B2B Payments

Shift to e-Payment Not as Hard As Some Might Fear, Says Study

Though many companies are “hesitant to commit to” launching an e-payment and cards program, the steps to implementing the technology can be easier and less complex than many executives think. In a whitepaper released earlier this year by Silicon Valley Bank, titled “Take Charge: How to Successfully Plan and Deliver a Strategic E-payment and Commercial Cards Program,” research found that opportunities outweigh the challenges. “There are smart ways to do it more efficiently,” said SVB in reference to e-payment adoption, “and see returns faster."

Card payments, especially, are catching the notice of financial executives, as the movement toward better intelligence on spending, and timely, real-time cash transfers to vendor and other parties can help save time and money.

Though 70 percent of organizations are working to shift from paper to e-payments, SVB noted that card payments are gaining traction as an added way to conduct day to day operations with greater insight to how everything from accounts payable to travel expenses are being managed.

At the moment, according to the whitepaper, the vast majority of electronic payments run the gamut from wire transfers to ACH debits. For example, 82 percent of businesses use wire transfers, 81 percent use ACH credits, and then the numbers drop off sharply alongside newer technology offerings. Only half of businesses use purchasing cards, 34 percent use ACH debits, and a relatively slim 13 percent use single use accounts, defined as transactions that employ virtual account numbers. And, for now, at least SVB has found that commercial cards are used mostly in tandem with travel and entertainment expenses, or only what would be termed “low value purchases,” and there is indeed room for a greater range of strategic payment options.

A comprehensive e-payments program would utilize elements of all of the aforementioned payment platforms, with an emphasis on movement to p-cards that can help in a number of strategic ways: from making procurement cycles more efficient (the paper notes that the use of p-cards can reduce that cycle by about nine days) to reducing the cost and time needed to work through expense report processing by about 44 percent.

The movement to EMV and the attendant liability shift in the latter half of this year is likely to spur adoption of mobile payments. The continued emergence of contactless payment technologies, most famously (for the moment) Apple Pay and Google Wallet. The key here is microchip technology and secure transactions that will push businesses to embrace mobile payment – and, SVB says in its report, 29 percent of organizations surveyed look to have mobile payment systems in place by year end.

Noting that p-card spending would top $290 billion by next year, and that translated to a CAGR rate of 11 percent. Key attributes driving the adoption of p-card spending include the elimination of several steps in the purchasing process, ranging from invoicing to requisition orders.  That in turn can help improve cash flow, upon the optimization of working capital.

Another key impetus to adopt card payments comes through security concerns, as 60 percent of companies said they had been victims of fraud or attempted fraud in 2013.   More recent data posted last month shows that data breaches have been costing companies an average of nearly $4 million, as found by the Ponemon Institute.

In reference to fraud, 43 percent of financial institutions reported fraudulent card payments in 2013, with a jump from 2012 levels of 29 percent. As the migration to EMV in Europe has shown lower incidence of fraud with the advent of greater security, and SVB notes in the report that “leading p-card users” surveyed by the Aberdeen Group fraudulent occurrence plummeted by a whopping 82 percent with adoption of the technology.

Within the organization itself, notes SVB, and citing RPMG, p-card administration proves a part-time effort until an outfits card count reaches 200 – and then oversight requires at least some full-time administrative staff.

In advising businesses on strategic process to embrace commercial card programs, SVB says businesses should interact with their banks in order to establish just which suppliers can, or will, accept p-cards, especially in an effort to reduce paper-based check transactions. The same relationships with financial institutions can help steer ant-fraud efforts, via credit controls, encryption and even merchant blocking, with an eye on transitioning to EMV standards later in the year.

Also, SVB advises enterprises work with banks to adopt financial products that “immediately and automatically flag issues” and send e-mail or text alerts to both administrators and the cardholders themselves. Data reporting itself for commercial cards should be automated into expense reporting and enterprise resource planning systems, to ensure ease of use and automatic reconciliation and lessen the need to “re-key” data. And of course, investing in “people training” via staff education, attendance at seminars, consistent training and monitoring updates makes for a smooth transition, says SVB.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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