As payment innovators explore how to build up existing payment rails, or build entirely new ones, to combat friction, the low-hanging fruit remains plentiful to improve the multitude of ways money moves.
When it comes to B2B payments, plenty of pain points also mean plenty of opportunity for solution providers, although no single payment technology could possible combat every B2B payment challenge today.
Rather, it is perhaps sometimes more valuable for payment technology companies to discover niches in which certain payment solutions can gain traction and bring the most efficiency.
That's been the strategy for B4B Payments, a U.K.-based B2B payment solution provider that expanded into North America this year with its prepaid commercial card tools. Speaking with PYMNTS, Managing Director of North America Kieran Draper said employee expense management and contractor payouts have become a valuable niche for the corporate prepaid card.
Streamlining Employee Spend
When it comes to managing companies' capital outflows, ensuring controllers have the visibility and control they need over how professionals spend money is essential — yet increasingly difficult in today's work-from-home environment.
As Draper explained, there are characteristics of the prepaid card that can be particularly effective at helping firms achieve these goals.
"It gives freedom, in terms of doing things much quicker and at lower cost," he said. "You can disburse funds in real time, you can see how cards are being used and place limits onto where they can be used, and you can actually see the transactions as they happen to monitor and control expenditure much better than other methods allow."
Rather than pushing through the back-end burden of filing, reconciling and paying out employee expense reimbursements, prepaid cards can arm professionals with company cash with pre-set restrictions that aren't always available when an employee is handed over the company credit card. And for the employee themselves, said Draper, there is no need to go through a credit check, open a separate bank account, or front the bill for their employer.
With the pandemic weighing heavily on small- to medium-sized businesses (SMBs), Draper said he's seen expenditure decline among the smaller firms. Yet for B4B Payments, the target is more toward the medium-sized end of the spectrum, where spending remains steady. There, one of the most valuable strengths of the prepaid card is the opportunity for continued management of the card, even within remote working conditions, as employers can reload cards or adjust restrictions digitally.
In addition to managing employees' capital expenditure, prepaid cards have also carved a niche out in the area of capital inflows for professionals.
For B4B Payments and its expansion in North America, compensating contractors has emerged as a powerful use-case for the prepaid card. Draper pointed to contract workers who don't have steady or frequent jobs with an employer as one example in which prepaid technology can mitigate friction for both professional and company.
"A contractor would very often rather receive their fund immediately after they've done their work," he said, noting B4B Payments can facilitate that accelerated access to earned capital. "It's also almost like having another bank account because funds can sit there for a period of time, and you can move funds around. The contractor also has a good way to ring-fence everything they've earned for their own reporting purposes."
For controllers, meanwhile, there is value in being able to disburse a prepaid card without having to obtain sensitive data from a contractor, like bank account details required for other payment methods like direct deposit. Meanwhile, the same kinds of controls and customization available when managing employee expenses is also available in the contractor compensation setting, enabling controllers or managers to include unique features like a per diem amount to a prepaid card, which can be added automatically for the contractor.
That's not to say, of course, that there's not a place for ACH or wire transfers in the landscape of compensating professionals or managing employee spend. Indeed, said Draper, the prepaid card can be effective at combating friction in these niches, but no less vital, B2B payment scenarios.
As B4B Payments expands its presence throughout both Europe and North America on its growth trajectory, the company will be one of many players in the B2B payments arena, participating in an ecosystem of multiple technologies and payment methods.
"We don't assume we'll completely replace direct deposits, ACH transfers or checks," said Draper. "But we do see tremendous opportunities for companies to save a lot of time and a lot of cost in terms of running their expense management systems, as well as their disbursement processes, by using prepaid cards."