Limitations on supplier acceptance ofpurchasing cards have been one of the key factors constrainingvolume growth in the B2B purchasing card business.
Every growing purchasing card program has dedicated resources to”supplier recruitment” and “supplier enablement,” in order togenerate increased acceptance of the commercial card, whetherphysical or virtual, as a payment vehicle. The conventional wisdomhas been that many suppliers are unwilling to bear the cost ofcard-based interchange. While many in the business have argued thatboth buyers and suppliers can benefit from settling accountspayable via card-based e-payables, Accounts Receivable Departmentshave been slow to absorb the message. In truth, the message is abit complicated and always context-sensitive, depending on whetherthe offer is enabled via a ghost card, supplier-initiated paymentsor buyer-initiated payments.
Within the past few months, we have seen signs that the merchantacquiring side of the market, the technology providers that servesuppliers, have begun to recognize in B2B a different opportunitywith different customer needs. Wholesale suppliers which have, todate, only heard the request to accept cards from individualbuyers, are now being offered the ability to accept commercialpurchasing cards and to optimize (i.e., minimize) their interchangerates. Network pricing for commercial transactions changed severaltimes in 2012, including both preferred rates for largertransactions, and better rates for transactions including Level IIIdata. While these changes may have been motivated by purchasers andcard issuers, it is encouraging to see that the benefits are nowbeing presented directly to suppliers.
Two years ago, Aaron Bills of 3Delta Systems expressedhis enthusiasm and optimism for the B2B market with PaymentsJournal. Hisarguments were sound and growth in B2B card use has in fact beenstunning. Many in the B2B card business believe however that thebest is yet to come, and have reason to believe that B2B cardacceptance is accelerating. More suppliers are moving beyond aknee-jerk rejection to paying interchange, and seeking tounderstand the potential benefits associated with dataavailability, more efficient reconciliation, and working capitaloptimization.
This link an announcement fromeProcessingNetwork late in 2012 regarding their Level III datacapture capabilities for wholesale merchants. By pulling invoicedata that described the merchandise, ePN’s tools allow merchants tocollect via the card networks at substantially reduced interchangerates. They have since leveraged that functionality by integratingit with their billpay tools. Mercator Advisory Group sees this as apositive development, sparking a conversation from the supplierside about “e-receivables” to mirror the existing buyer-sidediscussions of e-payables. Increased interest from the supplierside will provide a significant lift to purchasing cardusage.
If you are a wholesaler that accepts cards, or if you are a vendorthat offers technology tools to facilitate that process, Mercatorwants to hear about your experiences; please email [email protected] and we’llarrange a time to talk.
