Limitations on supplier acceptance of purchasing cards have been one of the key factors constraining volume growth in the B2B purchasing card business.
Every growing purchasing card program has dedicated resources to “supplier recruitment” and “supplier enablement,” in order to generate increased acceptance of the commercial card, whether physical or virtual, as a payment vehicle. The conventional wisdom has been that many suppliers are unwilling to bear the cost of card-based interchange. While many in the business have argued that both buyers and suppliers can benefit from settling accounts payable via card-based e-payables, Accounts Receivable Departments have been slow to absorb the message. In truth, the message is a bit complicated and always context-sensitive, depending on whether the offer is enabled via a ghost card, supplier-initiated payments or buyer-initiated payments.
Within the past few months, we have seen signs that the merchant acquiring side of the market, the technology providers that serve suppliers, have begun to recognize in B2B a different opportunity with different customer needs. Wholesale suppliers which have, to date, only heard the request to accept cards from individual buyers, are now being offered the ability to accept commercial purchasing cards and to optimize (i.e., minimize) their interchange rates. Network pricing for commercial transactions changed several times in 2012, including both preferred rates for larger transactions, and better rates for transactions including Level III data. While these changes may have been motivated by purchasers and card issuers, it is encouraging to see that the benefits are now being presented directly to suppliers.
Two years ago, Aaron Bills of 3Delta Systems expressed his enthusiasm and optimism for the B2B market with PaymentsJournal. His arguments were sound and growth in B2B card use has in fact been stunning. Many in the B2B card business believe however that the best is yet to come, and have reason to believe that B2B card acceptance is accelerating. More suppliers are moving beyond a knee-jerk rejection to paying interchange, and seeking to understand the potential benefits associated with data availability, more efficient reconciliation, and working capital optimization.
This link an announcement from eProcessingNetwork late in 2012 regarding their Level III data capture capabilities for wholesale merchants. By pulling invoice data that described the merchandise, ePN’s tools allow merchants to collect via the card networks at substantially reduced interchange rates. They have since leveraged that functionality by integrating it with their billpay tools. Mercator Advisory Group sees this as a positive development, sparking a conversation from the supplier side about “e-receivables” to mirror the existing buyer-side discussions of e-payables. Increased interest from the supplier side will provide a significant lift to purchasing card usage.
