A white paper focused upon financial services and how to digitally transform.

1. How do you refresh to be fit for today?
For anyone involved in bills and payments, there have been issues for years in wasted time and
wasted money. According to a variety of reports more than $2 trillion of cash is sitting, wasted,
on corporate balance sheets. The issue is the way in which businesses manage their payables
and receivables processes. The solution is to digitise them. The question is: how? This paper will
detail the issues, opportunities and provide a clear map of the future way. Specifically, the paper
discusses that there is a solution today using apps, APIs and analytics in a platform ecosystem.
How does that work and what does it do?
Introduction
For years, we have accepted a simple payments structure: cash. Then, during the last century, things
became turbo-charged. We moved from cash and cheques to electronic transfers and Swift.
Remembering when Swift started in the 1970s, it was a major movement from telex to transfers.
Many people will not have the memories of this as they have grown up in a world where everything
moves electronically and instantaneously, but Swift messaging was a revolution in payments.
Suddenly, we could communicate using machines in near real-time rather than having to send a
telegram or telex message.
Bear in mind that Swift is an acronym that stands for the Society for Worldwide Interbank Financial
Telecommunications. Society means a network of banks worldwide. Founded in 1973, Swift is a
global provider of secure financial messaging services, connecting more than 11,000 banks, financial
institutions and corporations in more than 200 countries and territories.
This was a radical change back then, but then things changed.
We moved on to create more and more electronic structures to manage interbank messaging and
automate payments and financial operations. All sounds good? Yes, but no.
In fact, there was a very popular comedy show called Little Britain, where the bank assistant would
enter your details into their system, and then reply computer says no. Computer says no seems
more and more of an issue these days, and particularly if you work in accounting and finance. Part of
this is the complications we have created in making payments. In B2C, we now have too many
options. We have pay-by-cash, pay-by-check, pay-by-card, pay-by-app, pay-by-finger, pay-by-face,
pay-by-crypto and more … and the banking system has not kept up.
This is as true for the consumer as for the small and medium enterprise (SME). In fact, there is a
huge opportunity growing in the B2B space and many new companies are now focused on SME
finance, lending and more.
Similarly, corporate systems have found it hard to keep up. We have ERP (Enterprise Resource
Planning), CRM (Customer Relationship Management) and more. But what has happened is that
these systems have become cement. In fact, for banks, companies, or government organisations
and specifically for accounting and finance, systems are so cemented in position that they cannot
adapt to the needs of today’s world. This is an issue that spans entire industries, some more than
others.
Today’s world demands flexibility, adaptability and movement. Systems cemented in place from the
2000’s cannot deliver. By way of example, in corporate systems we have tried for years to ensure

2. that payments are made on time, and yet the major focus has been on reconciliations and
exceptions (R&E) management. This is because we often invoice and have no idea if the payment
was made or, vice versa. We order and have no idea if the order was placed. That statement seems
fine if you are dealing with a few dollars, but when you are dealing with millions it is a bigger issue.
This is today’s major issue and headache for businesses from small to large: how to take and make a
payment in a world full of myriad payment options.
Let’s then add an extra layer of complexity: how to take and make a payment in a world full of
myriad payment options … globally.
During the 2000’s, everyone believed that globalisation was the way to go. We started dealing more
and more across borders. Banks and corporates had to deal with dollars to sterling; yen to dollar;
renminbi to rupee; roubles to ringgits; and more. The system became even more complicated and
hard to manage.
Then, in what some believed would simplify all of this, Europe launched the euro and the banks
responded with SEPA, the Single Euro Payments Area. Twenty years later, it’s all still developing as
we now have ERP, CRM, cross-border, FX (foreign exchange), internet and mobile systems with
cards, cash, apps and more.
If you live in Poland, you have Zloty; if you live in Sweden, you use Krona; if you work in Romania,
you are paid in Leu. This means that both globally, regionally and locally, there are big issues in how
to make and take payments.
Cross-border payments involving conversion of currencies creates a whole wealth of issues for both
corporations and consumers. There’s the money transfer fees, foreign exchange rates and more,
which is why many are seeking new and innovative solutions that minimise these transactions to
save costs. In fact, the more these transactions can be automated the better, which is why there are
many solutions developing that automate cross-border transactions using smart software with
models built into them that can factor in the nuances and legal aspects of a range of countries.
For many years, research firms have produced an annual report of working capital locked up in poor
systems. JPMorgan analysts estimate that corporations could unlock $633 billion of liquidity through
working capital optimisation1
, but this estimate may be low compared to others who estimate it in
the trillions. For example, analysis by the Hackett Group who have been tracking the efficiency of
working capital operations for over a quarter of a century, found that more than $1.37trillion was
wasted in the US alone2
. You could triple that for a worldwide view.
Either way, it is clear that corporations and financial institutions struggle to deal with cashflow and
forecasting. The issues are how long it takes to get accounts paid and orders fulfilled. Some call this
accounts payables and receivables, but there are more dimensions than pure payments and order,
as there is the length of time products are held in storage or, if you prefer, DIO (Days Inventory
Outstanding).
1
Strategies for Resiliency: Working Capital Index Report, JPMorgan, August 2023
https://www.jpmorgan.com/content/dam/jpm/treasury-services/documents/strategies-for-resiliency-
working-capital-index-report-2023-ada.pdf
2
Midyear Working Capital Survey Update: New Developments and Challenges, The Hackett Group, 2022
https://www.thehackettgroup.com/insights/2022-us-working-capital-survey-2210/

3. The whole issue is how the supply chain works. You order goods; you get the goods; the goods go
into stock; you sell the goods; you deliver the goods.
In fact, there’s a whole other discussion here about working capital and liquidity. If we could make
the processes behind bills and payments faster, we improve money flows in the organisation, thus
cash flow, and eventually liquidity. That is a key focal point for CFOs in most companies, and an area
that can deliver immediate benefits to a company’s bottom-line.
In fact, for financial operations it is all about Days Sales Outstanding (DSO); Days Payables
Outstanding (DPO); and the aforementioned DIO. It is all about how the company runs its balance
sheet.
You would think, with today’s technologies, it would be easier.
Globalisation and payments
Well, in some ways it is, but the issue is that it requires an overhaul of the system. Can you imagine
dealing with global supply chains in the 19th
century? It was possible, but it involved a lot of heavy
lifting to work.
You had a lot of paperwork such as letters of credit, invoices, stock and bill lading documents and
more … and we still have much of that today, but it is gradually being automated. The key point
being to reduce friction in bills and payments in order to boost liquidity.
This is because, these days, it still involves an awful lot of effort even though it is quicker, easier and
more seamless than ever before thanks to technology support and enablement. However, a lot of
the corporations of the world work with business models created in the 19th
century. Many banks
were established in the 1800s or even earlier – JPMorgan was established in 1871 and Barclays in
1690 – and then the companies that deal with them are equally dependent upon their antiquated
systems and processes.Although we talk a lot about the big tech firms who are just a few decades
old, don’t forget that some are far older. Walmart and IBM are both old, and Marks & Spencer even
older. Can you imagine how much baggage they’ve built over the last century?
This means that the fact that we are now global is great, but it involves massive infrastructure
change. It’s called technical debt. Technical debt is the debt built up over time from layering more
and more new stuff on old stuff. The fact the decision makers did not decide to renew the old stuff
creates the debt.
For example, it is generally estimated3
that engineers spend 33% of their time dealing with technical
debt. From discussions with well established firms, the estimated is far higher – 60% or more – but
even new companies suffer from this. PayPal, for example, is now a quarter of a century old. Imagine
what they built in 1999 compared to 2024?
McKinsey4
describes one company that estimates the cost of their technical debt is anywhere
between 15%-60% of every dollar spent on IT, which is not accounted for in their business cases. In
3
Business costs of technical debt, Codescene
https://codescene.com/hubfs/calculate-business-costs-of-technical-debt.pdf
4
Demystifying digital dark matter: A new standard to tame technical debt, June 2022
https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/demystifying-digital-dark-matter-a-
new-standard-to-tame-technical-debt

4. that same study, another large bank estimates that its 1,000 systems and applications together
generate over $2 billion in technical debt costs.
This has to be the core issue for all banks and corporations, particularly those who are over a century
old. How do you refresh to be fit for today?
What is the solution?
The obvious answer is to digitise the corporation. The harder question is: how?
The reason for the hard question is that, whether your company is twenty years or two hundred
years old, if you have technical debt lying underneath the organisation then it is very hard to
eradicate. That is changing and, for firms created in the 2020s, may mean that we could even get rid
of the challenge of technical debt. Again, we can ask how, and the answer is: open systems.
In the last decade, everything has become open to change through open systems. The revolution
began in the 2000s with two key developments: the mobile network of smartphones and cloud
computing. It has since become even more revolutionised by the back office impact of analytics
turbo-charged by artificial intelligence (AI). We talked about Big Data years ago; today it is better to
talk about Small Data. Small Data is where data is pinpointed in real-time through systems to give
customers the best experience ever.
Any data about any customer at any time and anywhere, can be pinpointed to reveal a range of
insights that influence how you serve them, their payments track record etc.
The best examples of this practice is where we can use apps, APIs and analytics in a platform
ecosystem. That line sounds technical, but it is all about re-engineering the front, middle and back
office. For any organisation, renovating the whole structure of the business is the need today, if you
want to be nimble and lean, open and integrated.

5. At that time, we talked about product, process and people. The back office focused upon product
and service, the middle office connected front and back, and the front office was all about face-to-
face service. What we know now is that technology has massively changed things.
It is no longer about face-to-face. It is all about device-to-device. Everything is being replaced by
device-to-device connectivity and, behind the scenes, device-to-device trade. What this means for
corporations and financial institutions is how to re-engineer their businesses for device-to-device
commerce.
So, we have this mixture of more and more complexity in the trade and commerce system; more
and more simplification of the system through technological design; and more and more challenge
of the system in how to redesign the old organisation to incorporate the new.
But it is not just changing the systems to incorporate the new. It is changing the whole business.
How do you move from a business wholly focused upon and built to operate through buildings with
humans to now work with software and servers?
Well, as mentioned, that change began twenty years ago, and has been turbo-charged by the
introduction of cloud computing and smartphones.
In 2023, we live in a world of open systems where the front, middle and back office have been
radically restructured. The front office has moved from stores and branches to apps and
smartphones; the middle office has moved from massive mainframes to plug-and-play software; and
the back office has shifted from head offices with mainframes to AI and analytics.

6. It is a totally different world, but one that has massively improved payments and billing. We talked
about the trillions of dollars lost in working capital earlier, due to poorly performing processes. With
real-time integration of payments processes, that is no longer the same challenge or system.
However, to shift from physical to digital integration and overcome technical debt is still a huge
issue. How do you deal with this?
Call to action
The key is to run the firm and change the firm. This sounds impossible, but many business leaders
have seen the challenge and responded. Of course, you cannot just dump the existing business, but
it is that age old question: how do you eat an elephant? One bite at a time.
So, how can you change a centuries-old institution to be fit for the future in an open systems
structure? One process at a time. This is actually far easier in the 2020s than it used to be, because
so many processes are being automated using APIs – Application Program Interfaces. It is the reason
why thousands of companies have started up, focused around processing payments, by way of
example. In fact, there are now several decacorn companies in fintech – firms worth more than $10
billion – who focus on this area.
The reason why this revolution has happened so fast is because of the issues highlighted in the
opening section. Being fit for purpose, processing online payments, providing reconciliations
between payments and receivables, managing DSO and DPO.
The opening of the markets to these new structures and processes is an imperative to rethink and
reinvent the business model of institutions. That means a front office of apps connecting devices
through the internet of things; a middle office of APIs connecting the front office apps to the back
office analytics; and a back office augmented by intelligence, artificial of course.
For example, businesses could link directly to their bank through ERP systems to reduce time to
process; they could outsource more processing to reduce internal pressures on the financial teams;

7. you could use AI to manage complex contracts and transactions; and more. This would mean
radically rationalising all legacy systems, activities and processes, but the benefits would be that
people would free to focus on far more value added tasks, activities and processes, such as
generating sales and delivering great customer service.
In order to re-engineer to that new business model structure, institutions – whether financial or
corporate – need to rethink every part of their business to be digitalised. Every single process, one-
by-one, needs to move to cloud-based services that can integrate applications developed both
internally and externally. It is not an easy ask, but that is the demand for 21st
century businesses and
is also the need for a 21st
century business.
The outcome
After digitalising everything, institutions can become completely transformed. A great example is
that a company can track and trace their complete supply chain in real-time, all of the time.
Imagine a world where a finance and accounting professional could see a real-time dashboard of all
of the suppliers but, not just the suppliers, the goods and specific items the suppliers were shipping.
Every single component wherever it is in the world, and know exactly when it is arriving. Talk about
just-in-time processing, we are moving to a world of real-time processing. Real-time processing is
pretty much a game changer as that discussion of DIO (Days Inventory Outstanding) becomes almost
irrelevant, as you would never order supplies until necessary and, when ordered, you can track
delivery in real-time.
The challenge in all of this may still be getting paid, because outstanding payments is the biggest
issue and exposure for many. Yet again, technology transforms the accounts receivables process
however, by giving real-time views of the processing.
What’s needed to achieve this is to take a platform approach.
What is a platform approach?
It is where the corporation, institution, business, bank is all operating on a digital structure. All of
your processes are open and connected, in order to enable the organisation to track and trace all
actions related to bills and payments. By doing this, there are massive savings in organisational
overhead and leverage for improved working capital. In other words, incredibly improved processes
and efficiencies.
When you imagine a platform-based operation, there is a non-stop, real-time, connected dashboard
for all communications and actions related to bills and payments. This platform, integrated globally
with everything that is needed, removes the need to take actions, such as going in and out of email
to find invoices and send messages about them. Everything is in one place.
This means a situation where the ERP and other systems talk to each other creating a bills and
payments holistic platform, as opposed to a series of disjointed systems. Organisations can capitalise
on digitising processes if data becomes joined up in one source of truth.
The result is that all of this creates better issue resolution, trend tracking and predictability.
By way of example, imagine an accounts professional is given a dashboard with all Accounts Payable
and Receivables on one dashboard, with a messaging app to discuss invoices and send payment links
and QR codes. They no longer need to go in and out of email to find invoices. Equally, the system is
constantly updated automatically so that they can work faster, and thus cash flow improves. They

8. can also track slow payments easier, spot trends and even tap into discount opportunities they can
get by paying early. All of this is in one screen and facilitates easy transactions, such as online
payment options being sent over instant messaging apps, so payments move faster.
The result is that the company has a streamlined bills and payments processes that delivers better
liquidity, transparency, use of data, instant transactions, fast communications and faster payments.
Real-time, instant, faster billing and payments, improving working capital and global operations.
Sounds like a dream, doesn’t it? In some ways it is as, for example, if we talk about faster payments,
why do we need faster payments? Because payments that take days or weeks to transfer just does
not make sense in a 21st
century business. By way of example, many American firms still use cheques
(checks) for payments. The use of a cheque in Europe is like using a gas lamp. It is so last century.
That is why some countries – the Netherlands spring to mind – have banned the acceptance of
domestic and foreign cheque deposits in their financial system. Why would you want a paper-based
payment in your real-time operations?
After all, there’s a lot of work involved to manually process paper. It makes far more sense to have
paper-based payments scanned, with data going straight to a single source of truth, and funds
digitally transferred to the right accounts.
Last century payments have become antiquated, and 21st
century organisations and their clients
expect all payments and billing to be streamlined, online and real-time.
So what?
Having discussed the regenerated, re-engineered organisation, the obvious challenge goes back to
the point made about how to eat the elephant. It will be clear where things can be replaced easily
and quickly, but what about the harder bits? The areas that are half a century old and so cemented
into organisations across entire industries that it is hard to have a clue what to do. These are the
areas where you need to talk to someone objective and impartial. That usually means a consultant,
but it doesn’t have to be. It can be any company that knows what they’re talking about and can
partner with you to drive these elements of your digital transformation.
This paper was commissioned by XBP Europe. Checkout these links for more information:
https://xbpeurope.com/solutions/accounting-and-finance/
https://xbpeurope.com/solutions/enterprise-information-management-eim/
https://xbpeurope.com/solutions/intelligent-process-automation/
https://xbpeurope.com/solutions/integrated-communications/
https://xbpeurope.com/solutions/remote-working-tools-and-work-from-anywhere/
https://xbpeurope.com/solutions/banking-and-finance/
https://xbpeurope.com/solutions/software-solutions-for-a-small-or-medium-sized-business/
https://xbpeurope.com/solutions/digital-cloud/