Financial news

The value-added services market could reach £371billion in value according to a new report by Accenture, the IT consulting firm.

The Accenture report titled Commercial Payments Survey 2023, reveals that of the 223 clients surveyed, they are willing to pay 8.1 per cent on average of their annual payments costs towards value-added services. Examples of such services include fraud management tools, real-time data dashboards, automated bill payments, biometric payments and tax system integration.

Though 8.1 per cent may not initially seem like a lot, a third of commercial payment clients said they would be highly likely to switch to another provider if it offered more value-added services that enrich the payments experience. In fact, failure to receive value-added services was clients’ second-biggest pain point, just behind weak fraud prevention.

The report showed the oblivious nature of banks and payment providers. Of the 211 211 executives from banks and payments providers surveyed, 63 per cent did not recognise the importance of value-added services. They only view commercial payments merely as a cost center and as a result are not prioritising these services.

Legacy institutions have the upper hand when it comes to consumer trust

More than half (56 per cent) of payments incumbents agree that competitive solutions from fintechs and bigtechs are diluting their share of wallet in commercial payments, according to the report. Most incumbents (72 per cent) said that it’s hard to compete with fintechs and bigtechs in merchant services, payment cards and cash management — areas where digital natives have quickly gained scale.

Nonetheless, legacy firms have an upper hand when it comes to consumer trust. Over nine in 10 (92 per cent) corporate clients would switch to a banking provider while only 48 per cent would switch to a fintech or bigtech. This presents an opportunity for the incumbents to address clients’ common frustrations and transform payments into a platform for revenue growth, client retention and service innovation.

“Forward-thinking payments incumbents are using value-added services to differentiate themselves and take ownership of the entire commercial payments experience, from onboarding, invoicing and billing, all the way to reconciliation and fraud prevention.” – Sulabh Agarwal

Legacy struggles

Close to six in 10 (59 per cent) banking and payments executives agree that their organisation struggles with the slow provisioning of new payments solutions due to a legacy tech stack.

The results suggest that most incumbents face an urgent need to modernise their commercial payment tech stack and build a ‘digital core’ to help develop innovative payment solutions leveraging cloud, AI and automation at pace. Yet only 30 per cent of banks have adopted high levels of automation and AI in their commercial payments division. Meanwhile, 43 per cent have adopted cloud and 27 per cent network connectivity to a high degree.

Considering the large amount of customers that are willing to change provider if their tech demands are met, this is a huge hurdle banks must overcome.

Sulabh Agarwal, global payments lead at Accenture, said: “Business-as-usual isn’t going to be enough for incumbent banking and payments providers to keep pace. They need to commit to continuous, holistic reinvention if they are to defend market share from digital challengers.

“Forward-thinking payments incumbents are using value-added services to differentiate themselves and take ownership of the entire commercial payments experience, from onboarding, invoicing and billing, all the way to reconciliation and fraud prevention. Whichever routes they follow, successful companies will use their clients’ evolving needs as the blueprint.”

Adoption of Gen AI in payments nascent

Generative AI is still in its early stages of adoption among commercial payment providers surveyed, with only 13 per cent stating that they have made significant investments in the technology. However, 85 per cent indicated that their organisation will be at a disadvantage if it does not invest in it moving forward.

Close to seven in 10 (68 per cent) providers said they would develop generative AI solutions in partnership with other banks or fintechs. Among the early adopters that are implementing the technology in commercial payments, the top areas of investment are securing payments data, improved fraud detection and advanced credit scoring using synthetic datasets.