COVID-19 has shone a spotlight on digital payments and processing

The time has come to bid adieu to coins and bills.

According to Todd Roberts, National Payments Leader at Deloitte, it’s not surprising we’re witnessing a permanent decline in the use of cash as people and businesses practice physical distancing. The adoption of digital payments for businesses and consumers has consequently grown at a much higher rate than previously anticipated.

“There has been a huge boost in digital sales, including account-to-account and wire transfers, because people around the world are working and living away from the office and far from physical points of sale,” he added.

That’s also resulted in an increase in fraud and operational risks. The people running accounts receivable and payable departments are now working from home, so it’s adding risk to how cash management functions are working within companies. And fraudsters are taking advantage.

Situations where transactions can be disputed or repudiated, even though businesses think the client is good for the payment — and the client has the means to revoke the payment — is becoming a common fraud during the pandemic, Roberts noted.

Companies have had to adapt to a “new normal” for payments. This includes having to deal with remote authorities and counterparty risk to ensure liquidity and defend against fraud. Many of these changes are expected to become permanent in terms of how people and corporations manage their business.

Real-time and enriched data that enables businesses to make smarter operational decisions is particularly important now. This also includes the need for e-commerce capabilities, swift supplier payments and billing, international wire capability and expedited domestic payments. For companies with an international footprint, access to data is critically important when it comes to frictionless payments.

When it comes to internal payments, organizations will require payroll cards and virtual cards to enable team members to execute within their authority and enable the initiation of digital transactions without paperwork or cheques.

Roberts issued a call for businesses to rid themselves of cheques. “People need to accelerate getting off cheques. It’s cumbersome and all the data stops flowing with that cheque.”

Virtual credit cards are one way that businesses can begin digitizing their payments.

“Virtual cards are a simple, efficient way to make B2B payments to suppliers or employees without the need for a physical card,” said Myriam Mamane, Country Head of Commercial Cards, Global Payment Solutions, HSBC Canada.

Here’s how they work:

• Clients send a payment request to HSBC via the HSBC Virtual Card portal
• They can set how the transaction will be made; for example, a $100 transaction available for 24 hours
• Then an actual picture of the virtual card is created and sent via email to the end user, whether it’s an internal staff member or a supplier
• The end user can instantaneously process the payment
• The virtual card is a single, secure tokenized number, meaning it’s for use one time and emailed through secure channels that can only be used for that specific purchase, eliminating fraud risks.

“The benefits are that it’s free, with no fees,” Mamane said. “It’s also one of the very few payment methods that can be an income generator because clients can get rebates.”

While most organizations have moved away from traditional paper cheques, Jude Leclerc, Country Head of Product, Global Payment Solutions, HSBC Canada, says there are still some outliers who prefer the old-fashioned way and are turning to HSBC’s Cheque Outsourcing Service.

“It’s a mature HSBC product that helps them make the digital transition in smaller steps,” says Leclerc. “Essentially, the bank takes care of everything for you, including mailing out the cheques, and reports back to your company. You just deal with an electronic file upload, saving time and money by not stuffing envelopes.”

Cheque Outsourcing means that the company also gains control over payments without maintaining cheque stock and accessories. This approach also brings with it a reduction in potential internal fraud.

Another innovative product that is streamlining the payment process is HSBC’s Beneficiary Self-Management.

This is a value-added payment service allowing beneficiaries to retrieve their payments electronically through a secure web portal service hosted by HSBC – no physical cheque required. It also eliminates the need for clients to store and manage the beneficiary's payment details – simply a name and email is enough to make an electronic payment. In fact, the beneficiaries are notified by HSBC electronically, and they can register on the portal to claim their funds. Once HSBC authenticates the beneficiary, they can complete their full bank account details to deposit their electronic payment into their account, no matter where they are located in the world.

Whether it’s moving away from cheques or cash altogether, one thing is clear – COVID-19 accelerated a trend that was already on the horizon. Businesses that are set to thrive in the new normal are the ones that realize that the “smart money” is now digital.

Contact HSBC to find out more about how your business can trade in its traditional approaches and embrace a digital day-to-day.