Beyond the stereotype of the piña colada on the beach and tropical climates, the Caribbean beckons as a hot spot for B2B payments through virtual commercial cards.
Boost Payment Solutions, a New York-based FinTech focused exclusively on B2B payments, announced late last month that they’d signed a strategic alliance with Mastercard to bring straight-through processing — via the company’s Boost Intercept platform — to the Caribbean.
In an interview with PYMNTS’ Karen Webster, Boost Payment Solutions’ CEO Dean Leavitt said the agreement brings virtual card payments to nascent markets, where tens of billions of dollars flow between buyers and suppliers, and where many verticals — such as auto dealerships, hospitality services and pharmacies — rely heavily on imports to get goods on the shelves.
“The Caribbean is truly embryonic when it comes to B2B electronic payments ... so we’ve partnered with Mastercard to attack that marketplace and eliminate any friction associated with how businesses pay their trading partners,” said Leavitt.
Mastercard is, in effect, using the Boost Payment Solutions gateway to make funds and related data flow more seamlessly between the accounts payable (AP) and accounts receivable (AR) sides of the buyer/supplier equation. Leavitt continued, “Most people think of a Caribbean island as a strip of hotels on a beach, but each market is a meaningful economy that can be the size of a state in the U.S.”
The relationship with Mastercard is one that Leavitt said exemplifies his firm’s thesis to “convert manual virtual card acceptance into a very neat and passive process called straight-through processing, or STP, around the globe. This is just more of that, in a different region, with a great partner in Mastercard.”
The STP model is particularly suited for the Caribbean, said Leavitt. “Regardless of the industry, you have corporates either directly purchasing goods and services from suppliers or buying them through wholesalers that, in turn, import them into the region from abroad. These are all B2B transactions that have historically been processed in a suboptimal manner.”
STP helps optimize AP spend so corporates can get the benefits of the card product, such as working capital extension, rebates, cleaner data or better deals with suppliers. Leavitt believes this will prove to be especially important in the Caribbean, where seasonality often plays a key role in the local economies where many islands are connected by tourism.
“If you want to serve the B2B community properly, you have to create a bridge between AP and AR … it’s about existing vendor/vendee relationships, where there are established payment terms and dispute resolution mechanisms in place and, in many cases, a decades-long relationship between the trading partners,” he told Webster.
All of this takes place against trillions of dollars of checks paid (no doubt readers of this space have seen our frequent exhortations to #killthecheck).
As part of its service to corporates, Boost Payment Solutions regularly educates suppliers that are used to getting paid via paper check or wire about how they can keep and even grow business with their customers, while increasing efficiencies and reducing costs across the supply chain.
“It also takes partnership among all the players,” said Leavitt. “It may be getting the buyer to gently utilize some of the leverage it may have with its suppliers along the lines of, ‘I’d like to use cards to pay our invoices in a way that’s mutually beneficial.’”
Many of the suppliers who engage Boost Payment Solutions might receive thousands of email-based virtual card payment requests per month that clog up their AR systems. “If they are presented with an option that unclogs the system at a price that is less than the early payment discount they are currently offering for ACH or checks, it’s a different conversation we can have with that supplier,” Leavitt explained.
The B2B marketplace is warming up to cards, where lower acceptance costs and the availability of better data offer operational efficiencies and savings to AR departments.
“For the markets we serve, you’re not talking about cannibalization of existing card spend; it’s all about incremental B2B spend that would otherwise never find its way on a card without the benefits offered by our technology and services,” he said, and the benefits extend well beyond rebates.
As data becomes more important in that buyer/supplier relationship, as ERPs become more ubiquitous and the thirst for data grows, commercial cards become a bigger part of the conversation, said Leavitt.
And, in that conversation lies any number of opportunities for card-based, straight-through processing, he said, as “every buyer is a supplier, and every supplier is a buyer.”