Where Commercial Cards Are Just A Means To An End

Developers of accounts receivable technology have a lot on their plates these days. Not only do they have to keep up with the in-house tools that suppliers want to manage their AR departments, but firms must also keep an eye on the broader payments industry and how technology is shifting the way their supplier customers are getting paid.

There are the obvious disruptors, like the increasing demand for automation in the accounts receivables space. Then, says Jay Tchakarov, VP of product management and marketing at AR solutions firm HighRadius, there are new technologies and changing needs from manufacturers and suppliers all coming into play to shape the way businesses pay each other.

Tchakarov offered PYMNTS an update on the evolution of AR tools in a recent interview.

“In general, there is more and more interest in automation,” the executive explained, adding that needs have not only changed among suppliers when it comes to AR but they have also grown more sophisticated.

Previously, these companies showed interest in visibility within the AR department — task management, knowing who’s doing what and overall staff management.

“What we’re seeing, in the last couple years, is moving away from that old paradigm,” Tchakarov said, “and taking advantage more of automation and robotics and having a system perform some of the manual, clerical tasks.”

Today, instead of task allocation management, suppliers now want many of those tasks to be taken care of automatically, via robotics, software and artificial intelligence.

With suppliers pushing aside some more monotonous tasks to computers and robots, they have more time to focus on the business itself and relationships with corporate buyers. This means operations become faster, and a supplier can focus on growth.

Payment rails, Tchakarov explained, can play an integral part in supporting suppliers’ push for automation and their refocus on expansion.

“Electronic payments are the way to go,” he stated. “Anything away from paper is beneficial. On the supplier side, I think manufacturers and suppliers have realized that paper has absolutely no benefit to them.”

Digital payment solutions may be taking off in the AR department, but not all electronic payment tools are created equal.

For instance: blockchain and bitcoin? Forget about it, Tchakarov said.

“I really don’t see it. There are a lot of questions around the management of the money supply and the value of the currency itself,” he noted. “There’s also a question, to some extent, of regulatory hurdles.”

HighRadius clients, at this point at least, aren’t really clear on the business value of such technologies, Tchakarov continued.

Even more traditional payment tools, like credit cards, don’t have a high enough corporate value for suppliers, he added.

“Some of the payment cards and virtual cards, I don’t think they’re going to make that much of an impact on accounts receivable,” the executive said. While card products can help a supplier get paid more quickly, they generally are connected to the variable costs of interchange fees.

“Businesses are operating on a slim margin these days,” said Tchakarov. “If you’re looking at a business on a margin of several percentage points, any percent that goes back to processing a payment, in effect, removes direct from the bottom line.”

Card solutions, instead, can be an “intermediary solution” for the supply chain when its players are looking to transition from paper checks to electronic payments. But it’s just a means to an end — that end being digital payments that can facilitate AR automation.

The best way for suppliers to accept payment is ACH, argued the executive.

“For the supplier side, ACH is a no-brainer,” he stated, pointing to the flat transaction costs and the speed with which the payment clears.

Corporate buyers aren’t entirely convinced yet, however. Tchakarov said that some of his supplier customers have reported resistance from their own corporate clients in using ACH to pay their invoices — most often from the mom-and-pop companies that have been dependent on paper for years.

The friction, however, is beginning to fade.

“There hasn’t been a technology that had come out yet to make it simple for them to make the change,” Tchakarov explained. “What we’re seeing is, now, that there has been technology coming out to integrate buyers and suppliers directly with small business accounting systems.”

Tighter integration between business partners can help remove barriers for buyers to adopt electronic payment methods and streamline the B2B payments process, he noted.

The evolution of the accounts receivable department is far from over, though.

Same-day ACH is on the way, and while Tchakarov said some companies are interested in learning more about it, he doesn’t expect it to have much of an impact on the AR process.

What will have a bigger impact, he claimed, is this continuing shift from paper check, to card payments, to ACH. It’s the payment solution that can best support both buyers’ and suppliers’ demand for automation in their accounting departments, said Tchakarov.

“In the long run, everything will get down to the lower-cost alternative, which is ACH,” he argued. “Yes, in the beginning, various virtual cards will help [in the migration away from paper]. But, I think, ACH will be the destination.”