How will the Evolution of Payment Methods Affect Accounting and Financial Departments?
Electronic payment has become not only an upward trend in the last ten years, but also a distinguishing feature in the market for many industries. According to a study by the Institute of Chartered Accountants in England and Wales (ICAEW), the number of daily payments made by credit card in the UK grew from 15.7 million in 2004 to 31.6 million in 2014, and for the year 2024, it is estimated to reach 52.5 million. There is no doubt that the Internet, e-commerce, and mobile devices have revolutionized the way we pay, and with it, the way we do business.
What can we expect in the coming years? The ICAEW points to the following trends, to name a few:
More and better devices to receive payments: We will see an evolution in traditional points of sales, in which smartphones will have a greater presence thanks to devices that can charge credit cards securely.
Faster Payments: Anything that makes our lives easier to manage is welcome: wireless payments through credit cards and smartphones only need to approach a payment terminal thanks to technologies like NFC (Near-Field Communication).
More, many more mobile payments: the smartphone as a digital wallet.
More and better payment options: Payment options will become natural channels to place products and services.
Of course, this means the financial and accounting departments within companies need to quickly assimilate these drastic changes. We’re not only witnessing a surge in electronic records, but also a boost in data sources and a greater probability of exceptions and errors when identifying those payments.
Just last year (2018), Deloitte published a survey among high-level executives and financiers, in which they pointed out that confidence in financial data was still dwindling mainly because of human error: 41% of the surveyed did not fully trust the precision of their financial data due to the human error in manual processing. Thirty-six percent of financiers estimated that correcting and identifying these mistakes and making the necessary adjustments takes them about 9-10 days every month, which comes out to 114 days lost yearly to fixing mistakes.
When we compare this data to the ever-increasing volume of information that financial areas have to manage just for payment methods, it’s no wonder that financiers have stated that, on average, six or more days are required to complete the month-end closing procedure, and twenty or more days for the year-end.
It’s that manual trading continues to be the Achilles’ Heel of financial departments: more than 76% of surveyed companies stated that they continue to perform activities such as accounting reconciliations and data consolidation manually and with homemade tools based on emails and spreadsheets.
Hence the importance of solutions like Conciliac for financial departments in a wide variety of businesses: as an RPA (Robotic Process Automation) tool, it is capable of replicating manual tasks such as collecting source files, data transformation and normalization, and data matching and reconciliation, through automations that are easily programable for financial analysts using graphic interfaces. The result is an impressive increase in the speed and effectiveness of these departments, reducing human error and providing reliable information.
When we look ahead to the growth in the number of transactions only from payment methods (remember, that was 15 million daily transactions via credit card in 2004 to 52 million in 2024), we can understand the 114 days lost to fixing human errors and manual processes. That’s why the value that Conciliac’s technology brings to organizations goes further than automating manual processes: it has become a strategic component to handling massive growth of information, allowing organizations to scale their operational capabilities, without altering the systems core to their business.
Author: Conciliac Team
“The future of payments”, ICAEW (The Institute of Chartered Accountants in England and Wales), 2016