B2B Payments

Commercial Cards Find Opportunity In Transparency, Lower Fees

There is more than one way to drive commercial card innovation.

For corporate buyers, adoption can stem from opportunities around rewards and rebates, elevated transparency, fewer hidden fees and data integrations with other back-office financial management tools. For vendors, commercial card acceptance can be a matter of wielding technology to lower interchange costs.

Below, PYMNTS examines the latest in commercial card innovation, and uncovers ways that the commercial card industry is capitalizing on a slew of opportunities to drive adoption in B2B payments.

A Focus On Transparency

One of the largest stories for the commercial card industry is the recent complaint filed by the U.S. Federal Trade Commission (FTC) against commercial payments technology company FLEETCOR Technologies, which has been accused by the watchdog of "hidden" fees and charges. The FTC filed the complaint last month, and asked a Georgia federal judge to stop FLEETCOR and its CEO from charging those alleged hidden fees, as well as disgorge proceeds obtained by such practices, reports said.

According to the FTC, tens of thousands of FLEETCOR customers have issued complaints to the Better Business Bureau and other government bodies, accusing the company of unfair practices related to hidden fees linked to fleet card products, with "at least hundreds of millions of dollars in unexpected fees," the FTC's complaint stated. In a statement, FLEETCOR said it "strongly disagrees with the FTC's complaint, which the FTC commissioners were not unanimous in approving, and believes the FTC's claims are without merit."

The case has raised the broader issue of hidden fees in commercial card products, with an opportunity for industry participants to focus on transparency.

Tackling Interchange Friction

There are opportunities not only in lowering costs for commercial card users, but in easing the financial burden of commercial card acceptance. Recently, Revolution Payments announced a new interchange optimization service, designed to enable Level 3 Processing data, which can lower interchange fees.

Revolution Payments explained in its announcement that it keeps half of the reduction in interchange costs, with the optimization service entirely automated for merchants, meaning sellers do not have to manually key in line-item data to achieve Level 3 Processing. Furthermore, the company noted, the technology can work across any payment terminal: Historically, terminals could not support the additional data required to achieve Level 3 Processing, and lower interchange costs.

Uber Jumps Into Biz Card Rewards

Rewards and rebates are among the most enticing benefits for commercial card users. Recently, Uber and American Express announced a collaboration to connect business travelers to Uber Rewards when they pay for Uber rides using American Express corporate card products.

Uber Rewards connects corporate payers to more points when using Uber Pool, Uber X and Uber Black for business travel, and they can cash in those rewards for Uber or Uber Eats, as well as additional benefits, the companies said. According to The Points Guy, the launch of Uber Rewards follows a revamp of American Express' commercial card product rewards last October.

Addressing The Middle-Market Gap

In a recent interview with PYMNTS, FIS General Manager and Business Line Executive of Credit Payments Kris Carrera explored why a gap persists in connecting commercial cards to middle-market companies. Banks and other financial service providers will often target their commercial card products toward either small businesses or large corporates, with the middle market falling somewhere in between, without a clear choice.

"But you shouldn't shove [the middle market] into small business or commercial," she said. "You should have a third segment."

Carrera noted that this industry gap presents a significant opportunity for commercial card issuers to address a potentially lucrative customer segment, defining the middle market as firms with revenues between $10 million and $500 million.

"For banks, the middle market is the sweetest spot because they don't require so many rewards," she explained. "They're not even asking for rebates. What they're looking for is ease-of-use, convenience and reporting that can come out of it."

Cards' Data Integration Opportunity

ScaleFactor recently announced the launch of a Visa charge card that integrates directly into its small business bookkeeping-automation solution. Reports in CardRates said that ScaleFactor is targeting real-time expense reporting for small businesses by automatically adding data from transactions made on the small business card into the ScaleFactor portal.

In a statement, ScaleFactor Senior VP of Lending Eric Steinhoff said that the company wanted to introduce a lending solution that would only otherwise be available to large corporates.

"We knew we wanted to offer lending products," he said. "The card was at the top of our list because — and this is a pain point that came out in our customer research — small businesses struggle to integrate their cards with their existing accounting solutions."

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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