In A Decade of Digital Transformation in 12 Months, 46 C-suite executives spoke with PYMNTS for its Q2 eBook on what the world will look like as recovery rolls on and the next iteration of normal rolls out. In this excerpt, Carl Mazolla, chief strategy officer at Boost Payment Solutions, shares his thoughts on how digitized B2B commercial card payments and acceptance can be as simple as personal payments, and why he expects them to continue to grow in acceptance post-pandemic.
Consumer trends toward payment digitization began to transition long before the pandemic. Contactless payments – thanks to innovative options like Apple Pay and Google Pay – led the transition. And before that, leaders like PayPal in the online retail space and Venmo in the consumer-to-consumer arena led the way, with consumers understanding and valuing the ease, convenience and security in using their products. No longer did consumers have to carry their cards on their person or type sensitive card data into a web browser.
Thanks to these innovative companies, consumers have begun to expect and value more passive transaction flows regardless of where the point of purchase may be. For consumers, the digitization of payments offers convenience and reduced risk of sensitive data, and the pandemic fast-forwarded the use of these digitized payments across the consumer ecosystem. And many technologies and trends, once they are adopted in our personal lives, quickly find their ways into our professional lives.
In the world of business-to-business (B2B) payments, the pandemic forced many to digitize workflows and explore alternate payment options, such as commercial credit cards, as a means of survival. These businesses are just now beginning to realize the broader benefits associated with these newer payment methods – not only as a matter of convenience and reduced risk, but also as a means to reduce processing costs, extend working capital and facilitate faster payments.
While many businesses have historically had challenges with processing commercial credit card payments, B2B payment processing using a commercial card is now almost as simple as setting up a Venmo or PayPal account.
Straight-through processing (STP) technology, which has been commonplace in the consumer payments space, is now making B2B commercial card payments just as easy. Suppliers can send an invoice to their buyer, and after the buyer completes their audit of the invoice to the services/products received, payment is as simple as hitting the “pay” button within their AP automation software. No sensitive data is ever shared with the participants or exposed over the processing networks. Most B2B processing platforms will create a reconciliation document in the supplier’s preferred format and send it to the supplier to easily digest into their ERP system.
Taking commercial card payments even further, buyers and suppliers can establish unique agreed-upon acceptance terms. These “acceptance on your terms®” rule-based agreements, such as those offered through Boost Intercept®, expand the benefits of digitized B2B payments. A supplier can establish rules for each specific buyer, such as the amount of payment, timeliness of payment and many other variables. For example, suppliers can accept payments for a certain buyer as long as they are under $10,000 and paid within 10 days of the invoice date, and any payment falling outside those established rules must be paid via alternative methods.
Digitized B2B commercial card payments and acceptance can be as simple as your personal payments and offer more control of your payment acceptance program — and will likely continue to grow in acceptance post-pandemic.
After a holiday spending frenzy, consumers have returned to a more normalized rate of spending, as measured in incremental borrowing on credit cards and other forms of debt.
December saw a massive $37.1 billion increase in total credit, where revolving credit — the category that includes credit cards — surged at an annualized pace of 18.5%, after a 16.1% drop in November. The data suggests that consumers were loading up on dry tinder ahead of the year-end frenzy of gift giving and taking advantage of sales.
On Friday (March 7), new data from the Federal Reserve revealed that overall credit increased $18.1 billion during the first month of the year, above of the consensus estimate that the headline number would grow by about $15 billion.
Revolving debt was up by $9 billion. Non-revolving debt, which includes auto loans, was up by about $9 billion, as measured month on month.
Overall consumer credit increased at a seasonally adjusted annual rate of 4.3%. Despite the increase, it represents a slowdown compared to December, in which the same rate was at 8.7%.
We note that the 4.3% in January can be considered “normal” for January, as the values recorded in the same month of 2020, 20221, 2022, 2023 and 2024 were 4.4%, 3.1%, 4%, 4.5%, and 3.7% respectively.
As for the “normalization” of revolving credit, the same rate was 10.5%, 8.5% and 8.6% for 2022, 2023 and 2024 respectively. In the case of non-revolving credit, the rates for the January months of those same years were 2.1%, 3.2% and just under 2%.
During January, the total outstanding consumer credit (seasonally adjusted) reached slightly over $5 trillion dollars. Despite this, it represents a slight drop of 0.6% compared to January of last year.
The normalized pace still represents an “addition” to the overall monthly obligations that are being shouldered by already-stretched consumers. There’s also a positive read-across for BNPL providers, where a paring back on traditional avenues of credit may mean that consumers are opting instead to take on pay-later plans, tied to debit accounts.
The torrid pace of activity at the likes of Sezzle and Affirm — as many categories saw double-digit spending (and Sezzle notched triple-digit revenue growth) — has far outstripped the growth in the Fed’s data.
PYMNTS Intelligence has estimated that credit card debt has become fairly ubiquitous: Among high-income cardholders annually earning more than $100,000, 75% have an outstanding credit balance. This share is the same for middle-income cardholders annually earning between $50,000 and $100,000. A similar share — 74% — of lower-income cardholders, those annually earning less than $50,000, carry balances on their credit cards.
But the same research details that 25% of cardholders have said that their outstanding balance increased over the last year, while 55% said it stayed about the same. Just 21% said that it decreased — so the dry powder in terms of spending power is constrained a bit, especially as more debt was added in January.
Roughly 19% of our sample indicated that they had reached card limits at least once in the past year.
Elsewhere, the Fed estimated last month that credit cards continue to be the loan type with the highest share of balance 90+ days delinquent, at a percentage that reached 11.5%. This share grew 2% quarterly and 17% year over year.
According to data from the Fed, 40.2% of the total share of outstanding consumer credit is held by depository institutions. The federal government holds 30.9% of the total, while 14.8% is held by finance companies and 13% by credit unions.