The subject matter in this article is basically around card payments for B2B scenarios, the difficulties that banks and PSPs have had in gaining more supplier adoption, some reasons why, and then a reference to the title, essentially deferred to the next posting. But a good viewpoint and worth a look at the piece in Spend Matters. Readers of these postings will know that we often cover similar topics. Members of our commercial & enterprise payments advisory service will soon be reading a comprehensive report on the subject of supplier enablement, with a primary focus on cards, which will be available in the first week of April. The author for this referenced piece makes good points about the level of activity in the B2B space these days, which is derived from several overlapping variables.
‘Facilitating B2B payments is certainly the “in” thing these days as witnessed by some of the more recent acquisitions…Why all the excitement? The market sees opportunities around three areas — interchange fees, cross border payments and FX….For many payment companies that deliver solutions to automate payments and accounts payable, their core value proposition, infrastructure and business model are built around converting their clients’ suppliers to card payment. That’s typically the “e” in electronic B2B payments.’
One of the interesting points in the posting is around the legal structure of card payments for B2B use cases. Essentially the dispute resolution process is similar to the C2B buying scenario, therefore creates supplier risk in extending payment timeframes. It is not necessarily something that comes up in our various discussions around supplier acceptance friction, but certainly is a valid point and does nothing to reduce that friction. The greatest friction remains the pricing question, followed by processing complications associated with certain virtual card handling. The author indicates that the benefits are generally a one-way proposition, weighted in favor of the buyer. We generally agree and have been seeing more movement towards a supplier-centric industry model designed to extract friction.
‘According to MasterCard, 1.6% of commercial spend is made via cards versus 15% of personal consumer expenditure through consumer cards. When it comes to B2B and B2G transactions, card companies still fail to make significant inroads in capturing spend volume, even after adding all kinds of fancy virtual card and ghost card products.’
There will be lots of paper leaving the B2B payments space over the next five years, so providing flexibility to allow the broadest choice and ease of experience for the counterparties (especially suppliers) will be a key execution challenge.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
