Citi takes on the role of unifier in global B-to-B payments
Citigroup is extending a technology program that's designed to cut excess out of international supply procurement.
Called Citi Payer ID, the program was developed in partnership with Citi's international network including its innovation labs. Citi last week extended the product to 17 new markets in North America and Western Europe, making it available in 44 countries.
"We are able to use the technology that the fintechs bring coupled with our understanding of our clients, and the infrastructure and assets that we have," said Manish Kohli, global head of payments and receivables at Citi's Treasury and Trade Solutions. "We can bundle all of that together and build a solution."
Citi Payer ID allows companies to assign unique account numbers to their payers for receivables. To improve visibility and expedite reconciliation, the account numbers match the payment to the payer.
Like a lot of international payment technology plays, this is designed to remove steps where the flow of money is halted for extra processing. In the case of B-to-B payments, this requires staff to match incoming funds with invoices to suppliers. The distinct account numbers act like tokens that speed this process.
As supply payments become increasingly international to serve e-commerce and other corporate efforts, the payments become more complicated due to regulatory and currency differences.
"We are seeing commerce grow internationally," Kohli said. "Commerce isn't just about large supply chains, it's also about small businesses buying or selling internationally, using marketplaces."
Alibaba, for example, uses Payer ID to collect money from the buyers who use its e-commerce site to sell to consumers. These buyers use Payer ID to send money to Citi to allow reconciliation of funds with the e-commerce purchases. Citi makes payment information available to Alibaba, so the e-commerce company knows what funds it received and from whom. "This can help them efficiently reconcile payments with the buyers they work with," Kohli said.
Payer ID is among several projects that large banks are using to counter the expansion of fintech companies into international payments. Recently, JPMorgan Chase agreed to buy WePay, which supports cross-border payments for marketplaces and other e-commerce business. The deal gives JPMorgan Chase a starting point to provide deeper financial and merchant services to its broad international network of business clients—before these clients turn to startups. Other banks are using digital tools to build their own cross-border payment technology for B-to-B and other use cases.
"There is a slumbering advantage; the challenge is waking it up inside the bank," said Richard Crone, a payments consultant, who said a risk-averse culture, regulations and talent gaps have worked against banks in the past. "It's a long list of things that startups and tech companies don't face by starting with a clean slate."
Banks have to rethink their position, according to Crone.
"Banks' payment products intersect the point of value, not the point of sale," Crone said. "Banks' advantage is in vertically integrating to other points of value … before, during and after the payment."
Like JPMorgan Chase, Citigroup is relying on its size as an advantage—thousands of businesses already do their general banking with Citi, which connects to about 250 clearing systems to help with global money transfers. "Our embedded relationships with clients gives us an advantage," Kohli said. "We understand their businesses."
If banks can take a step "backward" in the value chain and vertically integrate to the payer, identify them, assign an account number, the banks can open a new set of receivable and cash management services, Crone said. "More than streamlined account reconciliation, it sets the stage for streamlined [electronic invoice presentment], adjudication of partial payment of invoices and handling all of the exceptions that have plagued B-to-B invoicing and payments."