Although one can be forgiven for not exactly buying into the rather sensational headline of this posting appearing in Forbes, which contains the word ‘revolutionizes’, and almost nothing is revolutionary in the B2B space, it is actually an interesting partnership announcement between Amex and SAP Ariba, one of the largest B2B networks (if not the largest). We have been keeping members and readers informed about the ongoing frenzy of activity in the B2B payments space (which is more or less a proxy for other commercial payments as well, such as B2G and B2C in some cases), so this is no surprise and more like it will be following we are sure.
‘The multi-year partnership that will fully embed American Express payment capabilities into the Ariba Network was one of the biggest announcements at the recent SAP Ariba Live event. During the keynote, E-Bai Koo, executive vice president, global commercial services at American Express, outlined the benefits of the virtual card payment solution for buyers and sellers that rely on the Ariba Network to purchase goods and services with their American Express cards.’
At this point most readers are aware of the strategic importance that the branded networks (and many payments industry participants) have placed in the B2B space. As we have seen (and will continue to see), both of the four party schemes are moving into expanded products and services for B2B payments delivery, adding to the traditional cards-based approach. Amex has also been adding non-card capabilities. However, there remains substantial upside for the virtual card product category as it pertains to the corporate cash cycle. So this announcement targets that portion of B2B network activity.
One of the competitive disadvantages for Amex versus wholesale banks is the lack of transaction accounts, therefore more difficult to extend corporate relationships for Amex products through the key constituency of CFO/Treasury. The Ariba network partnership provides direct access to both corporate procurement departments, as well as supplier receivables areas, so basically a side door into CFO by virtue of key cash cycle services. We expect that this setup will be straight-through (BIP), which is more advantageous to suppliers and could allow for reduced acceptance costs (a key friction point as always).
‘Saksena acknowledged that while electronic payments promise to bring cost-savings and efficiency to companies, widespread use is far below expectations. Part of the problem is siloed financial and ERP systems from mergers and acquisitions. Also, there can be resistance to cloud-based computing fueled by security fears. Even so, every company is on its own transformation journey exploring how payments are made, improvements in cash flow, and automating card payments to save time. She and Koo saw virtual, secure payment cards uniting buyers and suppliers for process efficiencies.’
We’ll keep you posted as the B2B space marches on into 4IR.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group