Trends are both a record and forerunner of progress and innovation - success depends on anticipating the megatrends of today and tomorrow. As the pace of change accelerates, these insights can help to prepare and empower your business to last.
Trends at a glance
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How can companies embed digital as a core part of their DNA?
Organizations have shifted from a survival mindset to one based around sustainable growth. There is also a growing realization that, whatever the sector or industry, this growth will be powered by technology. On a basic level, companies are looking to use digital processes and automation as much as possible. Once organizations have discovered their gaps, they are then building on the infrastructure, improving accessibility and adding more sophisticated capabilities like on-demand and real-time. From a payments’ perspective, companies are beginning to think carefully about which options are most convenient for their customers and which offer real strategic value, such as implementing an integrated digital wallet across multiple business lines.
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How can businesses benefit from the continuing the shift from hardware to online services?
One of the most exciting business models to emerge in recent years is Anything-as-a-Service - where a vast number of different goods or offerings are provided as a service, without need for ownership. The classic example is Spotify. Instead of having to own albums, listeners can access the music they want via streaming for a monthly fee. But this model can also be applied to physical goods, such as delivering mobility-as-a-service by enabling cars to be rented on-demand. Payments play a vital role in Anything-as-a-Service. The growth of embedded payments and the different ‘as-a-service’ models are integrated to enhance an organization’s ecosystem – with payments serving as the single connector.
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How can your payments strategy be used to drive growth and generate new revenue streams?
What models like Anything-as-a-Service show, is that having optionality in payment capabilities can be the lever to drive new business growth. If a B2B company wants to increase margins by offering direct-to-consumer (DTC), then they will need the infrastructure to accept consumer payments. This can be a major organizational shift, especially if they have traditionally transacted via invoicing, or credit arrangements. Some gig worker platforms are also using payments as a key competitive advantage. By paying workers on delivery, rather than on a weekly or monthly basis, they offer an attractive alternative to the leading players in their market.
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Understanding how payments will impact Treasury functions and what the risks are.
As payments take a more prominent role, there are a number of implications for Treasury teams. It’s important that organizations align their working capital and liquidity strategies to ensure they are designed to support the broader impacts payments has on the overall business strategy. For instance, giving suppliers or outsourced workers shorter payment terms may require new lending options, such as commercial cards, in order to manage cash flow. Before embarking on any new strategic projects, organizations need to analyze the inherent risks and gaps it may pose to working capital and liquidity.
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How can companies ensure their growth is sustainable in the long-term?
J.P. Morgan believes that sustainable growth is inclusive growth, and that this will be a heightened trend in 2022. ESG initiatives will not just be the preserve of one area of the company but will also have to be addressed across all operational areas including treasury and payments. The social factor in ESG is becoming increasingly important. Not only do companies have to take care of the communities in which they operate in, but also their employees. By leveraging emerging technology, faster payments can be enabled which can have a beneficial impact on employees and communities at large1.
2021 priorities were to strengthen the organization. 2022’s focus is on sustainable growth.
There are four columns in this chart.
Column one is optimization – cost and efficiency. The priorities in this column are visibility and control, operational efficiency, and data and analytics.
Column two is survival – resiliency and quick pivots. The priorities in this column are supply chain health, operational continuity, and business survival. This column begins in March 2020 and runs through January 2021.
Column three is lessons learned – shifting mindsets and foundations of growth. The priorities in this column are working capital optimization, digital and automation, and business pivots. This column begins in January 2021 and runs through January 2022.
Column four is sustainable growth – powered by technology. The priorities in this column are digital as a culture, anything as a service, payments as a revenue driver, aligning working capital and liquidity, and addressing ESG agendas. This column begins in January 2022 and continues through 2022.
References
Finextra, June 2021. ‘It is time for banks and businesses to step up on ESG.’ Available at: https://www.finextra.com/blogposting/20517/it-is-time-for-banks-and-businesses-to-step-up-on-esg .
Accessed January 2022
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of J.P. Morgan, its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed to be reliable. Neither the author nor J.P. Morgan makes any representations or warranties as to the information’s accuracy or completeness. The information contained herein has been provided solely for informational purposes and does not constitute an offer, solicitation, advice or recommendation, to make any investment decisions or purchase any financial instruments, and may not be construed as such.
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