When it comes to payments, tech firms are sometimes the worst offenders for archaic, paper-based practices, says Chris Skinner.

I often find myself in weird or frustrating situations that are hard to crack – for example, dealing with clients who need a UK tax residence certificate or to clear other hurdles before they can make a payment; or dealing with US clients who want to pay me by cheque; or, worst of all, US clients who require lots of form filling thanks to Sarbanes-Oxley audit trails. These forms should be easy, but they can be quite cumbersome.

A recent case in point was when I spoke at the conference of a leading digital solutions provider – one of the top technology solutions companies worldwide. It hired me to inspire digital change among its fusty old bank clients; I expounded the wonders and beauty of digitalisation and left.

Post-lecture, my assistant was invoicing the company and was told it would only accept an invoice in the post (we had sent our usual electronic version). Of course, this entailed my assistant printing out the copy we’d sent them electronically (and posting it) – couldn’t they have just done that? 

A month later, we chased up payment and were told the company hadn’t received the invoice. Could we provide the tracking number? Unfortunately, we didn’t have one, so the whole process started again a month later, with tracking this time. On our side, we now had a large invoice outstanding for over a month, affecting our cashflow. Yet from the company’s side, they’d never received an invoice.

An 'easy' payment

In another recent example, a client wanted to pay me the easiest way, by credit card. However, the link my assistant sent over wouldn’t work for some reason so the client asked if they could put a cheque in the post. This was not ideal for either of us.

For me, it meant filling in the Internal Revenue Service’s W-8 forms for tax exemption, getting a cheque in the mail that must be then taken to my bank, which will take a month to process it through the Swift network, and then charge me fees and then some more on exchange rates… but hey, we’ll get there.

For the client, they have to get the whole procurement department on board, set up a new vendor, register all the details on their e-invoicing system (that secretly relies on paper) and do vendor due diligence.

But if paying by card doesn’t work, then it is pay by cheque, as that’s the only alternative for the company – which happens to be a payments technology company. You get where I’m going with this.

Anyway, my assistant sent off our standard W-8 form, which was rejected because it is too old and not signed this year. We printed a new one and I signed it. We emailed it to the client, which rejected it because it is not a PDF file. We printed it again, I signed it again and packaged it off. This time it was accepted, but needed to be sent in the post to their head office before they could process the payment.

Dinosaurs awaiting extinction?

At this point, I’m flabbergasted to find that I’m working with a 21st century payments-processing firm that leads in technology marketing and prowess, but whose internal processes require days of emailing to clarify what’s needed, which is:

To enable the client to put paper in the post to the supplier, so that...

The supplier can paper in the post to bank, so that...

The bank can put messages through nostro to the counterparty, so that...

The counterparty can agree funds to be transferred, so that...

The bank can place funds in the supplier’s account...

...all of which takes about six weeks and costs hundreds of dollars. 

Now, personally I think that some processes are there to allow big companies to avoid or delay payments to suppliers. But even if they aren’t, here’s my point. 

Leading technology firms are my clients. They fly me to exotic locations to put a rocket up the backside of their customers to digitalise. Meanwhile, some are more of a dinosaurs themselves than the banking clients they ask me to lecture.

This is why I often say banks’ main issue with legacy systems is not the actual systems themselves, but the legacy vendors who provide those systems. Take note.

Chris Skinner is an independent financial commentator and chairman of the London-based Financial Services Club.

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