So, what’s really broken in B2B payments? That’s the question that a group of commercial payments experts were asked last month in New York as part of the PYMNTS.com summit on “what’s next” in B2B payments. PYMNTS sat down with Dean Leavitt, CEO of Boost Payment Solutions, moments after this panel discussion to get his perspective on what he and he fellow panelists discussed.
WHAT’S BROKEN IN THE STANDARDIZATION OF COMMERCIAL CARDS
According to Leavitt, one of the things that creates friction in the commercial card acceptance arena is the continued use of single-use and ghost card products among large buyer-supplier relationships. Today, in order to use these products, suppliers must use login credentials issued to them by each financial institution that issues cards to the supplier’s customer, and then hunt down card data for each transaction and then manually process the payment through whatever acquiring system they use to process transactions. Virtual cards, while adequate for smaller suppliers, are too cumbersome for companies receiving a high velocity of card payments from their customers and this has created significant friction for the expansion of commercial card acceptance among larger suppliers.
“The element of standardization, or a platform that appears to standardize these transactions, is very much needed.”
Leavitt noted that most financial institutions that issue cards rightfully build into them functionality like security or other things the marketplace looks for – that can make gathering card data very cumbersome for mid-sized to large suppliers.
“There’s always this natural tension between standardization and differentiation. What we look to do is maintain the differentiation from the issuer’s perspective, but make it much simpler for the supplier,” he said.
Leavitt noted that one of the things that has helped build traction for his company’s “Boost Interceptsm”platform is the ability to transform virtual card transactions into a buyer-initiated experience for the supplier, thereby eliminating the need for the supplier to track down, store or process card data since it’s completely handled in an automated way on their behalf. Instead of receiving a call to action, suppliers simply receive a notification that the transaction has been completed on their behalf and that the funds will be deposited directly into their account. An interesting byproduct of this transaction is that the supplier no longer needs to be concerned with PCI DSS compliance for such transactions, as card data never enters into their world.
THE BUYER-SUPPLIER EQUILIBRIUM
The value proposition that buyers receive for using commercial cards and suppliers receive for accepting them is critical and always will be, said Leavitt. Currently, the marketplace is seeing an equilibrium that’s slowly evolving as a result of three primary functions: pricing, delivery of data, and automation.
“Over the last couple of years there have been a lot of innovative changes on the pricing front. The pricing constructs are now better reflecting the relationship between that buyer and that supplier,” he said.
The delivery of data is becoming increasingly important to suppliers, with automation, both buyers and suppliers are having an easier time processing and receiving card transactions.
“Those three together are working to create that equilibrium – it’s not 100 percent there yet, but I think the movement we’ve seen towards equilibrium among all of the stakeholders in the card acceptance and payment arena has been substantial,” he added. “We’re getting very close.”
EXPANDING THE ROLE OF COMMERCIAL CARDS
Making it easier for both suppliers and buyers to facilitate a card transaction, and creating an equal value proposition on both sides, are very important in expanding the role of commercial cards, said Leavitt. However, that must be coupled with education.
“The marketplace needs to be brought up to speed as to what changes are available out there, what innovations now exist and what pain points can be resolved,” he said, adding that he feels that it’s the responsibility of companies like Boost Payment Solutions to educate suppliers on behalf of the financial institutions they serve.
“We make sure they understand what the true value proposition is to them. That’s an often-understated mission critical piece to which people don’t pay enough attention.”
IS THERE INERTIA IN B2B PAYMENTS?
While there’s been tremendous progress made over the last several years in the B2B commercial card arena, that doesn’t mean there’s not inertia, said Leavitt. There are large companies on all sides of the equation – payers paying in a certain way for years, suppliers having been paid a certain way for years, and FIs with their own “variations of rigidity” when it comes to systems, products and programs they bring to market. That makes for some inertia, he said, but things are starting to change.
“We’re beginning to see an increase in flexibility, innovation and a realization by all players in the ecosystem that a business-to-business payment is very different from a consumer-based payment,” he said. That realization, he added, was evident in many of these players’ actions.
“I think we’ll see massive changes over the next couple of years, which will get us closer to that goal of true equilibrium between a buyer and a supplier.”