In many cases, inefficiencies and the ensuing frustration in the collection process arise from the complexity in understanding the position of the payer. The main challenges in collections can be distilled down to three important points: local payment culture; selection of collection instruments; and collections matching.
Get inside the world of the payer
The efficiency of a collection product is often defined by the impact it has on the payer. This is mostly observed in commercial payments - both in bricks-and-mortar shops as well as in e-commerce - where merchants are looking for frictionless payments to ensure that the last step of the sales journey becomes as smooth as possible.
The efficiency of any collection instrument itself undeniably depends upon how much the payer is willing to cooperate. Thinking about how you would like to pay yourself - either personally or professionally - may give a good idea of the position of the payer.
Local payment culture
One of the factors that is difficult to influence is the payment culture of a certain country. The culture in a country often due to legacy products, has a bias towards a certain category of instruments. Statistics from the European Central Bank show clear preferences. Taking this cultural appetite into consideration in the selection of the proposed collection method can reduce friction and increase efficiency.
The Single Euro Payments Area (SEPA) offers a high level of standardization in a large geographical area, making the effort for implementation reasonably small.
The success and efficiency of SEPA implementation is not in the ability to process these payments, but in the value they offer to the business and customer relationships.
Nevertheless, the biggest achievement of the harmonized landscape is the momentum of innovation to connect payer and beneficiary. Faster, easier and richer means of payment are around the corner, but it is their acceptance by the payer that will determine their success. Optimizing the use of already implemented payment instruments will most likely bring the highest return for businesses today. Making a selection of the most optimal means of payment for each business activity and each payer segment remains a critical success factor.
Two of the most noticed complaints of payers - both professionals and consumers - are the management of outstanding invoices and the manual entering of payment information. On the receivables side, the most frequent complaints are receivables forecasting and matching the collected funds with the outstanding receivable.
Direct debit products are initiated by the beneficiary of the funds in order to address the above mentioned complaints. However, some payer segments do not appreciate what they call a 'lack of control'. Countries with a traditionally low appreciation for direct debits, have put in place different solutions based on credit transfers. Some countries have peer-to-peer e-invoice solutions, others have developed structured or extended remittance information to guarantee collection matching. BNP Paribas for example, has developed a virtual accounts offer to help improve collections matching on those incoming flows that may seem difficult to optimize.
BNP Paribas has its finger on the pulse on the evolution of collections and the needs of companies both locally and globally. Having one of the largest local footprints in Europe provides the bank with a deep knowledge of local practices, cultures and solutions. Combining this with BNP Paribas' comprehensive and reliable global channels proposition, offers a strategic advantage to corporates across the world.