What are Corporate Credit Cards? – Different Types of Cards
February 12, 2025
Infrastructure projects continue for a long period of time. Sometimes these projects continue for decades. Hence, they need long term finance. On the other hand, there are entities such as insurance companies and pension funds which are looking to invest their money for long periods of time. Ideally, insurance companies and pension funds should be […]
In most parts of the world, the financial system can be divided into two parts viz. the private sector and the government sector. However, in many parts of the world, there is a third sector called the quasi-government sector. This sector has the characteristics of both the government as well as the private sector. The […]
Businesses may all look the same when you look at the building in which they operate, the employees they hire and the product they sell. However, they can be very different when it comes to their legal structure. The legal structure determines the type of entity they are which in turn determines the rules that […]
We all know that professional sports teams are run like a business across the globe. This means that these sports teams have professional marketing agents, an executive team, and a finance team and operate like a full-fledged organization. These professional teams are often referred to as sports franchises. Football clubs in the English Premier League, […]
Commercial banking has traditionally been slow to adopt the latest technology. However, over the past few years, commercial banks have undergone so much transformation that they have now started using different technologies to complete different steps of the same process. In order to foster automation and better adoption of technology, it is important to view […]
In the previous article, we have already studied how commercial banks help in providing point-of-sale services to their corporate customers. We have also studied how point-of-sale systems have become strategically important for corporations. However, they are some pain points in the point-of-service system as well. Commercial banks provide another service called next-day funding in order to help overcome some of these issues which result from point-of-sale systems.
In order to understand the benefit of next-day funding, we first need to understand the problems which are faced by businesses with regard to the collection of payments. We already know that a large number of transactions happening inside any store are electronic transactions. This means that most of these transactions happen via debit cards, credit cards, or mobile wallets.
Now, when transactions are conducted electronically, the merchant does not receive payment immediately. The payment processor or the commercial bank generally holds on to the payment for a few days in order to help mitigate risks. Hence, merchants receive their payments only after three to four days after the transaction has taken place. This means that a significant portion of the daily revenue is locked up. This means that the working capital requirement of the company also goes up leading to an escalation in costs.
As the name suggests, next-day funding is a service provided by commercial banks to their clients where they shorten the timespan for receiving payments. Instead of waiting for three to four days in order to receive payments, corporations can receive the payments on the very next business day. The ability to expedite the reception of payments helps in reducing the credit to cash-cycle.
The next-day funding service is an important service provided by commercial banks. However, there are a couple of factors that need to be taken into account to ensure that the service provides the desired results.
The details of these factors are as follows:
If the cut-off time is too early, then the number of eligible payments gets reduced. This is because of the fact that empirically most of the sales in retail stores tend to happen during the evenings. Hence, companies must carefully consider the cut-off time and how it impacts their business before they decide on which commercial bank to choose for providing next-day funding services.
Next-day funding is popular amongst businesses because of the several benefits that it provides to business users. Some of the benefits have been mentioned below:
The bottom line is that next-day funding is an important feature and is very useful for companies if it is reasonably priced. There are faster alternatives such as same-day payment also available in some developed countries. However, these payments tend to be quite expensive which makes them unviable.
Your email address will not be published. Required fields are marked *