B2B Payments

Credit Card Payments Taking Off In B2B Payments

Although credit card payments represent barely 10 percent of all B2B payments that number has doubled in the past two years, according to a report from the Hackett Group. In 2011, credit cards accounted for barely 3 percent of B2B transactions.

The report, as discussed by a story in The Wall Street Journal, said the change has been fueled by payment card perks as well as a way to get an easy loan.

“Why the sharp increase? As companies struggled out of the credit crisis, many sought the extra 30-day float and perks that credit cards offer, and wrote fewer checks, according to Veronica Wills, a Hackett Group director. Plus, using a credit card also can increase fraud protection and lower processing costs, especially on small purchases,” the Journal story said. “The trend, however, is squeezing the profit margins of companies that accept cards, because fees range from 2 percent to 4 percent of the value of the invoice. Electronic payments through the banking network known as the Automated Clearing House, by contrast, cost a company less than $1 per transaction, on average.”

Dollar for dollar, credit card loans are easily the most expensive. But when a small business needs a loan very quickly and for a short amount of time—and wants to avoid the lengthy hassles of a traditional bank loan—the cards can be very helpful.

But it is very expensive.

“A company accepting a credit card for a $200,000 tractor would pay a $5,000 fee to the card issuer, based on a 2.5 percent fee rate. But the additional cost of carrying that balance for a month, assuming a 10 percent weighted cost of capital, would be $1,644, shrinking the profit by 3.3 percent,” the Journal said.

Wills noted that the shift toward plastic payments has slowed this year. “There’s a little bit of saturation and companies [that accept credit cards] are starting to get a little smarter about it, too,” she said.


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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