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Driving innovation to impact treasury management
And at this time, I'd like to formally welcome everyone to our December webinar, which we, believe it or not, it's already here. It is our final one for the year. And we're going to go ahead and focus on driving innovation to impact treasury management, hosted by your U.S. Bank Global Treasury Management partners. My name is Brianna Dunn, and I'm from U.S. Bank Global Treasury Management Learning and Development Team, and I'll be moderating today's webinar.
Now leading today's discussion I'd like to go ahead and welcome and introduce working capital consultant John Melvin, faster payments product manager Anu Somani, API platforms product manager Daniel Keleher, and customer experience product manager Mike Draxton. These individuals, as you can see from their diverse backgrounds, bring a well-rounded wealth of knowledge, experience, and client advocacy to today's discussion and we're very excited to have them here all together to talk about where we've been and where we're going. So welcome to each of you and thank you for joining us. And with that, I'll hand it over to you, John.
Hey, Brianna. Thanks so much and greatly appreciate the introduction there. And team, looking forward to our conversation and those of you joined joined, thank you for joining us. I think we're going to have a bit of an entertaining conversation here today. So let's kick it off here.
Let's think back to Y2K. How many of you remember that significant watershed moment? And I say significant because I remember December 1999. It was all hands on deck for the organization that I worked with because they were really concerned about that date change. In all of our testing leading up to this, and we had several years to test, we had always seen the Julian date turn back to 1900, which for a lot of us, pretty significant impact in the financial world, right?
However, we really focused on making sure through upgrades in ERP systems and upgrades in some of the other technology and back-office systems, we were able to meet that challenge head on. And roughly $600 billion globally was spent on-- depending upon which Google search you listen to or peruse-- it really did have a global impact as part of that. Now I know, Daniel, you and I have talked a lot about technology back then and how the transformation has occurred. Tell us a little bit about your perspective on technology back then.
Yeah, John. Well, I think it's really interesting, actually, drawing that comparison between the beginning of the century and the beginning of the decade. In both situations, technology was really paramount to surviving as a business. And I think another really important thing that was highlighted was the importance of business continuity planning. So the similarities there are very strong.
I think in contrast, really, the situation and challenges companies are facing today technology is actually essential to the success of business succeeding and continuing operations, whereas back in Y2K it was actually viewed as the perceived risk that could bring a business to a stopping point. I think the other big consideration probably was the amount of time companies used to prepare to manage the situation that they were facing.
Daniel, you're absolutely right in terms of that timing. We had many years. I mean, as early as 1985 we knew that Y2K was going to be an issue. But now we fast forward to 20 years later, kind of ironic, within 2020 and we're having all these challenges that we actually thought we were going have at the turn of the century. But needless to say, we do have technology in place and we've been able to pivot.
And now I will say some of the business continuity plans and having that challenge of, wow, we're now working from home in a remote environment, but yet we still have checks coming in because we process our deposits internally, did create some challenges for some customers. But luckily, technology is in place to be able to pivot from that.
Now Anu, you and I have talked about a lot about how now is a watershed moment in payments. You want to tell us a little bit more about what that really means?
Absolutely, John. Specifically for the payments industry I would say this new normal that all of us have seen in the last nine months or so, whether it's the new normal in working, the new normal in shopping, or even the new normal in socializing, what it has meant is it's accelerated some of the ongoing, existing themes, like the demise of checks. But it's also led to some transformative changes making it the watershed moment.
In fact, I would go as far as to say that in the normal course of things what would have taken maybe five, 10 years, those amount of changes have been compressed in merely a year. And these changes would have taken a long time not because they were technologically complex or challenging, but they were more fundamental in nature. Things like changes in customer preferences, user behavior, or even payment operating model. So that's what sort of makes it a watershed moment for us. That's me, but Mike, what about in your world?
Yeah, thanks Anu. so I know I'm probably going to date myself here, but I was in high school during Y2K and all I thought about was school was going to be canceled. But in all seriousness, you know the other day I was reading an article was about e-commerce sales and how they've been up almost over 30% between Q1 and Q2 of this year. And some of the early statistics that we're seeing around Black Friday and Cyber Monday sales, those are up 30% to 40% from last year as well too.
And it's not really surprising given certain situations that we've been in this year, but I think the more important question to me is what impact does that have for digital? And I think the biggest takeaway for me is the habits that are formed for digital, I think, are here to stay.
So take for instance grocery shopping. You know it's never been easier than in the last nine months. I have three young kids, so one, it's always hard just to find time to get to the grocery store. And two, even more challenging. If I needed to bring the kids with me. And now I can shop for my groceries online. I can have them shipped to my doorstep. And for me, I think about the time that I've gained back. It's huge. And I think that's going to be a pretty tough habit to break.
Granted, I think when things stabilize a little bit people probably will still physically go back in the grocery stores, but even then I think you're thinking about the payment experience now. Why dig through your pocket or your purse for cash, or for your credit card, or even your phone when you can hold up your watch and make a contactless payment. So I think it's going to be really interesting to see which habits we've picked up on in the last nine months and which of those are really going to stick around long term.
So John and Anu, I think with the move to digital continuing to build this momentum, what are some of the challenges that you're hearing clients face along the digital journeys?
Great question, Mike, and you know what, digitization is the new buzzword for 2020 because we all had to pivot. But before we go there, Brianna, do you have our polling question ready for us. So essentially the polling question is-- G ahead, Brianna.
I do. Let's go ahead and open her up.
Great, thank you. So where is your organization today in the digital journey? We've completely moved away from paper, actively migrating, considering or planning migration, or paper cannot and will not die. That's kind of a funny reference, because for those of us who have been around the business for quite some time, yes, my gray hair is real on the pictures that you saw earlier.
But it's funny, since getting into the financial space, I've been talking about getting rid of paper as part of the payments process, both on AP and the receivable side as well. So I think it's really interesting. As we talk about that, Anu, what are some of the things that you're seeing in this mad dash to digital?
Yeah, it's actually interesting. I would like to draw your attention, John, to the graphic on the right. So basically it's from a survey recently conducted by AFP. When questioned about their organization's likelihood to converting their B2B payments from checks to digital, so moving to digital, how likely are you?
So it's interesting to me to see that only about 5% of the survey respondents hadn't even considered the move to digital. A very, very telling statistic, John. So I would turn it around and say, what do you think is the biggest reason why clients want to move to digital? Well, at least for me, one of the biggest reasons is speed of transactions and the visibility that that speed creates.
Yeah, John, it's interesting. Wile speed was certainly one of the top five, it was not the biggest reason for move. The biggest reason for moving is straight-through reconciliation. Straight-through reconciliation has been such a long-standing, burning pain point for clients that some of the data that comes along with these new digital payment trails is making the proposition so attractive. And it's really sealing the deal for some of the clients.
With that, John, I would love to hear, how did the poll respondents occur?
Great point, Any. Kind of what we thought. The B is garnering the most activity with a lot of you guys actively migrating into digital channels. And I think that really speaks to where we are in terms of processing. Because we have had to pivot and lift and shift, if you will, from being in the office to remote work environments. And we've had to create this whole new stream of business in order to be able to get things done. And I really think that speaks to faster payments, or at least in my mind it does.
Absolutely, John, and I think what the poll, the AFP survey, what's compelling there is some of these newer and emerging payment trails or faster payments, what we broadly categorize as faster payments, we realize that it's not just about money. It's not just about payment. It's about connectivity. It's about certainty. It's about the data that comes along and the transparency that ensues.
So in fact, I would go as far as to say that there have been actually three trends that have gained traction in the last nine months that are driving some of the move and migration to these faster payments. One I think we all have experienced it, we talked about it. It's the shift from the physical to the digital. We talked a lot about the way we do business, the way we work. All of that is moving from physical to digital.
The second emerging trend is a steep reduction in cash usage. So the reason could be anything. It could be a general hesitation to accept cash and notes that others have touched. It could be the closure of retail storefronts. It could also be that when the retail storefronts open up, they don't want to take any physical cash. But we have seen a very, very steep drop in the way physical cash is being used.
And finally, as a consequence there is a strong demand for contactless payments. So all these trends are great and you might be wondering why you should care. And you should care because all of these market drivers and emerging trends are leading to a fundamental shift in the adoption of technologies that we classify broadly as faster payments. So things like real-time payments-- Zelle and push-to-card.
So John, I talked a little bit about the industry drivers. What are you hearing from clients in terms of some of the intrinsic drivers that are leading them to faster payments?
You know, I know you bring up a great point in terms of the key drivers. And a lot of customers are now looking for good funds models in their processing. So think about what that does to credit, even in the trade credit side of things where we typically have gone net-30 terms for a lot of organizations. Some organizations, because they're having to deal with new vendors because older vendors may have had a reduction in staff due to COVID and not being able to produce as many goods, so they're having to lift and shift, if you will, into new suppliers.
And so as part of that, the vendors are now saying, hey, you're a new customer for me. We really don't have time to process the traditional trade credit application. Because think about that. Traditional paper-based process for most of us. So now some of these organizations have said, hey, if you'll pre-fund a portion of the invoice on the front end, we'll go ahead and ship. So that has had a big impact on the credit side of that.
But think about what that has done on the liquidity side as well. That has put some cash constraints on some organizations. Because now in that former process, just think about that paper check that I was talking about earlier and how that check was coming in on Monday but there's nobody there to process it. Now we have multiple days in delay not only getting the deposit processed, but think about those items getting posted. So now that's going to even delay the shipment, even though on the credit side we said, hey, we need to pay up a little bit earlier on the front end.
So it's been a really big change for a lot of organizations. And I think that really speaks to the business continuity planning that a lot of organizations have had to do, or enact if you will, because they've really had to go along and employ the business continuity plan so that they can continue their business and they can be that ongoing concern if you will.
So I know I've talked a lot about the business continuity credit and all that. What are some of the other things that you're seeing in terms of where we're going as it relates to the digital perspective?
Absolutely, John. In fact, I would say that just within the last nine months or so we have seen almost a tenfold growth in the number of clients who are opting for these new and emerging rails. Whatever the reason for initial adoption be, whether it's competitive pressure, whether it's evolving business model, changing customer expectations, or even something that is more mundane but critical-- like you said continuity of business-- we have seen an accelerated migration. And once these changes are made. It is here to stay. So that's what we're seeing in the faster payments arena.
So I know John and I spent a lot of time talking about the what of the innovation, some of the reasons why the innovation is occurring. Let's pivot a little bit, and Mike, let's move to how this innovation is likely to occur.
Yeah, absolutely. I think it's a perfect transition into the next topic, which is really about API and how they're critical in going digital. So we're going to load up our second polling question here. And while Brianna is doing that, I'm just going to share a couple experiences to touch on how organizations are leveraging APIs in today's environment.
And so you take a personal experience. It's the season of getting packages, and you think about before Amazon there was no personalization. You got an email confirmation that your shipment was on the way and then your package you just showed up. And now we have real-time notifications to our phones that say, hey, your package is on your doorstep. And you can also even track the shipping delivery truck on a Google map. And in fact, last night I was tracking one of my packages and they changed the shipping delivery truck to Santa's sleigh, which I thought was hilarious.
But these are the experiences that are all being fueled by APIs. And what's interesting to take note here is how that's morphing into the corporate world. So we think about if I can get my package delivered to my house in two hours or less, why is it so difficult to pay my bill? And these are some of the solutions that we're looking at and launching at U.S. Bank with our e-bill solution, which allows you to pay your bills in the comfort of your living room with your voice.
So we've eliminated the paper, we've eliminated the forgetting to pay your bill. Alexa can now remind you. And you don't have to rip off and fill out that remittance paper, write a check, put it in an envelope, stamp it, put it in the mail. This process can now all be done digitally and within seconds. And that's all through the help of APIs.
But I think if we go back to the poll results, the results don't surprise me too much. I think a lot of what we've heard is earlier this year a lot of people were still learning about what APIs are. Now I think people are starting to really think about where they can plug them into their applications to create those rich experiences that I just talked about.
So if we look at the bar chart below on this slide, this was from a study that was done in 2020 that looked at, by category, where organizations are investing in API capabilities. So Daniel, from your perspective, can you shed some light on these trends, as well as some of the focused areas that clients have been interested in?
Yeah, sure. Thanks, Mike. So looking at this bar chart, you can see that the majority of API products and capabilities that financial institutions have started to put out there for companies and third-party applications to use are around accounts and payment capability. So Accounts being the ability to see my balances on all my accounts, to see which transactions I have related to those accounts, or maybe even to pull statements back. Where Payments are around the ability to either initiate a payment or see status back on a previously submitted payment.
And I think these kind of makes sense, part of it largely because a lot of the push towards the API is coming from open banking and the PSD2 rulings that came out within the EU. But I think this trend has spread quite a bit. And the reason why I think we're seeing [INAUDIBLE] program is for capabilities really are twofold. I think the first, especially this year, the need for access to real-time data has become very important.
And John alluded to it earlier. My revenue might be unpredictable this year. I might be having a harder time within my collection space. And so understanding my short-term cash position has become more important than ever. I think moving towards dynamic cash flow forecasting and being able to measure my progress within my cash outputs and inputs has never become more important.
And so that's why you see products like our corporate account information API that allows you to pull real time balances and privacy down to on demand directly into my third-party app I'm using, like an ERP system or treasury management workstation, has become more important than ever.
Secondly, and we see this a little bit in the payments space probably more, costs this year probably are getting a harder look taken at. And so staffing within each organization needs to be used as effectively as possible. So the manual processes that may be were assigned to employees before where I was going out and doing reconciliation, take a payment of an invoice, where you might have previously had someone sitting around within your ERP system checking out the invoice and payment information then turning around logging into a bank portal, typing in that same information, I think companies are really looking to build efficiencies and reduce those manual processes so that the staff that they have can focus more on strategic initiatives and more value-add activities.
I do think it is kind of interesting that you see after Accounts and Payments I think the next iteration of API capabilities that are coming out, and this is kind of an area that really excites me, because the partnerships between banks, third-party applications, and the companies that own the big data, the possibilities for those types of relationships are endless. And so I think ultimately what we're going to see is those three groups coming together, figuring out how do we reduce business risk? How do we fuel companies with more tools, data so they can run analytics and measure their financials.
One use case that I find kind of interesting. [INAUDIBLE] is leveraging APIs within the bank to help businesses determine credit levels that they want to extend to their customer bases? So there's just a lot of partnerships and innovation that can be added here. And so I touched upon innovation right there, but before we talk about innovation, John, we started off talking about Y2K. I think now is a good point to just talk about the evolution of the digital space and how the digital space has evolved.
You're absolutely right, Daniel. And as we've gone along we've been bouncing around certain elements of digital in terms of just think about ACH. Companies will send an ACH payment, but the receiving company is, in a lot of cases, getting that payment in but the remittance data is coming in from an email. Well yes, both of those are de facto digital to a point, someone is physically pulling that email and having to hand key that information.
When you start looking at like Vantage Point, a receivables product that we use to coalesce all of that data from disparate channels and allow companies to pull that down and upload it into the ERP system, just as you were alluding to Daniel, to create that straight-through process element for the most part, I think there's a ton of opportunities in the marketplace for companies to be able to streamline and really get to that straight-through processing.
Speaking of that, Daniel, what other elements of evolution are you seeing?
Well, specifically in the technology space I think a lot of the factors why we're able to get to this place in the digital progression have been a lot of the technologies and tools that are now more available. You used to have a lot of on-premises servers and equipment, and now things are moving towards cloud-based solutions. Things moving towards 5G have really enabled progression in digital.
From an API perspective, I think now we offer API to use a lot of the same information that we used to previously offer over file-based solutions. So that means that integrations can happen a lot quicker, a lot more at the pace of our customers driving that integration process, and generally a lot less costly for companies to actually implement.
I was actually surprised we're seeing a lot of demand within our developer portal, which is kind of like our storefront for the API products that we offer as a bank. And it's been surprising to see that we've had a lot of small businesses and also non-profits come in. And I think the reason why that's a little bit surprising is because it used to be that you needed a big technology budget to do an integration over a file-based product, I think those days are behind us, especially with APIs starting to come into the picture. And that really has fueled innovation.
Anu, did you want to speak to a little bit of the innovative things that U.S. Bank has been doing?
Absolutely, Daniel. So while innovation does seem like the flavor of the year in 2020, the rate of transformation, the rapid rate of transformation has led to one conclusion. Clients really are not looking for innovation for the sake of innovation. They are truly, truly looking for meaningful innovation that aligns to their problem statements.
Another thing is clients recognize that there may be a gap between where they are today and where some of their customers, business partners may be in terms of innovation. So they are looking to partner with banks like us to bridge that gap. So we've been in the past year or so rolling out product in tandem, in close collaboration with our clients, which are directly aligned to some of their pain points to address their specific needs and to help them bridge this gap and help them move towards the future.
So while innovation is great, I think one important factor in considering innovation is scalability. Mike, what do you have to say about how to scale these innovations?
Yeah, sure. I think it's a really important topic, Anu. If you go back to my example about paying a bill, now imagine that you're setting up your profile for the first time. I think with technology now you can actually control how you want that experience to look and feel. So you can actually now validate in real time before that information is entered. So you think about how you can scale that to other payment types like real-time payments where those funds are moving in seconds, how important that is from a simple use case like fraud to be able to scale that to multiple experiences that you offer.
So in this digital evolution that we're going through, I think it's really important that you're also thinking about scalability as well.
Thanks, Mike. Greatly appreciate it. And thank you, guys, for your time. Join us next time in January for our upcoming seminar. Please look out for that. If you have any questions or need anything from our team, please reach out to your local TMC. Thanks for joining.
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