B2B Payments

How The Commercial Prepaid Card Could Rise To The Top

Businesses are facing increasing pressure to go paperless, especially when it comes to payments. But for small business owners, there is flurry of e-payment options for payroll and accounts payable – credit cards, debit cards, wire and bank transfers, to name a few.

Some experts are now beginning to explore how the prepaid card – a tool that helps consumers control their own spending – can be a perfect fit for the needs of entrepreneurs and small business owners. PYMNTS spoke with Toffer Grant, CEO of corporate prepaid card company PEX Card, about how the prepaid card can do more for small businesses than simply exercising self control when it comes to spend management.

According to Grant, choosing between a credit, debit or prepaid card all depends on the individual company, its spend management needs, and a business owner’s personal preference. For instance, he said, credit cards can work well for businesses that place these cards in just a few hands, as the card can control spending through preset spending limits.

But for many small business owners, there are many ways a credit card won’t be the right fit. “Most often an SMB owner applying for a small business credit card still has to undergo personal credit validation,” Grant explained, “as the business owner is personally liable for charges if the company fails to pay.” A single employee could wreak havoc on the business’s cash flow management efforts if their spending on a corporate credit card goes rogue – especially if credit limits reach into the thousands of dollars.

That’s where the prepaid card comes in. “Prepaid cards can work to nip these issues in the bud,” Grant said, “because the balances on cards day-to-day tend to be in the hundreds of dollars, not thousands, so risk exposure is inherently more limited.” He added that prepaid cards can work especially well “when a business owner wants to separate employee spend activity from their credit.”

It’s this ability for greater spend control that has gained new popularity for the prepaid card in today’s market.

[bctt tweet=”It’s this ability for greater spend control that has gained new popularity for the prepaid card in today’s market.”]

Research published last April by TD Bank found that millennials are especially fueling prepaid card adoption. A survey conducted by the bank found that 25 percent of Americans said they either use or have used a prepaid card in the last three years – a figure that numbers to one-third of millennial Americans. Plus, for millennials who aren’t using a prepaid card, more than half said they would consider using one.

As it turns out, millennial entrepreneurs may have the potential to drive the use of the prepaid debit cards in small businesses, too.

[bctt tweet=”As it turns out, millennial entrepreneurs may have the potential to drive the use of the prepaid debit cards in small businesses, too.”]

Those surveyed in the TD Bank report noted prepaid card benefits are highly applicable to small businesses. For example, for prepaid card users, the most common use of the product is for day-to-day purchases, while discretionary spending was also listed by more than half of respondents as a key benefit of these cards.

Survey respondents also reported acknowledging how a prepaid card can help themselves budget and track spending more adequately, and can provide tighter security of personal information.

With these benefits in mind, SMEs in the U.S. are showing signs of interest in the use of a prepaid card.

Research published last year by SYNERGISTICS found that more than half of SMEs surveyed said they were aware that a prepaid commercial card is an option for them – and nearly half of those respondents said they had actually used a prepaid commercial card in the last year.

“Prepaid cards are beginning to make their way into the small business market,” SYNERGISTICS COO Genie M. Driskill said in a statement at the time. “While current usage is narrow, particularly when compared to usage of debit and credit cards, there is an opportunity for growing interest in prepaid cards in the small business market.”

Analysts are continually putting out new data that points to the benefits of electronic payment systems for small business owners – and Grant said he concurs. “Cards, as an electronic form of payment, will offer greater benefit over paper-based check payments because the end-to-end payment transaction and accounting processes moves more quickly with cards,” he said. “Payers have the benefit of receiving rewards, and if a credit card, the benefit of time to pay the bill as typically provided by the credit card company.”

But as consumers increasingly recognize the benefits provided by prepaid cards that debit or credit cards can’t offer, small business owners could also be catching on. According to Grant, it’s the prepaid card’s spend management offerings that may just come out on top when an SME owner is deciding which e-payment technology to use. “As to debit or prepaid card benefits, the added value proposition is the ability to assign payment tasks to more people because of the controls offered within those solutions,” Grant said.



On Tuesday, March 31, 2020 at 9:00 AM (ET) join PYMNTS CEO Karen Webster and panelists Vincent Kilcoyne and Roland Brandli of SmartStream for an in-depth discussion on the need to use transformative digital strategies to remain relevant in today’s challenging financial landscape. The discussion will cover strategies that will allow clients to improve operational control, reduce costs, build new revenue streams, mitigate risk and comply accurately with regulation.

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