Why Corporates Are Rethinking The Commercial Card For Payment

From coordinating a team of newly remote workers to assessing new business models, the coronavirus pandemic is drastically disrupting the way organizations run and it is forcing a complete rethink of almost every aspect of operations — payments included.

While it’s still early days, Boost Payment Solutions Founder and CEO Dean M. Leavitt says there are already some patterns emerging that reflect potentially long-term changes to the B2B payments ecosystem. Among the most dramatic is a sudden urgency by organizations to digitize and automate their payment processes.

“Something as simple as not being able to go into the office and write a check, or open up the mail and deposit a check, is becoming a real issue for those businesses that are not digital and still rely on manual processes,” he told Karen Webster in a recent PYMNTS interview.

For digital laggards, the coronavirus pandemic will serve as a harsh wake-up call regarding the importance of digitization and automation, with commercial cards uniquely positioned to address many of the pain points companies face today in these unprecedented times.

But not every company will share the same experiences or face the same challenges, so as organizations race to modernize accounts payable (AP) and accounts receivable (AR) operations for a new reality of doing business, Leavitt said, B2B payment solution providers and commercial card issuers must embrace flexibility as they prepare for an uncertain future in B2B commerce.

A Surge In Commercial Card Interest

As organizations scope out alternatives to check, wire and ACH payments, Leavitt said commercial cards are uniquely positioned to support organizations in a way that other rails cannot. The value proposition is twofold: enhanced transaction data capture and the extension of working capital via the grace period offered by card programs, resulting in more cash on hand, a combination that has led to a sudden surge in commercial card interest.

Indeed, said Leavitt, the organizations that have not yet implemented a commercial card program are suddenly expediting their adoption journeys, while the firms that already have cards but have traditionally under-utilized their existing credit lines are now wielding the tool for spend categories they had previously reserved for other payment methods.

Card adoption today isn’t solely driven by the buy-side, either, he added. Vendors are similarly showing demand for card acceptance functionality to support collections in anticipation of a slowdown in their invoice-to-cash cycles.

“Everybody’s really concerned about cash,” said Leavitt. “The card as a credit instrument is very much on a lot of people’s minds.”

At the same time, card issuers are encouraging adoption in an effort to support their corporate clients, and their clients’ vendors. Thanks to online applications, the continued operation of banks and the digital-first nature of platforms like Boost, the commercial card ecosystem is well equipped to handle the needs of a remote, online-only workforce.

As buyers, suppliers and card issuers work to ease friction, they’re finding value in working together.

“So far, we’re seeing what seems to be, from our vantage point, a pretty collaborative effort on the parts of most stakeholders to get payments made,” Leavitt noted.

Supporting Unique Experiences

Commercial cards can be a vital tool to swaths of businesses struggling with cash flow, but no two organizations will have the exact same experience during this unprecedented event — and as a result, the commercial card ecosystem will have to adapt to a variety of business scenarios.

Cash crunches and B2B payment slowdowns are the new reality for many firms, particularly those in the transportation and hospitality sectors, where Leavitt predicted a meaningful decline in corporate spend in the coming months. And while both large and small corporates are facing financial struggles, Leavitt added that smaller suppliers are particularly at risk of running out of cash with fewer opportunities to access credit.

Other markets, like healthcare procurement and telecommunications firms, are experiencing a boom as corporate customers like hospitals and organizations that have shifted to remote operations accelerate their spend, which has driven the search for B2B payment solutions that can elevate buying power.

While commercial cards can offer benefits to both the AP and AR ends of the spectrum, Leavitt noted issuers face their own uncertain future as they explore how to balance extending financial support to those in need, while mitigating the risk of a business environment where company closures will be an inevitability.

“We are likely to see a lot of companies’ financial profiles change — and that may or may not change the way they’re underwritten,” said Leavitt, pointing to the possibility of a reduction in available credit, and an uncertain impact from the federal stimulus package. “There are a lot of balls up in the air right now. Nobody really knows.”

Commercial card programs and optimized B2B payments technologies can address many points of friction regardless of the financial position of an organization, from managing higher AP payment volumes to accessing much-needed credit to pay the bills. As such, supporting businesses of all types through flexible, versatile tools will be essential in the weeks and months ahead.

While it’s too early to tell exactly what the B2B payments ecosystem will look like when the market comes out the other side of the coronavirus pandemic, corporate cards are in a position to guide businesses through the volatility as they rethink their payments strategies.

“The jury is very much out, but based on the early days of what we’re seeing, this is awakening the realization that the old ways of how businesses pay other businesses just can’t continue,” said Leavitt. “This may be a watershed moment, where business will look at their operations through a completely different lens.”