Payments company Moneris, based in Canada, has traditionally focused on B2C transactions. So, when it announced last week that it would be launching operations in the world of B2B payments, the firm opened itself up to a whole new world of obstacles and clients not encountered in the field of B2C.
Rob Wilkinson, the company’s vice president of B2B sales, told PYMNTS that Moneris is up to the challenge and has the foresight to tackle the unique hurdles of the business-to-business transactions headed its way.
Moneris is approaching this segment with the supplier in mind. Specifically, the company said, it will focus on boosting supplier acceptance of commercial cards and other electronic payment forms. It’s easier said than done, but Wilkinson explained the factors in play today that make it a prime time to jump into this industry.
“You can’t ignore the size of the opportunity for us — the absolute size and value of payments that go on between companies, as opposed to between companies and consumers, is immense,” he explained. “Also, the fact that the majority of those payments are still via inefficient paper check methods. We combine a large market opportunity with those paper inefficient systems, and we saw that as the right time to take a run at B2B.”
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It’s no secret that B2B transactions are still struggling to let go of paper checks, invoices, purchase orders and documents. But while it may be a challenge to heighten the adoption of electronic payment acceptance for suppliers, Wilkinson said that, often, the market had taken the wrong approach to doing so.
“On the acquiring side, looking at suppliers, to date, it’s largely been an approach where folks have tried to implement more consumer-type solutions on the B2B side of the ledger,” he said. “Suppliers looking to accept electronic payment and commercial cards and the like are using consumer-based tools — the process itself is cumbersome and inefficient for suppliers.”
Consumer-facing tools and tactics aren’t the best way to convince suppliers to shred their paper processes, especially when other obstacles are discouraging these businesses from making the switch.
“We can’t ignore the fact that, historically, some of the economics and the price of acceptance has been somewhat of a barrier,” Wilkinson added about why suppliers aren’t always willing to accept cards.
But the market is beginning to change, and card issuers and financial institutions are launching corporate-focused solutions to ease the friction of accepting card and electronic payments.
“The card brands and banks have done a really good job making new payment methods available to their commercial customers on the buy side,” the Moneris executive said.
One way these new solutions have helped ease friction in B2B payments is by knocking down the risk associated with putting a high-value transaction on a card — a worry that, in today’s market, Wilkinson described as “a bit of a misnomer.”
“On the buy side, solutions like virtual cards provide a high degree of control for the buyer, so they’re much more comfortable about moving up in the food chain in terms of transaction size,” he explained, adding that with buyers becoming more used to using a card, it’s an opportunity for suppliers to get used to accepting them.
Of course, there’s always the cost associated with accepting a commercial card that acts as one of the largest deterrences for suppliers. While interchange fees are a challenge, Wilkinson acknowledged, it’s the overall value proposition of card and electronic payment acceptance that leads to a broader economic and business gain for these companies.
“It’s not just the headline cost of acceptance; it’s understanding how cards and electronic payments can fit within their business,” he explained.
Wilkinson pointed to research that finds evidence of increased sales for suppliers equipped to accept commercial cards. Moneris cited Visa Canada statistics in announcing its new B2B payments foray, noting that 32 percent of SMEs encountered an increase in sales when they began taking cards as payment and that businesses that shift from paper checks to electronic card acceptance can save about $24 per every $1,000 in sales.
There are other benefits to commercial card acceptance, too.
“Commercial card-equipped buyers tend to have good credit availability, so buyers are predisposed to work with suppliers that are efficient and easy to do business with,” Wilkinson added. Plus, there is the whole security, data and analytics side of this shift that comes with electronic payments often unattainable with paper-based transactions.
“The way to look at it is really optimizing processes and driving efficiencies so we can combine data and reporting to make AR more efficient for a supplier,” he continued. “When you package everything up for suppliers, it’s really a combination of a number of value elements that back up against the cost of what you’re providing for the service.”
Today, Wilkinson explained, Moneris sees the future of B2B payments as card-based and electronic. Suppliers need to get on board to capture all of these benefits and maintain positive relationships with their buyers.
And while Wilkinson recognized the challenges of supplier card acceptance — from misconceptions about cost to fears of security — the benefits, Moneris says, far outweigh the challenges.
“We think the combination of all of the above starts to present a compelling message for suppliers in considering electronic payments,” Wilkinson said.