Bottom Line Improvements Will Drive AP/AR Payments Collaboration

The consumerization and digitization of B2B payments, at a high level, is enabling money movement and financial flows — streamlined as accounts receivable (AR) and accounts payable (AP) processes are modernized — that were hard to imagine before the pandemic took root.

In an interview with Karen Webster, Gloria Colgan, senior vice president and global head of Visa Business Solutions card products and platforms, and Chavi Jafa, vice president and head of Visa Business Solutions for Asia Pacific, said modernization means some sacred cows have to go in pursuit of healthier operating profits and balance sheets.

The conversation took place against a backdrop where Kevin Phalen, head of global business solutions at Visa, late last year said that collaborative commerce exists as a transformational opportunity for B2B payments.

Said Jafa: “Collaborative commerce is here to stay, for all players in the ecosystem — CFOs, traditional FIs and B2B service providers.” The opportunity has been building for a while, noted Colgan — and tech and service providers need to address both sides of cash flow management to help corporates and supply chains operate more efficiently. “For so long, the solutions have been built up around one side or the other, and we’ve gotten very focused about bringing solutions to the AP or the AR side of the house,” she told Webster.

But businesses of all sizes (and, by extension, their treasurers and chief financial officers) have seen the frictions that develop when legacy systems and manual processes become unwieldy and payment delays materialize, resulting in supplier cash crunches.

Because enterprises have had to pivot to digital-first experiences, noted Colgan and Jafa, they’ve started to examine how technology can help streamline back-office activities focused on sending and receiving B2B payments. It’s a journey that has taken its cue from shifts in consumer behavior. Those changes in how consumers transact have led to ripple effects, according to Jafa: There has been a move toward contactless payments globally, as illuminated by trends in the APAC region. There, she said, contactless payments account for 44 percent of all face-to-face Visa transactions, with some markets at 70 percent and higher.

In Asia Pacific, especially, the stage is set for collaborative B2B commerce due to a confluence of factors, said Jafa. The region is a hotbed for FinTech innovation, and more than 20 percent of global funding for FinTechs has been in the B2B space. In Singapore, to name just one market, 80 percent of FinTechs are focused on B2B. Regulators across APAC are moving toward open banking and less reliance on paper-based processes. And then underscoring it all has been the pandemic, of course.

Just as companies have had to meet their end consumers’ expectations, said Jafa, “they’ve had to very quickly think about making payments digitally downstream to their vendors and supply chains. It’s been a significant shift and it’s definitely one that is here to stay … it’s no longer a ‘nice to have,’ it’s a ‘need to have.’” Though it’s important to break down the silos between various players and parties, he added, companies need to examine their own internal processes, examine what can be done better and look to others (such as Visa) for B2B expertise. “There’s a shift toward demand versus supply,” she noted. “We’ve seen a lot of CFOs asking us about the solutions that we can bring to the table to help them integrate the accounts payables and accounts receivable sides of the house.”

The Tech 

Of course, the intent to modernize B2B payments is not enough — even when, as Colgan observed, the urgency of streamlining back-end processes puts B2B payments higher on executives’ lists of priorities. Treasurers and CFOs also need the technology in place to make B2B consumerization and digitization a reality.

As Colgan pointed out, “the capabilities and the tools that modern technologies are now giving us” — such as RESTful APIs and cloud-based offerings — enable new solutions to be layered on top of legacy systems. The end result: AP and AR departments are able to sync up and “speak” to one another, to enable collaborative commerce between buyers and suppliers.

Letting Go Of Some Sacred Cows 

And in a collaborative environment, some things need to go.

One example is the paper check. During the pandemic, Colgan noted, “you literally didn’t have access to the paper — to send or receive.” Companies couldn’t afford to ignore the situation — they had to take a step back and examine the costs inherent in paying and getting paid by check (including handling and processing).

Bringing that forward/backward integration to fruition requires the standardization of data, recounted Colgan, which in turn streamlines the conversation between AP/AR functions. One example is the recent linkup between Visa and Stripe, where the Visa B2B Payables Automation platform allows buyers in Asia Pacific to pay suppliers directly with a Visa commercial card. Elsewhere, Visa and Conferma Pay have collaborated to globally launch Visa Commercial Pay, with on-demand virtual cards issued to employees’ mobile devices through an app.

Looking ahead, said Colgan, the consumerization and digitization of B2B payments will broaden and accelerate. She said they expect volumes to increase in 2021 and beyond.

“When clients start to see that improvement and cash flow, and that reduction in their operating expense, the true improvements in the bottom line … that’s where we’ll see the orders of magnitude change and lift,” Colgan told Webster.