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Citi and J.P. Morgan diverge on payments strategies

What’s the best way to leverage technology for corporate clients in fast-growing emerging markets?



Guhaprasath Rajagopal, J.P.Morgan

In some ways, corporations operating in big emerging markets now have tools to manage cash more easily. China and India each have real-time payment infrastructure, for example. But the payments usually lack remittance data; and the final amounts are not always what users expect.

Therefore global banks continue to see opportunities to grow their cash-management businesses in Asian and other emerging markets, to help ease the frictions and match payments with invoices.

But that’s where the similarities among global banks ends. Citi and J.P. Morgan have come up with different strategies, both using digital tools.

In Citi’s case, the idea is to double down on its global presence and standardize how it operates. Citi has already been the only big U.S. bank with a substantial local footprint, so investing in global technology should be seen as bolstering a wide network.

For J.P. Morgan, the play is to use technology to help it localize its services. Traditionally J.P. Morgan has been a truly global player, it now adds local digital tools to provide more of a local capability, and broaden service beyond multinationals.

Citi’s global approach with HighRadius

Citi is relying more on artificial intelligence tools to trace documents to match payments. Later this year it will introduce Citi Smart Match, which was developed by U.S. fintech HighRadius, to Asia, says Howard Yang, head of treasury and trade solutions in Hong Kong.

Howard Yang, Citi

The technology collates payment data from emails, attached files, account statements, and invoices. It then applies business logic to match payments to open receivables.

Citi is not the first bank to use HighRadius. The fintech also supports Bank of America, which in 2017 launched a solution called Intelligent Receivables designed to help companies match payments and invoices. (In a previous interview with DigFin, BoA’s Venkat E.S. said the bank pioneered the technology in Asia before extending it to North America.)

Citi’s Yang says the bank is working on other global services for companies, such as virtual credit cards. Every payment is related to a specific one-time credit card number created per transaction. Using tokenized credit can save treasurers time in trying to match them to invoices.

J.P. Morgan goes local with PayEx

J.P. Morgan has invested in enabling real-time information exchange on local payment platforms between buyers and sellers. To do so it has made its first-ever investment in an Asia-based fintech, India’s Global PayEx, says Guhaprasath Rajagopal, the bank’s head of treasury service in Mumbai.

This is designed to help treasurers struggling to make sense of discrepancies in payment information. For example, a company expects to be paid $100 but only receives $81. Not only is the treasurer missing money, but the lack of invoice information means he can’t book the amount actually received.

Of course, the money hasn’t been stolen – it’s been diverted for taxes or conditional discounts.

Global PayEx helps connect all of these dots, so treasurers understand their funding situation. For three years now, its cloud-based service, Freepay, has become a mainstream provider of information that makes it easier for companies to track electronic invoices.

Mohan Krishnan, the company’s founder, says the service is now live with 30 clients. It either plugs into a corporation’s back-end system (for example, the ERP system) or its order taking front end office to automatically pick up the invoice and send it to the end payer when it’s generated.

Using a mobile app, all related departments can access real-time invoices that come with payments. The logistic team can confirm the payment for the shipping; the sales team can take additional orders.

More beers sold

Global PayEx has partnered with eight global banks and nine Indian banks. This collaboration makes dynamic discounts easy to operate.

For example, Guhaprasath said, a beverage company often incentive the dealers with higher discounts for higher volumes sold. Like 5% discount for 100 crates sold; 10% discount for 200 crates sold; the discounts might go with other incentives that makes the pricing even more complicate, for example, a $100 rebate if the dealer pays five days ahead.

“Once you move it online, all discounts and trade terms become rule-based automatic calculations, ” Krishnan said.

J.P. Morgan plays a key role in the process. When a dealer accepts the invoice, the instruction flows from Freepay to J.P.Morgan which will present the direct debit to the dealer’s bank to debit the dealer.

Freepay can be connected to banks through APIs, the payer therefore doesn’t need to log into their bank accounts. Payments can be processed directly on the platform.

Krishnan told DigFin that GlobalPayEx is now creating a market place for lenders to address financing.

“All we need to do is to switch on one more feature; like that you can pay from your credit line too. Some customers are live on that,”said Krishnan.

Local challenge

Even though J.P.Morgan does double down on global offerings, (for example, the bank will soon roll out a global payment infrastructure to handle every payment type in every country around the world), in some cases, it would be more interested to invest in a local solution rather than a global solution.

“Very likely we would have a global solution as well, but a global solution wouldn’t get into a lot of local nuances. For example, the language preference in all markets might not be English. A local solution can better help us to meet the market requirements,” said Guhaprasath

One challenge in India is to move payments from check to electronic payment. But lots of small business will oppose a giant seller to debit their account automatically on the due date.

Global PayEx offers a solution that the debit alone would be hit in the account, not any other amount. Small businesses don’t need to worry being debited without any control of the information.

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