Corporates continue to lower their guard against digitization, embracing electronic B2B payments as they press ahead in their modernization efforts. Over the past several months, commercial card adoption in the accounts payable (AP) department has played an important role in fueling that modernization. But historically, the picture of virtual card traction has been presented from the buyer’s side, leaving little room to drive value for the vendors accepting payment.
What’s clear is that all of that is beginning to change, according to Dean M. Leavitt, founder and CEO at Boost. In a recent conversation with Karen Webster, Leavitt described a promising shift in the market, in which B2B suppliers are moving toward the center of issuers’ efforts to drive virtual commercial card usage.
There is still a long road ahead to ubiquity, but several seemingly unfortunate consequences of the coronavirus crisis may have actually opened up the opportunity to drive card usage in unexpected ways. And as Leavitt noted, vendors are taking a leadership role in that expansion.
Ongoing Education
While corporate buyers continue to flock to cards as a way to digitize payment, take advantage of capital float and embrace new revenue streams through rewards and cash-back programs, it was only relatively recently that the card industry began to turn its attention to the acceptance side of the equation to drive adoption.
In the past several months, Leavitt said these efforts have paid off, particularly among mid-sized and larger suppliers that are embracing card acceptance as a way to accelerate accounts receivable (AR) with a competitive price point. The ability for card transactions to connect vendors to valuable transaction data has also proven to be a key driver of adoption, particularly among suppliers with thousands of payments to process and reconcile.
But plenty of resistance remains, according to Leavitt. “There are, very often, misperceptions about the reality of commercial card products and what’s involved in their acceptance, from a transactional perspective, pricing perspective and reporting perspective,” he said, pointing to assumptions of a high cost of acceptance and friction in reconciliation as key barriers.
As a result, the virtual card arena is finding an opportunity to get the card issuers more involved in the conversation with those suppliers. Leavitt highlighted the education process that can occur with those institutions, too, in working with FinTechs to embrace dynamic pricing models and finding the right price point for those suppliers.
“Many issuers are still in the early days of recovery,” he said, noting that the pandemic put a large dent in commercial card transactions across other categories like travel and entertainment. “So they look to AP-based B2B transactions as a great opportunity to fill those losses.”
Unexpected Opportunities
As the issuing community continues to collaborate with buyers, suppliers and FinTechs to find win-win scenarios, the industry is also inching toward growth through other avenues. While the coronavirus crisis has undoubtedly created new challenges for commercial card adoption, Leavitt said some unanticipated opportunities have emerged, too.
“There is renewed excitement about cross-border payments, which took a real nosedive for the better part of the year,” Leavitt said. “We’re now engaged in conversations with a lot of corporations and their issuers about ramping up card-based cross-border payments.”
The shift is intensifying the need for the issuing community to deepen its focus on driving value for the supplier. Experimenting with proprietary processing rates and pricing flexibility will be essential to fueling cross-border virtual card payment acceptance. Considering the high costs and lack of transparency of traditional wires and correspondent banking payments for suppliers, there is room for continuing education on how global card payments can drive value for those AR departments.
The trend is also an opportunity for commercial cards to showcase their ability to work in harmony with other technologies. Leavitt highlighted blockchain as one example of a tool that can drive up the value of commercial card acceptance for both buyer and supplier.
“We’re working on an exciting program in the freight and logistics arena, where trading partners utilize blockchain technology to manage and enforce the contractual relationships between, say, shippers and carriers,” he explained. “You see these evolving technologies come to the forefront. You can mix and match different technologies in these relationships between buyers and suppliers.”
Whether it’s innovating to bring pricing flexibility to suppliers or collaborating to integrate transaction data with back-end systems, there are a multitude of ways in which the corporate card technology sector can increase the attractiveness of acceptance for B2B suppliers. As more corporates seek to digitize payments both domestically and across borders, developing those value-added features — and educating the supplier community about them — will be vital to continued adoption.
It’s all about placing vendors back in control of how they receive funds. “This whole notion of ‘acceptance on your terms’ really comes to light,” said Leavitt. “That’s the moment we’re in, and that’s the nature of how we’re presenting commercial card acceptance to suppliers.”