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

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Findings include that 65% of firms report still using outdated processes, such as manual spreadsheets, for crucial financial processes such as reconciliations.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