameters. However, intelligent payment routing technology is perhaps better defined in terms of a few of the problems it solves, and subsequent value.

Problem: A single payment is information-intensive.
Value: IPR can know all the info.

Notwithstanding the fact that humans are demonstrably capable of following rules and making decisions, IPR is driving unprecedented value for accounts payable functions with its ability to “know” every relevant fact about every payment request, then recommending the most efficient payment rail to use (fastest, cheapest, preferred, etc.), identify possible errors, detect potential fraud, or automatically originate or hold that payment request – all at the speed of light.

Problem: 10,000 payments are very information-intensive.
Value: Scalable IPR is as powerful among 10,000 payments as it is the single case.

Intelligent payment routing can also be understood in terms of scalability. Consider the fundamental AP process: at a glance, a company is invoiced by a supplier or service provider, matches that invoice to a purchase order, originates the payment and, if successful, ensures the transaction is recorded and reported. Ultimately, the value of the process relies upon both the successful transaction and how effectively it recognizes and reduces the risk for error. In the case of a typical large corporate enterprise, where AP transaction volumes can easily amount to 10,000 per week or more, the value of intelligent payment routing technology “knowing” all relevant data (vendor status, preferred payment rail, etc.) without sacrificing the fidelity of the single payment case, is infinitely scalable. 

 

Where and when does IPR fit in?

For end-user AP professionals, treasurers and CFOs mandated with the heavy lifting of corporate digital transformation – where risk is seldom rewarded – intelligent payment routing is a safe bet for quantifiable gains in terms of time and cost savings, and an uncommonly large step forward in the journey to automated processes, digital cash management and faster payments rails.

“IPR doesn’t just help you initiate payments and eliminate manual steps. It will help you find the cheapest, or fastest, or both, payment rails on a certain date, with customized security.”

And, no matter how much or little progress a company has made in the digital transformation journey, implementing intelligent payment routing technology may provide a noteworthy boost toward meeting strategic goals. If, for example, a company’s mid-term goal is to increase liquidity for potential acquisitions, IPR rules can be set to prioritize transactions on a specific payments rail, or customizing the AP cycle to each vendor’s specific payment terms and reserving non-outstanding cash to interest-bearing accounts until needed.

Intelligent payment routing settings can also be programmed to “rank” payment rails according to suitability – whether faster, cheaper, or both – in the payments origination process. For example, when a vendor profile indicates whether or not they’re enabled on a certain payment network, or prefer Same-Day ACH, or exclusively accept Wires, the IPR interface will “alert” the user of the various options, describing which rails match the preset criteria in order, recommending each according to how closely they’ll match. By eliminating the need for the payments originator to research and verify a vendor’s ability to receive, or preference for, faster payments, treasury managers and AP professionals may capture significant, immediate gains in process value. 

 

Intelligent Payment Routing and Real-Time Payments© (RTP)

Even if rapid savings in time and cost were the only benefit of IPR, the dramatic increase of faster payments and RTP adoption should come as no surprise.

“If there’s one really prominent use case we've seen success with, it’s pairing IPR with RTP,” said Tony Davis, Vice President and Digital Platforms Product Manager with U.S. Bank.

“There are nuances with RTP, namely inexperience, and (IPR) is like the fast lane for learning and using that rail, and finding out which vendors are on the RTP network,” he said, “and if it turns out that’s not an option that cycle, IPR tech will offer you some quick-pivot alternative payment options, prioritized however you’ve determined.”

From the “fast lane” perspective, IPR can accelerate transformation even further by delivering value as a critical enabler to payments orchestration – a unified payables experience that combines IPR, purposefully automated sub-processes and AI-driven cash forecasting. Although payments orchestration has been recently categorized as a post-digital transformation activity, the proliferation of API-enabled banking, B2B, B2C and P2P money movement indicates that industry transformation is as endless as the possibilities delivered via “Banking-as-a-Platform.” Futurism notwithstanding, IPR is fundamentally an implementation of “brilliance in the basics.” 

 

Core advantages to IPR (in terms of time and money)

  • Logic: Intelligent payment routing technology rapidly accelerates payments processing and initiation by replacing manual steps with a combination of user settings (aka “rules”) and automated data verification to produce logic-based payments rail recommendations. The system may also utilize machine learning to produce payments recommendations based on a user’s profile and history. By eliminating the need to manually research and validate vendor information, and without relying on the user to rank payments types according to each vendor’s preference, IPR can alleviate a significant portion of manual AP operations and allow the function to focus efforts on more strategic work.

    “IPR doesn’t just help you initiate payments and eliminate manual steps,” Davis said,” it will help you find the cheapest, or fastest, or both, payment rails on a certain date, with customized security preferences and ‘learned’ profiles that become incredibly complex and valuable decision matrices – and these tasks are, frankly, typically the most burdensome and mundane for humans … so there’s this intangible benefit with IPR in that it just makes life easier for the users.”

  • Precision: Improved cash management, enhanced controls and increased efficiency are just a few of the benefits realized when AP operations are biased toward precision. Intelligent payment routing delivers unprecedented levels of precision in payables and procurement with “always-on” data inferences that feed potential origination parameters, then using what’s possible to recommend what’s best. And, if leveraging IPR rules to prioritize faster payments rails, transactions can be planned and executed with precision timing and alignment with treasury, CFO, and corporate strategy.

    Davis stated that the value in precision stems from the fact that IPR “gives the user power to control payments and decide when another rail might be more beneficial; but before that happens, the system has already checked against entitlements, set user limits, account validation, customer data updates, whether batch or file is optimal … all this smart data,” he said, “and, if given all this information and you want to modify the payment, you can do it right then and there.”

  • Speed: Intelligent payment routing increases the speed of payments origination by eliminating various manual steps from “legacy” processes, but the value of increased efficiency has effects far beyond the end-user level. For example, by maintaining and updating vendor and payments data real-time, IPR contributes significant data (also real-time) to reporting, analysis and cash forecasting activities. Combining the speed of digital memory with the unmatched connectivity of the Internet of Things (IoT) within treasury operations could potentially fuel real-time updates on cash positions for deeper spend analyses and more informed decisions at the highest level.

    “At the CFO and treasurer level, they’re getting a new kind of information, faster, so IPR is definitely a decision-making tool,” Davis said.

 

Intelligent payment routing: digital transformation ‘without the headaches’

With an impressive array of benefit-forward features, IPR is a digital innovation that can save time and money with relatively light effort to implement. By leveraging all relevant payment data – end-to-end – to eliminate painstaking manual AP sub-processes at any scale, Davis said, IPR “is digital transformation; without all the headaches.” Davis also cautions against limiting use cases and potential according to what’s only currently available. “Given the nature of digital payments technology and the trajectory we’re seeing for the industry, I think it would be fun to have this conversation again … in six months.”

 

For more information about Intelligent Payment Routing, digital payments and automated cash management, visit the U.S. Bank corporate and commercial digital transformation hub, or connect with a treasury management expert.

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