| | NOVEMBER 20218CIOReviewIN MY OPINIONBy Guy R. Berg, Vice President Payments, Standards and Outreach Group at Federal Reserve Bank of MinneapolisBanks, corporations and their supporting payment processors are at a crossroad for enabling the mass connectivitynecessary to support Business to Business (B2B) electronic payments, invoicing and remittance information exchange. They have the option of continuing down the current path filled with artificial barriers preventing greater connectivity, or find ways toward the mutually beneficial goal of greater efficiency in the exchange of invoices, electronic payments and supporting remittance information. Although competition generally leads to optimum customer choice,laissez-faire market competition without some level of industry coordination oftenleads to disfunction. A model environment provides a level of coordination that paves a path of enabling innovation and competition encouraging collaboration resulting in decreased costs and improved efficiencies for everyone. Imagine if there was no standard for Internet communication, and instead, businesses relentlessly pursued the idea that their communication protocol would eventually win over all others. Where would the Internet's capability and reach be today? What if email service providers did not recognize the need to establish exchange standards? What would be the impact of the reach of our email systems? Today, banks, corporations and supporting payments processors are at acrossroad similar to the one that the email and internet stakeholders faced years ago. E-mail and internet providers decided collaboration was the appropriate path to gain significantly broader reach, leading to the mass connectivity we enjoy today with these services. This begs the question, what are the barriers to B2B mass system connectivity and approaches to fostering greater collaboration to achieve electronic B2B payment processing efficiency in a highly competitive market?Historically, a primary barrier has been the lack of a clear path forward that did not require central directories. Unfortunately, centralized directories raise valid concerns about ownership and concentration of competitive influence and power. In addition, they generally require businesses and service providers to contribute proprietary contact information that has taken years to accumulate.For B2B payments, the path to achieving collaboration and mass connectivity may be to model e-mail systems which leverage internet DNS (Domain Name System) for delivery addresses, and prescriptive e-mail exchange standards to facilitate interoperability BUSINESS-TO-BUSINESS PAYMENTS AT A CROSSROADGuy R. Berg
< Page 7 | Page 9 >