Commercial cards account for only a portion of corporates' overall spend, as checks stick around and ACH gains ground. However, their market share is on the rise as card issuers develop more robust rewards programs, and the ability to integrate card spend into back-office spend management and analytics platforms.
Yet, the issue of vendor card acceptance remains the often-cited hurdle hampering the commercial card from gaining deeper traction. Interchange fees, of course, are a top pain point for B2B suppliers, but not the only one: Vendors, especially smaller suppliers, can struggle to invest in the back-office restructuring required to accept cards from their corporate customers.
That hasn't slowed down the growing demand for commercial and virtual card solutions among businesses, however. After all, companies want rewards, and to make payments for their businesses the same way they do in their personal lives, said BankUnited Chief Operations Officer Tom Cornish.
"The commercial card program is moving away from its fundamental roots, which is being a credit card that people are using only for typical T&E expenses," Cornish explained to PYMNTS in a recent interview. "It's turning into being a business spend management and information systems program that companies are using, and trying to maximize across their entire business spend environment."
The opportunity in using commercial cards to obtain expense data and analyze spend habits is an attractive one, driving further commercial and virtual card adoption, he said. Other drivers include the ability for corporations to make faster invoice payments, thereby capturing early payment discounts without actually letting go of capital more quickly. Card issuers' security and fraud measures are helpful benefits, too.
With expectations for commercial card adoption to accelerate, BankUnited is in the process of designing its own commercial card offering, having announced the hiring of Joshua Kesner, its first director of commercial card services, earlier this month. With BankUnited only about 10 years old, Cornish said the financial institution (FI) — which targets middle-to-upper-market enterprises — is in a position to develop a commercial card offering from the ground up, and to act with greater agility on some of the more recent trends in corporate card usage.
Data, Cornish said, is a particularly bright spot when it comes to introducing opportunities for both the corporate end user and the bank issuer of commercial cards.
"People want data integrity — they want the ability to quickly drill down into spend that's being done, how it's being spent, what units are spending it," he said. "These programs allow for a real-time flow of information. It's all about data in the world today."
He continued, "Businesses that want greater data capabilities are going to gravitate [toward] products — whether they're treasury management products or commercial card products or other products — that allow them to more easily grasp data quickly, manipulate it, manage it, and figure out what it means to them and the running of their businesses."
Undoubtedly, FIs will see value in having access to that data as well.
There will be barriers to gaining traction as a new market entrant, however, though those barriers mostly center around promoting awareness and education about the benefits of a commercial card program, according to Cornish. What he doesn't see as a particularly large barrier, though, is the aforementioned issue of vendor acceptance.
Instead, as corporates increasingly demand commercial cards, vendors will find it a competitive advantage to accept cards and adjust to the payment requirements of their top customers, he said, likening a lack of commercial card acceptance today to retailers' and restaurants' lack of card acceptance 35 years ago.
"Today, that's virtually unheard of," he said. "No retailer today would not accept credit cards, so I think you're going to see a very rapid embrace of [commercial cards] within the supply chain management process."
He predicted that, in only five years, a lack of supplier card acceptance will no longer be a significant barrier to commercial card adoption. Within that time, there are sure to be other changes in the industry as well. With BankUnited stepping into the market within a period of disruption and innovation for the commercial and virtual card space, Cornish noted that the FI will closely monitor how the commercial cards fit into the broader landscape of B2B payments innovation.
We are in a period of "reverse innovation," he explained, noting that, rather than the biggest players driving innovation, its individual consumers and small innovators driving change from the ground up. As those consumers become small business owners, and as those small businesses evolve into larger enterprises, the impact of consumer payments innovation will ripple into the commercial segment — just as cards have done over the decades.
"You're going to have to watch how it fits into the overall payment systems world," he said. "Businesses want to know why the same technology they have at a consumer level is not available at the business level. Things like real-time payments will be critical in the payments ecosystem. Continued advances in integrated payables, [and] ways to move money [via] B2B. It's all going to be something to watch."