Sluggish global economic growth has placed pressure on international corporate activity, but it also is providing an opportunity for corporate payment-automation providers such as Syncada that peddle more efficient processing.
“We have about $20 billion in throughputs in the system, and we’re seeing that despite the economic uncertainties,” says Kurt Schneiber, CEO of Syncada, a joint venture owned by Visa Inc. and U.S. Bancorp that combines U.S. Bank’s electronic payment technology and Visa’s network of global relationships with corporates.
The global corporate-payments market is estimated to be in the tens of trillions of dollars in yearly transactions. But the market’s been slow to automate, hamstrung by proprietary payment systems from competing banks, differing local regulations and standards, and the varied tech capabilities of local suppliers to submit invoices–more than half of such bills still come via paper.
But Syncada hopes pressures on corporate balance sheets will give the firm more fuel to sign new bank partners, thus giving its network more size and heft around the world to increase automated payments.
“We’re growing faster than the economy overall, and that’s been driven by the aspirations of large corporates to reduce expense. In our case, accounts payable efficiencies are our signature, and it gives corporates better control on their document flow with suppliers and decreases volatility in their supply chain,” says Schneiber, noting the firm has added staff in Brussels and Singapore to help it develop payment-processing technology that can accommodate differing local styles.
Syncada has signed Citigroup and the Kansas City, Mo.-based Commerce Bank as partners thus far. Schneiber would not say how large those banks’ pipelines were.
Syncada is speaking with banks that have interests in the Asian market about partnerships, he says.
To help in its effort to lure more banks, Syncada is enhancing its technology to process cross border trade faster, and it is adding to its ability to process different types of documentation that support U.S., European and Asian cross-border trade.
Suppliers and buyers use Syncada to submit invoices, contracts and other documentation. Syncada’s Web-based software audits the documents to verify amounts and other data. Buyers also may decide how they want to respond to invoices and automate payments.
The venture designed the mode to make payments faster and more accurate and to provide more control to buyers. It also creates a means for banks to offer their corporate clients a simpler, more centralized way to navigate varied bill-presentment modes and the different regulations of the local jurisdictions where the corporates’ suppliers reside.
Syncada grew out of U.S. Bancorp’s PowerTrack invoicing and trade-finance system, which the bank uses to process payments in the freight industry. Beyond automating processing, services such as Syncada also can aid smaller suppliers in procuring credit, or obtaining better terms, by providing an automated means for banks to view pending payments to small suppliers from larger buyers.
“Because of regulations and a need for transparency, there’s more of a focus at corporations in making invoices electronic,” says Nancy Atkinson, a senior analyst at Aite.
Syncada faces myriad competitors in the global corporate-payments market. Many tech firms and banks offer processing engines, such as HSBC, JPMorgan Chase & Co., Bottomline Technologies and SunGard.
Chase also is pushing a collaborative approach among banks. “Financial institution clients see their corporate clients expanding rapidly into new geographies to gain access to new, high growth markets as well as diversified supply chains and labor pools,” says Christine Doria, a managing director and global product executive at JPMorgan Treasury Services.
JPMorgan has developed a service called Reference Accounts, in which its bank clients can leverage JPMorgan’s platforms in local markets, or though its multi-currency account service to provide corporate clients with access to local payment and receivables capabilities. These accounts are opened at JPMorgan in the name of the financial institutional client.
The advantages of these types of accounts are reduced fees and charges, and simpler standing settlement instructions. Doria says.
Historically, bank propriety has hindered open corporate payments networks. Efforts such as Syncada now may benefit from a more cooperative posture among banks than has existed in the past, Atkinson says.
“The investment to set up [supply chain finance] yourself is considerable, and most banks don’t have the money to spend on IT,” she says.
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