Today, accounts payable firm MineralTree announced a collaboration with Visa with a goal of helping corporates pay their suppliers by virtual card. Their partnership will create a platform in which Visa’s Payables solutions and card technology integrates into MineralTree’s AP management tool and will be offered to financial institutions so they can support their own corporate clients’ commercial card payment needs.
In a statement announcing the collaboration, MineralTree CEO BC Krishna said their joint venture will help companies not only pay suppliers the way they want to pay but support invoice, cash flow and risk management.
But the commercial card is hardly the most preferred method of payment for suppliers, and that fact could mean adoption challenges for MineralTree and Visa’s new tool. Krishna told PYMNTS, though, that his faith remains in cards — and he explained why.
“People are interested in driving more payments onto their commercial cards, for obvious reasons,” the CEO stated, citing not only the rewards and benefits a payer can rack up by using their credit card but also the cash flow component that enables a company to extend payment terms by 15–30 days.
According to Krishna, demand to use a commercial card for supplier payments is high, and that includes using a virtual card, in the sense that a payment isn’t associated with a physical, plastic credit card, he explained.
Krishna added that part of the initiative with Visa is to promote push payments, enabling companies to settle supplier invoices with a commercial card through the card’s network, as opposed to sending card information over the supplier to run a transaction (a pull payment). Proponents of push payments highlight their ability to automatically reconcile payments, because the amount charged on the card is always equal to the amount stated on the invoice.
But where MineralTree and Visa may run into obstacles is in supplier acceptance of these cards.
“There’s no question that, today, the economics of card transactions have an impact on how deeply we can penetrate the market,” Krishna said of the challenge to get suppliers to accept commercial cards. “The vast majority of B2B suppliers don’t accept cards.”
This could be due to suppliers acknowledging that they don’t necessarily need to accept card payments to retain business, as well as their effort to avoid the added cost burden of accepting cards imposed by interchange fees.
Research has shown just how difficult it can be for suppliers to get on board with cards.
A report published earlier this year by Receivable Savvy found that, while more than half of suppliers surveyed accept card payments, only 9 percent actually prefer this payment method over others, like ACH and paper check.
But the executive said that many B2B commercial card solutions often ignore the supplier side of the transaction. Krishna said MineralTree and Visa have accounted for this by integrating a supplier enrollment and onboarding capability onto their solution. Plus, he said, some suppliers consider interchange fees simply a cost of doing business.
The benefits of commercial cards, in many ways, outweigh the cost burden they impose on suppliers, argued the executive, even when other payment rails are taken into account.
“Let’s set aside the cost issue for just a minute,” he said. “In the long term, I truly believe card payments have a tremendous set of advantages.”
Firstly, card payments are made in real time, with transactions showing up almost instantly on accounts. Second, he said, the payment card infrastructure already offers sophisticated monitoring and security measures in place.
“If I were to compare and contrast the card infrastructure to ACH, let’s think about how much further ACH infrastructure has to go,” he said. “We’ve barely begun to talk about Same Day ACH, forget about real-time payments. We don’t have a way to properly monitor account information or to properly exchange information. We don’t have industry-wide standards to be able to do that.”
That’s not to say, he added, that ACH doesn’t play its part in the payments ecosystem. But, he said, while other rails, like ACH, are currently working on same-day payments, Krishna said the capabilities for real-time, secure payments already exist — in cards.
Still, supplier acceptance of card solutions remains a complicated beast to tackle.
“I do believe the cost issue has to be solved, particularly in B2B payments,” Krishna noted. According to the CEO, MineralTree and Visa are working towards a goal of between 5 and 20 percent check-to-card conversion for a given customer, which Krishna described as the “crux” of commercial card adoption in supplier payments. Collaborating with suppliers, integrating push payment capability and streamlining supplier onboarding, he added, all offer commercial cards the opportunity to really take off in accounts payable — only if, however, suppliers can be convinced.