EXECUTIVE INTERVIEW: Olivia Leong - Head of Commercial and Prepaid Payment Solutions, Visa AsiaPac
- Only 8 percent of all the 811 companies interviewed have access to analytics reports that provide real-time cash visibility
- 52 percent of global corporations have a 30-day window on their cash flow
- Corporates in Singapore spend an average of 122 hours per week rectifying errors in their cash flow reports. In Australia, the figure is 117 hours
- The average company across the 10 markets works with an average of 4.3 banks
Why is cash visibility such an area of importance? It has always been an issue, but it is very much in focus at the moment.
One of the biggest challenges to business profitability is the inadequacy in cash management. That has a direct impact on a corporate’s ability to expand their business and grow in a more effective way. So whether this is about businesses investing so they can meet current demands, or whether it is about investing in product innovation in goods and services which are more meaningful for their customers, it is really critical. When you look across Asia Pacific, industries are becoming saturated, competition is creating significant challenges and at the same time there is a sense of falling demand for goods and services as well. So the ability to collect funds more efficiently, so they can re-invest in the business is critical for business profitability today.
Visa recently commissioned some significant research with East & Partners Asia. What was the motivation for Visa to get involved in this type of research?
It starts with our mission to be the best way to pay and to be paid. Looking at the community of businesses today as both buying organisations and selling organisations, we want to understand how can they deploy more effective ways of managing their cash flow in the form of extending their days’ payable outstanding and at the same improve their days sales outstanding. It’s a vicious cycle. If you can collect in time you can also pay in time and that will create a more efficient eco system.
Tell us about the scope of the research. The countries you looked at and the kinds of questions you were asking?
The research has a global scope, covering ten countries, five of them in the Asia Pacific. We have the UK and US covered, the UAE and South Africa. The reason why we went beyond Asia Pacific was that we wanted to benchmark Asia Pacific corporates to their peers on a global scale. There tends to be a desire to look at best practices but getting that sense of a comparison between developed markets and emerging markets brought a different perspective for corporates in Asia Pacific. And it was delightful in the results to see that Australia and Singapore were ranked first and second. They were shown to be the better markets for cash flow visibility, so that was very pleasing.
What were some of the main take-outs? What really struck you in the results?
The biggest surprise me for was that despite the proliferation of ERP systems, there is a reluctance among corporates to leverage on the technology to help them manage their payables and receivables in a more effective way. If you look at the research data, less than 10 percent of organisations which had ERP systems actually used that system for automating payables and receivables, which would make a whole difference. If managing cash flow is a genuine priority, the question I ask is why wouldn’t you use those systems? There are several reasons of course. They could be enterprise systems which are very complex. To make changes to a certain module might incur additional investment. They might be slower to change because they have to get into a technology queue. By the time they get to deploy some of these new configurations, there might be to a 12 to 24 month gap.
So for us it’s about understanding if there are solutions which can help customers get to market faster, that can build on the technology the customer has already invested in, so they can still enjoy the returns on investment on that ERP technology.
So the message is that in terms of cash flow visibility, improvements can definitely be made, rapidly and without significant new investment?
Absolutely. I think the first thing is to have these cash flow analyses done in a faster way. The research showed the CFOs and treasurers are seeing these cash flow reports after a lag of ten days. With these reports coming in after that delay, how can you make the right business decisions? How can you improve the predictability of your cash flow? It must frighten a CFO at times knowing that there are orders they want to take, but they don’t know if they can fulfil. They think: my sales folks are doing a really good job out there selling those products and services, but am I going to be able to resource and invest and fulfil those orders? I think that must keep those CFOs awake at night.
So information and data has a real place in assisting this performance, and that is where the research comes in?
I believe that sometimes in business the frustration that managers have is that they don’t know what they don’t know. For us it’s about making sure we can help them, preferably across the world, to understand some of the key challenges they face and to help them understand that they are not alone.
When Visa puts an investment into new technology and as we create innovative payment capabilities, how do we prioritise? We prioritise based on the most extreme pain points that the customer faces today so that we can ensure that we are doing the right things to get the right solutions out there for our clients. A lot of our solutions are delivered through our financial institution partners; that is in the DNA of our business. So we need to make sure that these solutions can be easily marketed through our banking channels so they stay relevant to their business agenda as well.
One of the key trends we are seeing is that banks are digitising a lot of their payments services. When we look at some of the B2B payments services we offer today that can solve real problems in terms of cash flow management, we need to understand how that is embedded into the bank’s agenda so they can be a more effective channel of distributing the solutions. For us the story is very straightforward. When you are a cash management bank, you talk about payments every day, and the payment is initiated by invoice. So if you go down that process to see if you can be a value add to your customers at the front of the process then the payment and settlement becomes a very natural thing. You say “now I have all my processes automated, I understand what needs to be paid, when it needs to be paid and I can give an instruction for payment and clarity is available.” If you have that, then making that payment becomes an easy step. It is no longer as cumbersome as it was before.
There is also fairly large opportunity in trade finance. Around the world there is a US$1.9 trillion trade finance gap and US$1.1 trillion of that exists in Asia. The reason why this exists is because there is gap in the current processes of getting that finance request approved. A lot of this is due to documentation, which has to be presented and is not, or inefficiencies in processing those requests going through a bank. So that is where we see opportunity as well to understand how our payment technology can help solve this trade finance gap, because it is an underserved opportunity.
Visa is a payments solutions provider. Can you give us some idea around your offering, and where it addresses the issues we have been talking about?
Visa has always been a payment technology company. It is still the core of our business. If you look at the way our technology is transforming, it is moving away from a traditional manifestation of a piece of plastic to using a 16 digit account number to replace any account number. This can be wherever funds reside - whether they are pre-paid, debit or credit or linked to an account. The way we are looking at our technology today is that payment can be executed in any form factor. It can support e-commerce, m-commerce, traditional face-to-face transactions and even in some instances a virtual environment where these solutions can reside, such as a payables or receivables solution. So the future of payments for us is about leveraging on a very reliable, secure way to pay on that 16 digit account number and changing the way this manifests itself, depending on who is getting paid and who is making the payment.
When we start to look at some of the capabilities we have built to respond to the question of cash flow visibility and what Visa can do today, through our financial services partners as well, we have focused on understanding the different processes that organisations have to manage today. The solutions address the accounts payable process and how we can automate it. It addresses the invoice management process and how can we streamline the steps that are involved in reconciling an invoice for payment.
We are also looking at ways we can transform those capabilities from end to end. It is not a utopia but it is a reality today that you can manage that process end to end from procure to pay. We are also looking at ways that technology can help organisations to better manage transactions, providing them with the analytics, and automating that process so they don’t have to spend an average of 253 man hours a week generating those reports.
And last but not least, with all this technology there is a need for advisory, for consultation, to first understand what those exact challenges are, prioritise them and then apply the right permutation of our solution. So for us it is about ensuring we understand what the needs are so we can stay relevant, then apply the right solutions which are agile – because you don’t want to wait 24 months to see the results – and ensure that it is progressive, and not just about managing current requirements but also the future needs of the organisations.