New research from the Association for Finance Professionals (AFP) found that the median cost of a check transaction for a business is $3.00 — twice the cost of a transaction made via purchasing card.
The data, published in the AFP’s 2015 Payments Cost Benchmarking Survey, reinforces existing remarks by B2B companies regarding the high cost of the paper check.
The research also found that 80 percent of businesses surveyed are in the midst of switching from the check to an electronic form of payment, including card, with cost savings as one of the most common drivers behind the switch.
Saving a pretty penny is ultimately the end goal for corporates’ use of plastic, and last week’s developments in the corporate virtual and fleet card space each took their own path to cost savings.
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Cutting Out Friction
For some businesses, the path to saving money comes from reducing friction. Corporate travel payments firm AirPlus says the key to a thriving commercial cards sector is its ability to achieve a more streamlined business process — especially with virtual cards. That’s because corporate payments are expected to be “a silent facilitator,” said AirPlus CEO of the Americas Operations Yael Klein in a recent interview with Business Travel News.
“Virtual cards need to be part of the natural flow and need to be part of the no-touch environment because as soon as you have a disruption, the process optimization you’re trying to achieve goes downhill,” she said.
Why would businesses want to optimize their processes? It means employees can do their jobs smarter, faster and, ultimately, cheaper.
Banking The Underbanked
The National Association for Convenience Stores (NACS) wants to help its member businesses get on board with payroll cards as a way to pay underbanked employees — a strategy that ends up paying off for the stores themselves, too.
In an announcement on Monday (Oct. 12), the NACS said it is teaming with First Data’s Money Network, along with MasterCard, to launch the payroll program that lands prepaid cards in the hands of employees that don’t have a bank account for direct deposit. The group added that it will also lower costs for stores that will be able to switch from issuing more expensive paper checks to their employees.
According to NACS CEO and President Henry Armour, there are more than 2 million employees working at convenience stores and fueling station stores that are a part of NACS.
“In a time where the cost of simple retail banking is escalating at an incredible rate through service charges and NSF fees, this program will prove to be a great benefit for employers in the convenience and fuel retailing industry to offer their employees,” Armour said in a statement.
Payroll cards have become a hot button topic thanks to recent lawsuits that claim the fees associated with these prepaid cards are unfair. But according to NACS, the payroll cards issued through First Data and MasterCard do not come with POS fees, loading or offloading paycheck fees or overdraft fees.
The use of high-tech functions and a link to the world of Big Data mean commercial cards can empower managers with more robust ways to track spending, reduce fraud risk and cut down rogue purchases.
Take fleet cards, for example. Fleet managers are on the fast track to innovation thanks to the rise of telematics, which links fleet vehicles into the world of Big Data and allows businesses to track fuel usage, mileage, driving times and more.
Fleet card issuer Electronic Funds Source (EFS) is now taking the power of telematics to its payment services. Last week EFS rolled out SecureFuel, a new technology that links fuel cards to telematics as a way of reducing rogue purchases and providing an added layer of security for fleet managers.
According to EFS, drivers can have their fleet card purchases authorized at the tank as SecureFuel monitors vehicle tank levels, location and data patterns of the vehicle and fleet card.
“SecureFuel verifies the proximity of the vehicle to the merchant location before the fuel transaction is authorized,” said EFS President and Chief Executive Scott Phillips in a statement at the time. “With SecureFuel, we can limit the fuel purchase to the available tank capacity and provide real-time alerts and exception reporting to our customers.”
Security is key for the fleet card sector, said Dave Lukas, Grasp Technologies vice president and CMO. Lukas told PYMNTS about why virtual cards in corporate travel are so effective at controlling spending.
“Virtual cards are created in a moment for a specific transaction; this is why they’re so big in hotels,” Lukas said. “If a charge on a virtual card is $330, it can only be used at that hotel for, say, a two-night stay. There’s nothing you can do with that card information again.”
Plus, the use of Big Data with a virtual card means businesses, not just travel managers, can have a more detailed picture of spending behavior.
So, whether it’s through heightened security, streamlined business operations, going paperless or nixing unauthorized spend, corporations this week have made moves to improve cash flow with new commercial card strategies.