Much has been written, and opined, over the past week since Apple introduced Apple Pay and entered the payments market. But how might the service affect B2B payments?
In essence, much the same way single-use virtual card numbers have for businesses for some time. But unlike virtual card numbers, Apple Pay offers an added perk in that it can support both online and in-store payments, which could be ideal for local handymen and contractors buying their supplies at local home-improvement centers.
Indeed, virtual payment cards, which similarly serve as replacements for actual card data, already serve B2B commerce well. And there’s no reason to believe Apple Pay, which instead uses “tokens” as card-number replacements, won’t eventually play a similar role in buyer-seller relationships.
Virtual cards as starting points?
Through virtual card products, issuers provide to companies specific 16-digit card numbers they may use online or by phone to apply to specific transactions or payees, thus providing an extra layer of security compared with traditional card products. There is no actual plastic card issued, and the card data are unusable for other purposes if lost or stolen.
Two such companies, Fleetcor and Wex, for example, are poised to compete in that market, now that Fleetcor has announced plans to acquire Comdata, a virtual card specialist. In fact, Ron Clarke, Fleetcor chairman and CEO, called Comdata’s virtual card business the “crown jewel” of the deal.
“Comdata’s got a great position, great proprietary technology, a pretty unique vendor-enrollment model, and some great reseller relationships,” he said. “Comdata’s well positioned, and our view is this could mature into a very big—I mean very big—business over time. So in some ways for us, this line of business is really the crown jewel of the company.”
Token security, network support
Virtual card use is gaining momentum in the B2B market, with their use growing particularly in travel, invoice and health care payments, where use of paper checks remains common. Visa reportedly soon will launch a B2B tool to make it simpler for corporations to pay supplier invoices using virtual payment cards. The offering would complement a cloud-based payment initiative Visa launched last year using the SAP Financial Services Network.
Virtual card use for invoicing is especially important for the card brands, as nearly half of all corporate payments are still paid by check, according to Visa, which estimates global commercial consumption expenditures at US$112 trillion.
Similarly, Visa’s new token service, which also replaces actually card data, will support Apple Pay’s security for both in-store and online payments. MasterCard, which also support virtual cards, also will support Apple Pay with its own token service.
And if virtual cards are catching on with some businesses, so, too, can we expect Apple Pay to do so, especially with the card-network support it has for its token-based security.
In a recent blog post, Drew Hofler, director of solutions marketing at Ariba, a SAP company and operator of the AribaPay electronic “procure-to-pay” B2B remittance service, said Apple Pay “is a brilliant use of the networked economy … and a potential game changer” because the enhanced security keeps sensitive information stored in a single, secure location, “away from the prying eyes (and code) of hackers,” he said.
Indeed, Hofler said, in the age of the “networked economy,” sensitive consumer card or bank-account information, such as automated clearinghouse (ACH) data, should never proliferate on point-of-sale devices.
“The same holds true for payments in B2B context,” he said. “As Apple Pay is attempting to remove payment risk for consumers, AribaPay is removing payment risk for B2B payments … by substituting a non-sensitive proxy number at time of payment. Now, I’m not saying that Apple Pay took our idea (or our naming convention). … I’m just saying that it is a process waiting for a solution in both the B2B and consumer payments world.”
While Apple has not said where Apple Pay might fit into B2B commerce, it has said developers will be free to use the payment model in various capacities.
Habits already are changing in the right direction for Apple Pay to play a role in B2B commerce. Just as consumers already are paying for products and services online from their mobile devices, so, too, are business owners fulfilling their procurement needs while away from the office. With Apple Pay also functional as an online-payment tool, it’s just a matter of time before it enters the B2B space as a replacement for using actual card information for businesses’ online transactions.