In the absence of corporate travel and entertainment, as the road warriors stay (and work) at home, it may make sense that commercial card use would see a pause in the B2B space.
But in an interview with Karen Webster, Dean M. Leavitt, founder and CEO of Boost Payment Systems, noted that commercial cards — and virtual cards in particular — are ready for a steep adoption curve, made all the steeper by the pandemic.
Buyers are being forced to rethink their procurement spend … and perhaps are finally ready to abandon the paper check. Because, frankly, they may not be able to get their hands on the paper check in the first place.
It’s true that many companies that have historically had a tremendous amount of spend have seen travel and entertainment reduced dramatically.
“But we’ve focused on finding new areas of spend for buyers to utilize their cards,” Leavitt noted.
As he explained, the push to make the “uncardable, cardable” also means clearing up some common misconceptions about commercial cards themselves.
Historically, firms have had the misperception that the cost of card acceptance is higher than what might be seen with other payment methods. And many firms simply weren’t being prompted by their customers to use cards in the first place, Leavitt added.
For Boost and for other companies that seek to effect change in the B2B payments ecosystem, the opportunity is a significant one, as Leavitt estimated that more than 50 percent of what might be termed the “B2B spend population” has been mostly resistant to cards.
The catalyst is here to wear down that resistance, he said.
Over the past six months, firms that did not engage in digitized payments — either sending or receiving — found that not being able to go into a brick-and-mortar office to write checks has created an “emergent situation” that is pushing buyers and suppliers to get into the digital payments game.
Even the dynamics of interaction between buyers and suppliers using commercial cards are changing, observed Leavitt.
In a vacuum (or in the absence of a pandemic), he said, buyers want to use their cards, while suppliers may be a bit reluctant to accept them (there’s that misperception, again, over acceptance costs).
“We are seeing an interesting shift, where suppliers are more than willing to embrace card acceptance — for the surety of being paid, and the ability to be paid sooner,” Leavitt told Webster.
That visibility is particularly valuable for companies that might be struggling with working capital needs amid the pressures of the pandemic. The suppliers who opt to get paid sooner are shifting the burden of credit (extending terms to buyers without the certainty that the funds will come) to the issuers of commercial cards.
The B2B space is unlikely to see any backsliding here, said Leavitt, even on the other side of the coronavirus. It’s not as if commercial cards — and, with them, favorable terms — are a (cash flow) lifeline to be cast aside in steadier economic climates.
Perhaps some of the digital payments activity will “fall off,” maintained Leavitt — but not enough to dent the strides already made in B2B. As has been seen in past decades in the consumer space, technology-fueled payments simply become part of the fabric that weaves sellers and buyers together. As commercial cards become ubiquitous, he said, they will become a preferred way to pay firms up and down supply chains.
“Our experience generally has been that when organizations migrate off checks onto a digital payment platform, and specifically onto cards, they rarely go back — certainly here in the United States. It just seems to be a one-way street,” Leavitt noted. “When you have an important customer who wants to continue to pay via card product, you are less likely to stop [accepting it], because you really don’t want to make your customer unhappy.”
Reinforcing The Rules
Part of that stickiness can come through reinforcing the agreements and terms struck during card payments. Leavitt noted that Boost can help protect suppliers and short-circuit any movement back to “bad payment behavior” on the part of buyers by allowing suppliers to reinforce the rules established with their customer base.
If, for example, the rule is that suppliers will accept a card provided they are paid within 30 days of the invoice date, but a payment comes in after that date, Boost can “kick the payment” back to the buyer and require them to use an alternate form of payment.
Other advantages lie with card acceptance, which extend beyond the timing of the payment.
“It’s as much about data exchange” between buyers and suppliers, noted Leavitt, as automated processes streamline posting and reconciliation activities — with leagues of improvement over the human errors that can bedevil checks, wires and ACH payments.
The current environment has spurred suppliers — among them large organizations with high velocities of payments that previously never accepted cards — to sign up for card acceptance through Boost’s platform. (That’s especially true as far-flung, remote workers grapple with back-office functions at their kitchen tables.)
Said Leavitt: “They agree to take a commercial card from one customer — and then, fast-forward, they may have more than a thousand commercial customers paying them via card through our platform.”
He pointed to Dynamic Boost as a way to provide flexibility to the buyer and supplier as they establish pricing or payments logistics or interchange rates, along with the aforementioned rules — and where transparency and standardized processes are of value in a chaotic economic environment.
Looking ahead, Leavitt said the B2B payments space is “only on the 10-yard line (going the long way) as it relates to commercial card usage — and in many cases, specifically, virtual cards. The commercial banks, the mono-line commercial card issuers, and the corporate and institutional communities are slowly but surely realizing that commercial cards are viable.”
As he told Webster, “in many cases, commercial cards are a preferable alternative to existing and antiquated payment methods."