Apple Pay was not the first method for instant payments, but it is the largest. Introduced in 2014, it allowed iPhone used to make contactless payments at the point of sale with mobile phones via near-field communication (NFC). Before Apple Pay, mobile payments struggled for adoption. Retailers were hesitant to invest in the equipment and infrastructure to accept mobile payments that would only be used by a handful of clients.
That changed when Apple entered the instant payment game. When the biggest tech firm in the world with $169 billion in free cash flow got involved, things got serious. Today, Apple Pay and other mobile payment providers including Venmo, PayPal, and Google Wallet are available in grocery stores, boutiques, restaurants, hotels, and major retailers throughout North America, Asia, Australia, and Europe.
How does this change the game for your team?
Payments at the speed of business
Instant payments significantly increase the speed at which payments are made and received. Today, a typical transaction takes one business day between the time the payer dispatches the payment instructions and the time the recipient can use the transferred funds. With instant payments, this happens in real time, 24 hours a day, 365 days per year, with funds available immediately.
Consider how this affects cash flow. When a client makes an instant payment, the funds are available immediately. No more waiting for checks to clear or credit card transactions to process. Instant payments can significantly improve cash flow by eliminating “the check is in the mail” scenarios.
Instant payments can also reduce the time required to perform monthly bank reconciliations. Consider a future where all transactions occur instantaneously: how much time could be saved if the balance shown on your bank statement matched your check register without any need for reconciling outstanding checks and deposits in transit?
Regulation on the horizon
When instant payment innovators were small and scattered, regulators, for the most part, didn’t notice them or deem them worthy of attention. With a behemoth like Apple entering the picture, that is changing.
Currently, there is little regulation over the industry and views differ around the world. In an article for Bank Administration Institute, author Eric Grover explained it thus, “EU regulators . . . see payment networks and infrastructure providers as public utilities. In contrast, British regulators view payments infrastructure as a market that’s underperforming. And the paramount U.S. financial regulator, the Federal Reserve Bank, understands the ecosystem is complicated and works for banks, businesses and consumers, but is nudging the industry toward faster interbank payments.”
External and internal auditors should be on the lookout for increased regulation, but potential time savings for balance confirmations, since instant payments eliminate the ability to misstate cash using interbank or intra-bank transfers.
The emerging technology of instant payments provides an opportunity for accountants to be change leaders. Encourage the use of tools that speed up back office tasks like bank reconciliations. Recommending such solutions can meet stakeholder needs while eliminating the time-consuming, detail-heavy aspect of such work.
Ridding yourself of such labor-intensive work creates opportunities for more work on a deeper, more satisfying level. Let Tech remove the drudgery of data entry and rote tasks, allowing accounting and finance pros focus on the bigger picture and forward thinking ideas.
Keep your eyes peeled for our 2017 Salary Guide, and review the guide from 2016!