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Transformation in the payment landscape

June 2024

Corporate treasurers, and financial institutions, are facing market pressures due to the huge advancements in technology over the last 50 years, such as regulatory changes.

There is a ‘battle in the playground’ where infrastructure, geopolitical considerations and alternative payment rails have driven fragmentation. 

Global corporates are looking for local reachability together with global platforms, and technology modernisation is increasing clients’ requirements for embedded solutions. 

We must all learn to adapt or be left behind in this continuously evolving environment, and offer value beyond payments.

Digitalisation is altering the way we pay

Money has been part of our history for thousands of years in some form or another. 

The payments sector has undergone significant evolution, moving through distinct eras - from paper to currently transitioning from the account era to payments becoming increasingly disconnected via APMs (alternative payment methods). Market forces are shaping the new era in payments by demanding accessibility, affordability, and most importantly security.

Clients are looking at combining traditional and APMs to boost sale conversions by simplifying and streamlining processes, as well as increasing cost efficiency. 

APMs break down geographical barriers, enabling businesses to reach consumers around the world without the limitations imposed by traditional payment systems. This can also enhance cross-border transactions, allowing businesses to expand their customer base and international markets.

They can also drive fragmentation in the market with a lack of payer participation and the high cost of integration.

A company’s aim is to improve collection management, shorten DSO (days sales outstanding), reduce fragmented payment collection channels, and to improve automation in both payable and receivables, in order to reduce delays and the need for any manual intervention. 

‘Open Banking’ increases competition and innovation in the financial sector by allowing for greater transparency and collaboration in the payments space. However, in the  data sharing remit, the greater benefit resides in the combination of data from different sectors, not only financial sector. And we expect regulators to make efforts in this direction; it is at the core of the EU Data Strategy released by European Commission back in 2020.

The popularity of digital wallets is increasing at a fast pace, and they are becoming one of the leading payment methods globally. These can be electronic devices, an online service, or a software programme allowing electronic transactions with another user.

Digital wallets allow users to access products through devices to make purchases. Digital wallets generally see strong encryption which provides enhanced security. 

Business-to-business-to-consumer (B2B2C) is a model that combines business-to-business and business-to-consumer for a complete service transaction. The methodology for B2B and B2C companies was to stay ‘in their lane’, but digital evolution is altering everything. The payments ecosystem continues to mature and augment. 
The market is seeing a collaboration in processes that creates mutually beneficial services and product delivery channels. The main two payment types being ‘credit card rails’ (Mastercard/Visa) and ‘A2A’ (Account-to-Account). 

Key areas that haven’t changed are the importance of seamless payments, and the need to manage payments correctly to keep cashflow healthy. 

Santander transformation considerations  

We are in the Instant Payment Revolution where payments are moving away from the traditional methods towards API connectivity, giving superior transparency.

Santander acknowledges the digitalisation disruption and the import role banks play in enhancing capabilities while maintaining reliability.

PagoNxt is a one-of-a-kind pay-tech business providing customers with an innovative one-stop shop for payments and integrated solutions. It combines the innovative technology of a Fintech while drawing on the strengths, reach and expertise of a global, leading financial institution.

Banks must constantly innovate in the changing payment landscape. Santander appreciates the importance of uniformity and homogenising global standards. The environment is not static, and our goal is to support and deliver solutions that are secure and flexible without driving further fragmentation. 

Santander draws on 160 years of banking history as we transition into the next payment era. You can learn more about our bespoke, value-added solutions in this space here
Ana Santos, Global Head B2B2C, Santander CIB: “The digital revolution has placed payments at the core of the customer journey. Clients demand an instant, secure, valuable and integrated experience. Santander is uniquely positioned to contribute in the B2B2C space to deliver scalable solutions by combining the bank’s working capital capabilities, the flexibility of its payment fintech and the strength of its Consumer Bank.”