Electronic payments offer a number of important benefits for both buyers and sellers — increased efficiency, greater visibility, enhanced security, and reduced costs. Virtual Cards, in particular, are gaining in popularity because of the advantages they offer over other digital payment methods, such as ACH. While virtual cards are processed the same way as credit cards, they provide added security as well as cash rebates, which can cover the cost of the payment services, and, in some cases, even help companies to turn their Accounts Payable (AP) function into a profit center.
However, companies paying their bills are only half of the payment equation. Suppliers have to participate in the process too, obviously. Unfortunately, due to a lack of awareness and some common misperceptions, suppliers might be reluctant to make the switch to electronic payments.
Buyers play a key role in the adoption process, and helping suppliers get on board so they can mutually benefit from electronic payments. Following are seven typical adoption hurdles that suppliers face, and ways companies can help their suppliers overcome them:
1. Specific or complex payment delivery requirements.
Some suppliers with a large volume of payments, require specific payment delivery processes. For example, they might require payments to be made through an automated phone line or web portal. In other instances, large suppliers with multiple operating units might require companies to call or enter in payments separately for each one. Buyers and their payment providers can work closely with suppliers to address these specific requirements, and set up electronic payments in the way that works best for them. The key is that the payment provider takes on handling and automating the payments, so the buyer’s AP team isn’t saddled with additional administrative work.
2. Unfamiliarity with Virtual Cards.
Suppliers might not be familiar with Virtual Cards and how they work. They are processed just like credit cards, but are valid for one-time use only, making them one of the most secure payment methods available according to the AFP’s annual Payments Fraud and Control Survey. Once suppliers see how easy Virtual Card payments are, they often encourage them from buyers.
3. Concern about supplier fees.
While Virtual Cards result in fees to suppliers, just like credit cards do, they also provide a guarantee of funds once the payment is processed, as well as faster payment than checks and even ACH. Suppliers working under very tight margins, who don’t want to pay any fees, can still receive their payments digitally through ACH.
4. Receiving remittance data with payments.
Some suppliers that transition from checks to ACH are disappointed that the remittance information doesn’t appear with the payment. This requires AR departments to match them up manually. Virtual Cards address this issue by providing both payment and remittance information together, while offering slightly faster payment than ACH. Because of this, many companies are leapfrogging ACH entirely, and migrating suppliers directly from check payments to virtual cards.
Some payment providers also offer self-service portals that allow suppliers to view payment details from multiple buyers, in just one place. These portals also provide the ability to download remittance data in a format that can be easily imported into their financial systems for reconciliation.
5. Reluctance to share bank account information.
6. Concerns about security and risk.
Some suppliers are surprised to find out that digital payments are more secure than checks. According to the 2021 AFP Payments Fraud and Control Survey Report, 66% of companies paying by check experienced real or attempted fraud, compared to 34% using ACH debits, and just 3% using Virtual Cards. Unlike traditional credit cards, suppliers do not have to store and secure Virtual Card data for future use.
7. Buyer preference.
Many suppliers are unaware that their buyers want to pay them digitally. In some cases, increasing adoption of digital payments is as simple as letting them know your preference.
As businesses look to move more of their payments to digital, they may have to educate their suppliers, with help from their payment provider, on their preferences and the many benefits that digital payments offer. Any resistance or hesitation from the supplier might be due to a lack of awareness or knowledge about how digital payments work and what it means for them. By providing information and working closely with suppliers, companies can find the best digital payment method for both parties and strengthen the supplier relationship. It’s a win-win proposition.