uk business payments barometer

UK BUSINESS PAYMENTS BAROMETER DE-RISKING FOR GROWTH

2016

401UK financial decision makers surveyed

47%Believe their revenue has been negatively impacted by financial fraud

36%Feel 10% or more of their revenue is impacted by financial fraud

External Cyber Fraud Cited as the greatest concern for most organisations, but for corporates, the greatest

worry was the external exploitation of internal payment processes

1 in 5 Financial decision makers for enterprises admit to still using spreadsheets to manage

financial operations, despite ICAEW estimating that 90% of spreadsheets contain errors

The Need For Greater Security

The greatest single driver of change in the payments industry in the next 12 months

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Q12. On a scale of 1-9, to what extent do you think that your revenue has been negatively impacted by financial fraud? Base Total Respondents: 401 [TOP 4]

Q13. In your opinion, what percentage of revenue do you think has been impacted by financial fraud? Base Total Respondents: 401

Q14. Relevant to your business, which types of financial fraud are you most concerned about? Base Total Respondents: 401

Q6. How does your business currently manage its financial management operations? Base Total Respondents: 401 [NET: TOP 3]

UK BUSINESS PAYMENTS BAROMETER 2016: SNAPSHOT

Financial risks are stifling growth for UK businesses. And to thrive in today's

demanding environment, there’s a continued need for an enhanced strategy that

brings about stability.

Such an approach involves driving efficiency in your payments and cash

management processes. And with unease in the current macroeconomic

landscape and the challenging global supply chain, that is vital. No business is

exempt. To help organisations tackle these obstacles, Bottomline Technologies’

first UK Business Payments Barometer provides key insights into business

payments trends and risks.

The theme for this report, de-risking for growth, reflects the results of our survey

of over 400 financial decision makers. It lays bare the risks that are endemic in

many organisations and the effect it has on operations.

FRAUD AND ERRORS ARE A TOP PRIORITY

Payment fraud and error is the biggest challenge currently faced by financial

decision makers. Businesses rank protecting against these risks ahead of

reducing the cost of payments, innovation and regulation.

The bigger the company, the bigger the perceived risk when it comes to

payment processes.

BUSINESS PAYMENTS FRAUD IMPACTING PROFITS

The UK Business Payments Barometer finds that most financial decision

makers are confident in their anti-fraud measures. Yet more than one in three

financial decision makers surveyed felt that 10% or more of their revenue is

impacted by financial fraud.

UK’S LARGEST ORGANISATIONS FACE SPREADSHEET RISK

Another area for concern is the continued reliance on spreadsheets to manage

financial operations in some of the UK’s largest organisations. We believe the

inability to access required information for visibility, is creating the use of

spreadsheets.

Yet spreadsheets were never designed to handle enterprise-level financial

planning and operations. They are inefficient and open to fraudulent activity.

Spreadsheet errors can cause reputational damage and financial loss.

It's important to understand the underlying usage reasons, key business

payment risks and trends. It's the only way for finance managers to streamline

their business and payment processes. At the same time, they will achieve new

levels of efficiency, control and profitability.

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UK BUSINESS PAYMENTS BAROMETER 2016: FOREWORD

Ed Adshead-GrantGeneral Manager, Payments at Bottomline Technologies

Payments Landscape Insights 5 – 7

Cash Management and Visibility 8 – 10

Accounts Efficiency and Liquidity 11 – 12

Fraud Prevention 13 – 16

A View Ahead 17

Methodology 18

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UK BUSINESS PAYMENTS BAROMETER 2016: CONTENTS

5Q1. To what extent do you agree that the following factors will be a big driver of change in the payments industry in the next 12 months? Base Total Respondents: 401

UK BUSINESS PAYMENTS BAROMETER 2016: PAYMENT LANDSCAPE INSIGHTS

34%

37%

40%

51%

60%

67%

69%

75%

Blockchain

Cryptocurrencies

Wearables

Payment infrastructure consolidation

Regulation

Mobile payments

Innovation in payments technology

The need for greater security

Drivers of change in the payments industry in the next 12

months:

FUTURE-PROOF SECURITY SET TO DRIVE CHANGE IN

THE PAYMENTS INDUSTRY

The top three drivers of change in the payments industry in the

next 12 months are thought to be:

• need for greater security (75%)

• innovation in payments technology (69%)

• mobile payments (67%)

6Q1. To what extent do you agree that the following factors will be a big driver of change in the payments industry in the next 12 months? Base Total Respondents: 401


MOBILE PAYMENTS GO MAINSTREAM AND THE RISE OF

BLOCKCHAIN

Two thirds of businesses see mobile payments as a key driver for

change in the payments industry in the next year.

We recently held our Mobile Payments for Corporates launch in

partnership with Barclays Pingit. Ahead of the launch, we had

significant demand for mobile solutions - especially from insurance

and utility firms. Companies wanted to enable payments to their

customers via their mobile phone numbers.

Today’s customers seek convenient, instant payments from

businesses. They do not necessarily want to provide personal bank

details over the phone, or email.

The ability to deliver this can allow organisations to improve

customer engagement and satisfaction. What's more, it can also

save them money by reducing the costs associated with generating

cheque payments, and at a time when cheque usage is in steady

decline.

At the other end of the spectrum, businesses see distributed ledger

technology, or blockchain, as one of the lowest drivers for change in

the next year. That is not surprising considering the relative infancy

of the technology.

However, we continue to see significant levels of investment and

innovation in blockchain. It will be interesting to see whether this

changes next year as we see more offerings commercialised.

7Q4. Within your company, have you already or are you planning on migrating your payment systems to the cloud? Base Total Respondents: 401, Small /Medium: 101, Large: 100,

Corporate: 100, Enterprise: 100


23%

45%

28%

My company hasalready migrated ourpayment systems to thecloud

My company has notmigrated our paymentsystems to the cloud, butthere are plans to

My company has notmigrated our paymentsystems to the cloud,and there are no plansto

Have you already or are you planning on migrating your

payment systems to the cloud? SLOW BUT STEADY MOVE TO THE CLOUD

Retaining control, remaining compliant and reducing the risk of

failure is key to ensuring a seamless payment process.

Migrating payments to the cloud is one solution.

The cloud currently has limited take up as less than a quarter

have migrated their payment systems to this method.

While more than half of large businesses, corporates and

enterprises have plans to move their payment systems to the

cloud, over 60% of small businesses have no intention of doing

so. This is surprising considering internet banking is

fundamentally a cloud-based payment tool, which most small

businesses use.

8Q7. How confident do you feel that you have sufficient visibility of cash flow data to allow you to make informed strategic decisions? Base Total Respondents: 401 [TOP 4]

Q8. What factors are inhibiting your visibility of cash flow and ability to forecast? Base Total Respondents: 401

UK BUSINESS PAYMENTS BAROMETER 2016: CASH MANAGEMENT AND VISIBILITY

16%

22%

26%

28%

30%

Poor bank connectivity

Inefficient delivery of top-levelinformation

Ineffective reporting

Lack of reliable data sources

Lack of internal systems integration

Factors which inhibit financial decision makers’ visibility of

cash flow and ability to forecast:BETTER INTERNAL SYSTEMS INTEGRATION AND

RELIABLE DATA SOURCES REQUIRED TO BOOST

CASHFLOW VISIBILITY

Although four fifths of financial decision makers felt they had

sufficient visibility of cash flow data, there is room for concern

behind this seemingly positive finding.

30% and 28% of financial decision makers claimed that a lack

of internal systems integration and a lack of reliable data

sources respectively, were inhibiting their ability to forecast.

This suggests that financial decision makers are potentially

using unreliable or outdated data to make financial decisions.

This is further evidenced by the reliance of spreadsheets which

is discussed later in this report.

9Q6. How does your business currently manage its financial management operations? Base Total Respondents: 401, Small /Medium: 101, Large: 100, Corporate: 100, Enterprise:

100

Current financial management operations:

21%

31%

32%

45%

Specialist third-party vendorsystem

Spreadsheet

Enterprise Resource Planningsystem (i.e. SAP, Oracle)

In-house system

FINANCIAL OPERATIONS ARE AT RISK FROM

SPREADSHEETS AND IN-HOUSE SYSTEMS

Over a fifth of decision makers in UK enterprises, some of the

UK’s largest businesses, are still using spreadsheets to

manage their organisation’s financial operations. They are

favouring them over in-house systems or Enterprise Resource

Planning systems.

The use of spreadsheets is not without risk. This is particularly

true in enterprise organisations where operations and data

feeds are more complex. The accounting institute, ICAEW,

estimates that 90% of spreadsheets contain errors, ranging

from material errors such as incorrect models, to careless use

of formulae.


10Q13. In your opinion, what percentage of revenue do you think has been impacted by financial fraud? Base Total Respondents: 401

Current financial management operations (by business size):


45% 46%

42%

49%

43%

32%

8%

30%

34%

55%

31%

50%

33%

18%

22%21%

7%

25%27% 27%

Total Small /Medium Large Corporate Enterprise

In-house system

Enterprise Resource Planning system (i.e. SAP, Oracle)

Spreadsheet

Specialist third-party vendor system

This report also finds, over a third of financial decision makers

claim that 10% or more of revenue is impacted by fraud (see

Fraud Prevention section).

Therefore, eliminating spreadsheet errors is vital to ensure that

potential fraud is flagged immediately before it happens.

Some 45% of all the businesses surveyed also used in-house

systems which can be just as problematic. Bespoke systems

are typically built by a select few technical individuals, which

means that if these individuals leave the company, the integrity

of these systems may be at risk.

OPPORTUNITY TO DRIVE ACCOUNTS RECEIVABLES

OPERATIONS

Encouragingly, 70% of invoices are perceived to be paid on

time. Whilst this is a positive figure, it still means that 30% of

invoices are not paid on time.

Businesses should look at the value of these invoices and

consider the resources required to recover these funds.

Organisations can do more to increase the proportion of

invoices paid on time and therefore, lower the cost of their

accounts receivables operations.

Delivering electronic financial documents, whether it’s a legal

contract, invoice or a purchase order is no different.

Documents are more than just printed or electronic pieces of

paper. Each document has a place of origin, content, receiver

and destination. If the document doesn’t get delivered, the

process stops and creates payment delays and inefficiency.

The technology available to businesses today enables visibility

and insights into undelivered and un-actioned invoices that can

negatively impact cash flow.

Having a clear audit trail and visibility into the delivery journey,

enables finance departments to mitigate cash at risk. It also

encourages quicker payments from customers and more

importantly, optimises working capital – the lifeblood for every

business.

11Q9. In your opinion, what percentage of invoices you issue are paid on time? Base Total Respondents: 401 [MEAN SCORE]

UK BUSINESS PAYMENTS BAROMETER 2016: ACCOUNTS EFFICIENCY AND LIQUIDITY

12Q10. Do you use invoice discounting at present? Base Total Respondents: 401, Small /Medium: 101, Large: 100, Corporate: 100, Enterprise: 100

Q11. How do you anticipate on using invoice discounting in the next 12 months? Base Respondents who selected Yes or No at Q10 (Not Don’t Know): 375

*Research by McKinsey Oct 2015

UK BUSINESS PAYMENTS BAROMETER 2016: ACCOUNTS EFFICIENCY AND LIQUIDITY

Do you use invoice discounting at present?

18%

76%

6%

Yes No Don't know

43%

51%

6%

Small / medium

sized businesses

Large

businesses

40%

54%

6%

35%

57%

8%

EnterprisesCorporates

INVOICE DISCOUNTING

Currently only a third of organisations use invoice discounting.

Interestingly large businesses use invoice discounting the

most, while over three quarters of small to medium sized

business (SMEs) don’t use it at all. On top of this, less than

one in five plan to use invoice discounting more in the next 12

months.

These results suggest that SMEs more typically use factoring,

selling accounts receivable to third parties at a discount, or

may have moved away from direct invoice discounting in order

to participate in supplier finance programmes. These are

generally more competitively priced than invoice discounting,

as they are supported by their big customers who partner with

banks to pay suppliers early minus a discount.

This market is growing at 15-20% per year*. Similarly, some

large, cash rich corporates are adopting a technique known as

dynamic discounting, whereby they use surplus cash to pay

suppliers early and earn a discount, instead of placing these

surplus funds in low yielding bank deposits.

13Q3. What are the biggest challenges you're dealing with now regarding your current payment processes? Base Total Respondents: 401, Small /Medium: 101, Large: 100,

Corporate: 100, Enterprise: 100

UK BUSINESS PAYMENTS BAROMETER 2016: FRAUD PREVENTION

21%

21%

24%

28%

37%

38%

Compliance withpayment regulation

Improving internationalpayment efficiency

Cash flow visibility andmanagement

Keeping pace withpayment technology

innovation

Reducing costs ofpayments

Protecting paymentsfrom risk i.e. error and

fraud

The bigger the company, the bigger the

percieved risk when it comes to payment

processes. Only 1 in 5 small / medium

sized businesses state that protecting

payements is the biggest challenge

regarding their current payment

processes, while 1 in 2 enterprises

believe it is.

Enterprises

50%

Corporates

35%

Large businesses

45%

Small / medium

sized businesses

22%

The biggest challenges financial decision makers face with

regards to current payment processes:

DE-RISKING FRAUD AND ERRORS IS A TOP PRIORITY

Protecting payments from risk in areas including fraud and

error, is the single biggest challenge currently faced by

financial decision makers. It comes ahead of reducing the cost

of payments, innovation and regulation.

It is perhaps not surprising that the bigger the company, the

bigger the perceived risk. Half of enterprises state that

protecting payments from risk is the biggest challenge

regarding their current end-to-end payment processes. This is

compared to only one in five SMEs who state this as their

biggest challenge.

14Q15. On a scale of 1-9, how confident are you in the current anti-fraud measures that you have in place? Base Total Respondents: 401 [TOP 4]

Q12. On a scale of 1-9, to what extent do you think your revenue has been negatively impacted by financial fraud? Base Total Respondents: 401, Small /Medium: 101, Large: 100, Corporate: 100, Enterprise: 100 [TOP 4]

Q13. In your opinion, what percentage of revenue do you think has been impacted by financial fraud? Base Total Respondents: 401


BUSINESS PAYMENTS FRAUD IS IMPACTING THE

BOTTOM-LINE

The report suggests there is a level of apathy from

businesses, accepting that fraud is a cost of doing business.

The good news is that almost four in five financial decision

makers are confident in their current anti-fraud measures.

Although this lowers to two in three SMEs who are confident.

Despite this confidence, almost half of the financial decision

makers believe their revenue has been negatively impacted

by financial fraud.

More than 1 in 3 feel 10% or

more of their revenue is

impacted by financial fraud36%

53%Small /

medium

sized

businesses

19%Large businesses

26%Corporations

30%Enterprises

Percentage of financial decision makers by company size who think

their revenue has been negatively impacted by financial fraud:

15Q14. Relevant to your business, which types of financial fraud are you most concerned about? Base Total Respondents: 401, Small /Medium: 101, Large: 100, Corporate: 100, Enterprise: 100

GROWING ORGANISATIONS FACE SHIFTING FRAUD

RISK

Cyber fraud, such as the direct hacking of systems, remains

the single biggest concern for most businesses, especially

SMEs with over half claiming that they were most concerned

by this threat.

Whilst cyber fraud is generally a leading concern across all

organisations, the largest concern for corporates is the external

exploitation of internal payments, systems and staff, with one in

three corporates citing this as their greatest concern.

Other external threats include invoice diversion fraud and CEO

fraud. This is when an email is received which appears to be

from an individual or business known to the receiver, but

instead has sent by criminals hoping to exploit the receiver.

Type of financial fraud which causes most concern:


13%

14%

24%

37%

Internal exploitation of systems or controls, e.g.insider fraud, ghost employees, etc

External exploitation of internal staff, e.g.impersonations, collusion, grooming, etc

External exploitation of internal paymentprocesses, e.g. invoice fraud, fake vendor

details

External cyber fraud, e.g. hacking of systems

16Q14. Relevant to your business, which types of financial fraud are you most concerned about? Base Total Respondents: 401, Small /Medium: 101, Large: 100, Corporate: 100,

Enterprise: 100

Type of financial fraud which causes most concern:


As businesses grow, in particular through mergers and

acquisitions, the processes powering the organisation become

less consistent and more fragmented. This creates weak points

that criminals both inside an organisation and external to it, can

exploit.

At the other end of the scale, enterprises have gone through

these pain points as they have grown, addressing these issues

as they are identified. However these are often tackled by

patching issues on an ad-hoc basis.

While this solves the issues in the short term, it often comes at

the cost of higher levels of inefficiency in areas such as

business payments.

37%

52%

30%28%

39%

24%

13%

24%

34%

27%

14%

6%

17%

22%

13%13%

4%

23%

11%13%

Total Small /Medium Large Corporate Enterprise

External cyber fraud, e.g. hacking of systems

External exploitation of internal payment processes, e.g. invoice fraud, fake vendor details

External exploitation of internal staff, e.g. impersonations, collusion, grooming, etc

Internal exploitation of systems or controls, e.g. insider fraud, ghost employees, etc

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UK BUSINESS PAYMENTS BAROMETER 2016: A VIEW AHEAD

Payments solutions need to be both secure and easy to use. The next solutions

that reduce the risk of fraud and human error.

Security is the most important aspect of payments processing, that’s why we

focus on it all the time. One of our growth drivers is the adoption of cloud-based

payment platforms, and once again security has to be built in, with an array of

tools that protect payments from tampering – whether it’s rogue employees or

people on the outside.

Our solutions are making mobile payments for business easier, faster, more

efficient and more reliable, and that in turn will drive the rapid adoption of many

additional innovative mobile payment solutions. Great examples for this are

utilities and insurance companies, who have started to pay individuals and small

businesses via mobile telephone numbers. Another likely innovation we may see

is the development of a B2B Direct Debit system in the UK, which would really

help businesses with their cash flow forecasting.

We are excited about the opportunities offered by industry initiatives such as the

UK Open Banking Standard and the EU’s Payment Services Directive 2 (PSD2).

These changes in the payment landscape will make it easier for businesses and

consumers to get a single view of their cash balances across all their investments

and bank accounts; the great benefit is that they will be able to manage their

payments more efficiently.

We are seeing a growing number of FinTech companies being licensed and

regulated as Payment Institutions, and entering the market for payments services.

This promises more competition and more choice for businesses and consumers

alike.

We will see companies collaborate more closely with their suppliers and customers,

thanks to cloud-based payment and invoicing platforms, which in turn will result in

more efficient supply chains. The improved visibility and tracking of financial

document receipt and approval will improve cashflow forecasting and the

management of working capital. This will result in faster approval of invoices, which

opens up opportunities for bank-funded supplier finance programs and cash-rich

buyer-funded dynamic discounting programs, with significant benefits all along the

value chain.

Bottomline is closely involved in industry discussions about the potential of

Blockchain and Distributed Ledger Technologies to transform the payments

industry. We do not expect that these technologies will have an immediate impact

on UK payment systems; at the earliest we will see the adoption and roll-out of

these technologies in about three to five years, once questions about identity

management, security and scalability have been resolved.

We are confident that the payments landscape will continue to develop rapidly as

new solutions come to market. The winners will be the providers who understand

their customers and are capable of delivering solutions that anticipate and meet

their customers’ demand for elegant and simple solutions that deliver one thing:

easy and secure management of payments.

Ed Adshead-GrantGeneral Manager, Payments at Bottomline Technologies

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UK BUSINESS PAYMENTS BAROMETER 2016: METHODOLOGY

Edelman Intelligence was commissioned by Bottomline Technologies to

a five minute online questionnaire across 400 financial decision makers

in the UK about their attitudes towards business payments. Financial

decision makers were defined as those who input solely or as part of a

group in to the purchase of accounting, tax, or financial services.

The survey was representative across:

• SMEs (up to and including 250 employees) n=101

• Large companies (251 employees+) n=100

• Corporates (1,000+) n=100

• Enterprises (10,000+) n=100

Edelman Intelligence ensured there were quotas on each audience and

a robust sample size per group so we were able to cut the data by

business size.

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ABOUT BOTTOMLINE TECHNOLOGIES

If money is the lifeblood of the economy, then Bottomline Technologies

(NASDAQ: EPAY) provides its financial heartbeat. Our company helps

banks, corporate and government bodies to securely move money,

transmit financial messages, and digitally capture and communicate

financial documents.

Focused on improving financial health and liquidity, our mission-critical

solutions help businesses to innovate, win and grow. As companies large

and small send and receive payments, we help them to comply with all

national and European regulations, and protect them from fraud and

regulatory risk.

We are a vital part of the global financial system: 65 of the Fortune 100

companies and nearly 80% of FTSE 100 companies depend on

Bottomline Technologies for their financial transactions. In total, over

10,000 corporations, financial institutions, and banks around the world

benefit from Bottomline solutions.

Headquartered in the United States, Bottomline also maintains offices in

Europe and Asia-Pacific.

UK BUSINESS PAYMENTS BAROMETER 2016: ABOUT BOTTOMLINE TECHNOLOGIES

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Europe, Middle East, Africa Headquarters

115 Chatham StreetReading, Berkshire RG1 7JXUnited KingdomTel (Local): 0870 081 8250Tel (Int): +44 118 925 8250Fax: +44 118 982 [email protected]