Consumers have gone paperless, time for businesses to catch up
Corporations and banks face at least two of the same issues: a reliance on legacy technology and a need to trim expenses.
And one way for them to relieve some of the pressure involves the thing likely cluttering the desks of corporate treasurers: mountains of paper.
Innovation for commercial clients has lagged behind the tech offerings for retail customers, but perhaps one of the most tangible solutions to export from the consumer world is going paperless. In fact, commercial clients are clamoring for it.
"I can't think of a company that doesn't talk to us about going paperless and trying to go more digital," said Bob Kaufman, general manager for virtual payments and products at Minneapolis-based U.S. Bank. "Less paper for them means less paper for us."
Banks have started to make inroads, such as by offering virtual cards to replace physical corporate cards, many commercial clients want to take it even further when going digital and paperless.
According to a survey conducted by TD Bank of 350 corporate finance professionals, while only 17% said that they have paper-free receivables today, this is set to dramatically change as 69% reported they expect their organization to begin the transition to electronic payments in the near future.
Similarly, Kaufman said about half of business-to-business payments are made via paper check.
"There's still a long way to go, and I don't know if we'll ever get to completely paperless, but we pride ourselves on helping companies move the pendulum," he said.
Comparatively, the retail banking world is largely paperless already. Only 1% of baby boomers and those in Generation X and 2% of millennials perform routine transactions - such as paying bills - via mail, according to recent retail banking report from Salesforce. At 34% for both segments, baby boomers and GenXers say the web is their primary method of transacting. At 31%, mobile is the top method for millennials.
Going paperless "makes it more efficient for banks and corporates, as we work toward a common purpose," said Rick Burke, head of corporate products and services at TD Bank.
TD, for instance, lets corporate clients process bill payments through a customized website, replacing paper bills, statements and invoices.
U.S. Bank offers corporate clients a virtual payments service, so for employees who need to make a one-off work-related payment or who make purchases rarely enough that they don't need a physical plastic card, the virtual payment generates a single-use, cardless account with a 16-digit number to make the payment.
These digital payments can be more easily tracked, and save time for both the bank and customer, Kaufman noted.
Indeed, more than half of executives polled in the TD Bank survey believe a completely paperless environment will save 6% to 15% of their departments' work hours.
Banks would likely see the same benefits, as they'd have fewer checks to process and less paperwork to store.
"It takes out the huge costs associated with humans processing paper, for one," said Mitch Siegel, head of strategy for the financial services practice at KPMG. "And secondly, it enhances the customer experience for these corporate clients, and creates a stickiness factor."
And digitization can also mean cost savings for banks beyond less paper to handle. For example, Siegel noted that in the past banks typically issued hard tokens to their corporate clients to give to those responsible for authorizing transactions. Now, many banks issue software-based tokens, thus eliminating the need to procure, handle and ship physical tokens.
Not surprisingly, many corporate treasurers expect the digital transformation to be a multiyear project: 47% of respondents in the TD survey said they expect it will take between one and two years for their organization to move most receivables from paper to electronic and 20% said it will take three to four years.
Part of that timeline can be attributed to a topic banks know well: an unwillingness to invest in the huge costs associated with replacing legacy systems.
"The large corporate [tech] environment looks a lot like the banking environment; they're saddled with old legacy systems," said TD Bank's Burke. "In most cases, payments systems are looked at like general overhead and a lower level of priority when it comes to investment, especially when it comes to something like new product development."
But, financial officers at companies realize the need for digitization and automation and will spearhead the effort to upgrade and replace existing systems.
"They are going to want to do it and look to their bank partner for help," Burke said.