Interesting title to this piece at Yahoo Finance, which is penned by a senior at Comdata, the payment processing company that specializes in fleet cards and other B2B payments. Members will know that we cover this space fairly closely through ongoing research and other postings. The pandemic wreaked havoc on business travel but B2B payments (payables) are more closely related to general economic activity, which was down about 3.5% in the U.S. last year. However, some of that gap in potential card spend was filled by the rush to expand upon the use of electronic payments to replace paper financial process in the remote working office environment.
‘With the advent of widespread remote work, businesses have made impressive leaps in eliminating checks and adopting electronic supplier payments. These changes primarily translated to increasing the number of ACH or Direct Deposit payments made. According to Nacha—the governing body for the ACH network—business-to-business payments for supply chains, supplier payments, bills, and other transfers increased by almost 11% in 2020. But as organizations adopt electronic payment processes, there’s another strategic opportunity for AP to consider: electronic credit card.’
Commercial cards have been around for several decades, having traditionally been used for T&E purposes but over the past 20+ years have expanded into office supplies (P cards) and accounts payable (virtual cards). So if one looks at commercial credit cards historically as a percentage of overall B2B payment activity (for the purpose of value exchange in goods and services), it is somewhere in the range of 2%, which is a fairly small share of payments. Most value exchange is made through ACH, wires, and check payments (although check payments are now declining more rapidly than prior to the pandemic). So the author reviews the value prop of using commercial cards for B2B payments, and some of the reasons suppliers are now opening up to acceptance. Whether or not there will be a massive uptick over the next few years remains to be seen, but the utility of the product(s) for inbound payments is at least getting a better reception as an option these days.
‘Fintechs—technology-focused by nature—build their systems with a holistic viewpoint in mind, preferring to create software that doesn’t sacrifice one business’ operations for another’s. By enhancing the system end-to-end, previously reluctant accounts receivable teams, who felt strong-armed into giving up outdated payment processes, often become more willing and interested to learn about electronic alternatives.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
