Innovations on one end don’t always lead to smooth sailing down the chain. Sometimes one department’s upgrade is another one’s headache.
This is clear in the case of accounts payable (AP) shifting spend to digital or virtual cards as Flint Lane, CEO of payment cycle management leader Billtrust, told PYMNTS’ Karen Webster in a recent interview.
“Accounts payable departments were sold on the premise that they could be turned into a profit center by driving their spend to virtual cards,” Lane said. “Anytime finance can generate profit instead of cost, that’s usually a good thing.”
So off they went.
AP departments then began sending payments via email with one-time-use credit cards as part of a larger push to move away from receiving bills and paper checks toward more efficient digital channels. The rise in one-time-use credit cards attracted investments and interest from software providers to provide AP solutions to enable moving spend into the virtual card space.
An AP star was born.
But what’s good for AP departments aren't necessarily good for the people they are paying — i.e., accounts receivable (AR).
“The accounts payable guys weren’t trying to create accounts receivable problems,” Lane said. “But the result of their embrace of digital and a new business model has become a huge headache for AR departments.”
The push to virtual cards created a number of issues for suppliers. The first was that it actually created more work on the receivables end. Staff had to manually open every email, retrieve payment instructions from third-party portals, enter the emailed card information and input remittance data into their ERP systems.
For some businesses, receiving and processing virtual cards created so much additional work that it required new, full-time hires tasked exclusively with handling the flow. Lane noted that some of Billtrust’s clients received up to 10,000 email payments on a monthly basis.
Along with the deluge of emails, virtual cards introduced compliance and security risks.
“You can imagine,” Lane said. “You’re paying someone to open an email and retrieve a credit card number. Even if it’s a one-time-use virtual card, it’s risky — writing the information down, people reading them, people repeating it into a website.”
Another issue that arose for both AR and AP is that emails have a pesky tendency to sometimes get lost in the shuffle — bouncing, going into spam folders or not getting processed in a timely manner. This leads, simply, to unpaid or delayed payment on bills.
To address these issues for AR and AP departments, Billtrust recently released Virtual Card Capture, a B2B software platform that works to remove the friction from both sides of the virtual card transaction.
Virtual Card Capture places the task of processing the influx of virtual card emails on Billtrust. The platform uses robotic process automation to open the emails, log on to websites, extract the correct credit card information and run the transactions through a merchant’s account. Billtrust has a manual team to handle the anomalies, Lane said.
Billtrust’s solution is PCI-certified. This ensures the security around the process allowing clients to improve their risk profiles without requiring them to apply for certification themselves. “We can also help them drive their card fees down,” Lane said. “We can process Level III data with these transactions — meaning they qualify for lower interchange rates.”
This opens up a whole new market for the company as a result, Lane noted. While Billtrust generally sells to medium and large enterprises, they now have the opportunity to sell down-market as well. Additionally, for B2B companies, clean remittance with payments is just as, if not more important than the payments themselves.
“Today, not only are those payments more expensive to process — the application of cash is more expensive because it’s an exception,” Lane said. “Virtual Card Capture not only gives clean electronic payments but clean electronic remittance.”
But for Lane and Billtrust, that’s just the starting point. Greater network interoperability is the next goal. Lane compared that ambition to the early ATM system.
“There’s never going to be a one-network solution here,” he said. “The ATM system works not because there’s one network but because multiple networks ultimately figured out a way to talk to each other. So we’ve started down the path of building operability between ourselves and other players on the market.”
Lane said he envisions a day not too long in the future when there will be a number of direct interoperability connections between large providers and other players on the AP side.
In other words, an AR switch, a vision that Lane and Billtrust hope they can enable — making innovations in B2B payments work for both payables and receivables regardless of what software they use to power their payments.