Two thirds of payments firms still use spreadsheets for critical financial control processes: AutoRek study

Rick Steves

“Keeping operating costs low while new regulations come into play will be crucial, and firms need to continue innovating and adapting to rid themselves of inefficiencies and keep ahead of any negative economic impacts.”

A study by reconciliation and finance automation fintech AutoRek has found that almost two thirds of payments firms agree that over the next two years, there will be an increase in regulation, specifically around customer protection, data protection and cryptocurrency.

The survey was made up of over 500 mid-level professionals working in payments firms across IT, Finance and Operations in both the UK and US.

Findings include that 65% of firms report still using outdated processes, such as manual spreadsheets, for crucial financial processes such as reconciliations. At the same time, 63% of payments firms believe their regulatory burden will increase over the next two years.

This is especially prominent in the US, with almost half (47%) of US respondents acknowledging that compliance expenditure will increase. Meanwhile in the UK, only 29% of firms anticipate spending will increase – especially as UK firms spend considerably more (£325,000 on average) compared to the US (£304,101 on average) to ensure compliance.

Recession to likely be payments firms’ biggest challenge to date

Gordon McHarg, CEO at AutoRek, commented on the findings of the report: “While we anticipate the payments sector will double its revenue by the end of the decade, the current recession means payments firms will likely be facing their biggest challenge to date. Keeping operating costs low while new regulations come into play will be crucial, and firms need to continue innovating and adapting to rid themselves of inefficiencies and keep ahead of any negative economic impacts.”

Nick Botha, Payments Lead at AutoRek, added: “Our payments report has demonstrated clear differences between UK and US regulatory landscapes, strategic priorities, and future outlooks. 2022 has been a turbulent year for payments on both sides of the pond, but the variety of payment methods and volumes are still expected to increase in the near future – a positive sign. We hope this report highlights challenges and areas of opportunities for the global payments industry.”

US firms more confident, but UK firms have more scalable operations

While most global payments firms will be ready for real-time payments in the next 12 months, there are still stark differences in readiness between the UK and US, the study concluded as US payments firms are more confident in their ability to accommodate real-time payments, with 70% noting that they are already prepared, compared to only 50% in the UK.

The payments industry has been much quicker to adopt technology than their banking counterparts, but 65% still use spreadsheets for critical financial control processes, although two-thirds (67%) of US survey respondents admitted to being overly reliant on spreadsheets compared to only half of UK respondents.

Nearly a third (29%) of US firms noted that their back-office costs grow in direct proportion to the growth in payment volumes, which indicates inefficiencies of manual processes. In the UK, however, back-office costs grow at a slower rate than payments volumes, which is fuelled by greater adoption of back-office automation.

Additional findings from the report include:

  • 42% of UK based respondents expect their number of cross-border payments to decrease, compared to 28% of US firms
  • 14% of payments firms are unprofitable and 33% are only breaking even. US firms are more likely to be profitable than those across the pond
  • The key focuses of regulatory scrutiny include: customer protection, operational resilience, crypto payments, and data protection. 64% of respondents believe that the US will adopt a similar approach to the UK’s Safeguarding Rules
  • More than half (60%) of firms expect payment methods and volumes to increase in the future

Read this next

Retail FX

Interactive Brokers adds 680k accounts, daily trades hit two-year high

Interactive Brokers LLC (NASDAQ: IBKR) recorded 2.44 million daily average revenue trades (DARTs) in February 2024, marking a notable increase from the 2.2 million transactions observed in the previous month. This figure represents the highest DARTs reported in two years, indicating an 11 percent monthly surge and a 15 percent year-on-year rise.

Retail FX

Financial Commission adds Ultima Markets to membership roster

Multi-asset brokerage firm Ultima Markets, operating under the trading name Ultima Markets Ltd, has been granted membership of the Financial Commission, marking the most recent inclusion into the ranks of the self-regulatory organization.

Digital Assets

Bitcoin hits fresh record high amid massive short squeeze

Bitcoin has surged to record highs against both the euro and the pound, hitting €60,447 and £51,736 respectively on Coinbase. The primary cryptocurrency has seen an almost 7% increase in the past 24 hours.

Digital Assets

US court rules crypto trades as securities in Coinbase case

A US court ruled that trading crypto assets on platforms like Coinbase constitutes securities transactions.

Market News

Weekly Data: Oil and Gold: Brief Review before the NFP

This preview of weekly data looks at USOIL and XAUUSD where economic data coming up later this week are the main market drivers for the near short-term outlook.

Institutional FX

FXSpotStream reports lower volumes for February 2024

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for February 2024, which moved lower on a monthly basis.

Fundamental Analysis

Global FX Market Summary: EUR, USD, Gold March 4th,2024

US Dollar Weakness: The US Dollar (USD) is currently struggling to gain strength due to a combination of factors.

Technical Analysis

Bitcoin Technical Analysis Report 4 March, 2024

Bitcoin cryptocurrency can be expected to rise further toward the next resistance level 69000.00 (former multiyear high from January)

Opinion

Finding Opportunity in Challenge: Why New Regulations Offer a Chance For Business to Get on Top of Data Management

The combination of CESOP, PSD3 and the PSR, has put businesses under new pressures. In this engaging article, André Casterman, Senior Advisor at Intix provides invaluable guidance on how companies can stay ahead of the curve.

<