Payments survey results: how quickly will the industry modernise?

A survey of attitudes towards payment modernisation has found plenty of optimism, despite resignation among some respondents about poor practices. Lem Bingley reports

Many construction firms have increased their use of digital technology since the pandemic began in 2020. While it was possible for site work to press ahead following adjustments for social distancing, back-office roles have been more deeply affected by new ways of working. As such, many firms have accelerated plans to adopt digital payment systems, according to a survey by Construction News late last year, undertaken in partnership with technology provider Payapps.

A prior CN survey, carried out 12 months earlier, found only one-third of firms (32 per cent) had either adopted a digital payment system or were planning one. But by November 2021, the proportion had risen dramatically, to almost two-thirds. Now, 41 per cent say they have already digitised their payments, and another 22 per cent expect to do so within a year. Only around one in 10 (11 per cent) have no plans to move to digital payment.

Both surveys polled a comparable mixture of business leaders and senior managers, with around 70 per cent of both samples drawn from contractors and subcontractors.

The sharp rise in adoption holds out hope that the sector’s perennial problems with late payment might eventually resolve, with our sample of 257 respondents appreciating many upsides.

When asked about bringing money into their business, most respondents associated digital payment systems with a range of benefits. Most ranked the following as either important or very important aspects of digital payment:

Potential benefit (as a payee) Chose important or very important
Improved speed/reliability of payment 93%
Improved visibility/tracking of payments 88%
Improved communications 87%
Reduced errors 86%
Better client relationships 81%

Asked about making payments to others, a different set of expectations came to the fore:

Potential benefit (as a payer) Chose important or very important
Reduced errors 87%
Improved productivity/time savings 84%
Better supplier relationships 84%
Reduced costs 80%
Improved supply chain stability 79%

The survey results suggest that as more firms become familiar with such benefits, they could develop a preference for working with firms that have modernised their payment processes – at the expense of those that have not.

When asked about barriers to widespread adoption, the most common problem was a basic lack of knowledge and digital skills, cited by 58 per cent of our sample. The cost of deployment was an issue for 54 per cent, and the time and effort involved was a factor given by 47 per cent. Resistance to change among suppliers was chosen by 44 per cent of those surveyed.

When do you expect to adopt digital payment?

Two-thirds of firms have adopted digital payment or plan to do so

Quizzed in detail about what it would take to make digital payment the norm, responses fell into several camps:

Time

Many respondents felt that the use of digital payment would simply increase organically. One, a director at a subcontractor, said adoption “will be a natural progression, which requires more time for some than others”. A consultancy director agreed: “It will happen – it’s just a matter of waiting until the industry is comfortable with it.”

“When asked about barriers to widespread adoption, the most common problem was a basic lack of knowledge and digital skills”

Standardisation

Many participants wanted to see better integration between payment systems from rival vendors. “The architecture of digital systems needs to be unified across the different applications,” said one subcontractor manager. The boss of a consultancy said common formats would mean “not having to provide the same information to 12 different payment platforms”. Another respondent said: “There needs to be a universal system, adopted by all stakeholders.”

Leadership and legislation

Clients must drive change, some felt. The use of digital payment “needs to be led by and pushed by clients and main contractors”, said one employee of a main contractor, although another respondent warned that small clients would struggle to reap benefits. A few wanted to see leadership from banks, but many more pointed to government. “Contractors need to be forced to pay on time,” said one subcontractor boss.

Payment terms

Various issues with contracts were raised by survey participants, with many subcontractors hoping that digital systems might make large contractors abide by payment terms. The perennial issue of retentions was also frequently flagged, while one subcontractor boss said: “The problem with digital payment is
that it reduces the human interaction in the supply chain. This leads to [sums] being potentially rejected without a discussion about why they were included in the first place.”

Security and trust

Fraud and cyber-risks were frequent concerns for respondents, as were honesty and trust between trading partners. “Main contractors need to do what they say will,” said one subcontractor boss. “It doesn’t matter what systems are in place: if they don’t want to release a payment they simply won’t do it, digital or not.”

Mindset

Many of the most frequently cited barriers to modernisation were related to mindset, internal culture and resistance to new ways of working. As the boss of one construction supplier put it: “Any change needs to be fully understood and the people taken on the journey. It is more of a change-management issue than a digital payment issue.”

Conclusion

Our survey shows that, heading into 2022, many firms in construction have either completed or begun a process of modernising their payment processes. Most expect a range of benefits, from either side of the transaction, but
many feel cultural challenges remain a greater problem.

As one civil engineer put it: “The payment issues I see have to do more with contracts that don’t reflect the real costs […] That is why projects are delayed and over-budget. If a more realistic approach was considered, then technology would play its part.”

‘Important’ and ‘very important’ technology priorities for 2022

79%

Forecasting or planning

71%

Digital project management systems

67%

Digitisation of back office

29%

Telematics or remote monitoring

 

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