Commercial cards make up just a fraction of the supplier payments space, but the rise in virtual card technology – and the efficiency and security that come along with it – could help card issuers grab a larger slice of the B2B payments market.
Today, Noventis and Comdata, a FleetCor company, are teaming up to combine their respective capabilities in the virtual card segment. An announcement on Tuesday (March 6) said Comdata will link its virtual card offering to Noventis clients using its bill payment platform, while Noventis will integrate its payment processing technology into the solution.
That integration means the companies can help suppliers that wouldn't normally be able to accept card payments from their corporate clients; Noventis and Comdata added that virtual cards will help eliminate paper checks in the B2B transaction process.
In a statement, Comdata's corporate payments division president, Kurt Adams, said their tie-up demonstrates the importance of collaboration in this industry.
“Partnership between FinTechs like Comdata and Noventis is what is driving innovation in B2B payments,” he said. “Both our companies are obsessive about removing friction between buyers and suppliers to enable fast, secure, electronic payments. But we've been focused on different pieces of the puzzle. Now we can use each other's technology to improve our own capabilities.”
“This agreement furthers a strategic tenet of Noventis’ marketing strategy in B2B payments around elimination of checks through our proprietary straight-through processing capabilities," added Noventis CEO Steve Taylor. “The partnership is incredibly beneficial to both firms. Comdata’s capabilities and scale in card issuing, along with our expertise in processing and accounts receivable posting, aligns perfectly with Noventis’ core mission to accelerate the adoption of electronic payments in the B2B sector.”
In an interview with PYMNTS, Noventis COO Blair Jeffery said this tie-up enables the companies “to work together to leverage each party’s capabilities in terms of innovation, technology and expertise, to increase the reach of businesses that can benefit from automation of payment delivery.”
While B2B payments companies are pressing businesses to ditch the paper check, the migration toward electronic payments has centered mainly on ACH.
NACHA released a survey last year that found while ACH payments currently account for 32 percent of payments received by accounts receivable professionals, the AR industry expects ACH to surpass paper checks by 2020, accounting for up to 45 percent of payments received.
Commercial credit and debit cards, meanwhile, currently make up just 11 percent of payments that come into AR, while professionals told NACHA that they expect cards to hold 12.5 percent of payment volume by 2020.
“It demonstrates the growing importance of ACH payments to support the evolving needs and goals of businesses,” said NACHA senior director of corporate relations and product management, Rob Unger, in a statement. “Because they are electronic, allow for remittance to be sent with the payment in a variety of formats, are more cost-effective than other payment options and can be received quickly, ACH payments are becoming a very attractive option to both accounts payable and accounts receivable professionals.”
But Jeffery said that virtual cards offer a few key benefits over even ACH transactions.
“Virtual cards are the true proxy for payment,” he said. “Cards use existing infrastructure, and process through major credit card networks. Cards are easier to implement than ACH interaction, with no need to exchange bank account information. They are also an excellent way to facilitate payments from a wide range of payers. One-time use makes cards very secure and less susceptible to fraud. They are simple to track and easy to reconcile.”
Commercial cards have retained their reputation of being expensive for suppliers to process and difficult to integrate with card processing capabilities, however.
According to Jeffery, network fragmentation, costs and a lack of automation resources are the largest barriers to suppliers’ acceptance of virtual cards.
“There are customized solutions for $1 billion-plus companies, but these solutions are too costly for smaller businesses,” the executive said. “Most existing solutions require enrollment and serve a limited number of suppliers. These are not always viable for businesses with a diverse set of payees.”
Offerings by traditional banks don’t always meet virtual card needs, either.
“Very few businesses use bank-offered solutions, because they are not well tied into business accounting systems and require technical resources,” said Jeffery. “There is a lack of straight-through processing infrastructure,” he continued, highlighting the friction on the supplier side. “For example, large companies, such as telecoms, are not equipped to accept email delivery of virtual card payments.”
Yet proponents of the tool say that commercial cards can benefit both sides of the transaction: Suppliers get paid immediately, while buyers can still float their cash for several weeks and rack up rewards points. Industry players say these benefits are worth overcoming the friction.
As the B2B payments industry continues its digitization efforts, the threat of card fraud may be another deterrent to adoption. Research by APEX Analytix released last year found that 65 percent of businesses don't authenticate their suppliers, and 51 percent said there is no control in place to have multi-factor review of high-value supplier payments in the accounts payable department. Vendors largely aren't authenticating their buyers, either, leaving room for card fraud to occur.
This kind of threat has fueled virtual cards’ growing presence in B2B payments, with issuers highlighting the ability for payers to allocate a certain value for specific transactions, while single-use numbers reduce the threat that someone will steal the card and be able to use it for their own fraudulent purposes.
But the challenge of supplier acceptance of cards continues. Hotels, for example, often receive virtual card information via fax, and are then forced to manually key in card information when businesses book with that supplier.
Comdata took steps last year to address this issue, launching Spend Escalator to enable companies to more easily on-board their suppliers to accept virtual cards.
“When it comes to accounts payable automation, we focus our development on easy administration and vendor enrollment, because we believe those are the two biggest drivers of a successful program,” said Comdata senior vice president of product and strategy, Vijay Ramnathan, in a statement at the time.