The coronavirus pandemic has flung many businesses into crisis, disrupted supply chains and slowed down cash flows. Yet the health crisis may present a chance in the financial services space to turn lemons into lemonade, particularly when it comes to B2B payments.
According to a new report from Mastercard, COVID-19 is accelerating B2B payments digitization for companies across North America, with 57 percent of small businesses surveyed telling the payments technology conglomerate that they have indeed heightened their adoption of digital B2B payment tools since the pandemic began.
Reliance on cash and checks continues to add cash flow and payment pressures to companies in the U.S. and Canada, researchers found, with the pandemic exacerbating those pain points.
"Now, nearly half (48 percent) of small business owners say their business is one missed payment away from going under," Mastercard said in its press release, adding that many firms are now encouraging their own business customers to migrate away from cash and checks, citing speed, security and transparency as top priorities in their B2B payments agendas.
“The pandemic has made it painfully clear how labor-intensive current business payment processes are, especially for small and medium-sized businesses,” said Ron Shultz, executive vice president of new payments business, North America at Mastercard. “With cash flow more critical than ever, we’re seeing an accelerated shift to digital B2B payments as businesses of all sizes look to safeguard their operations today and prepare for the future.”
This could be a significant opportunity for the commercial card, which continues to enjoy steady growth in adoption. Mastercard research found that online card payments have experienced the largest increase in B2B volumes since the pandemic, with a 60 percent jump. Both checks and cash, meanwhile, have seen declines in usage.
This week's Commercial Card Innovation Tracker examines the latest efforts from B2B payments players to wield this commercial card opportunity and drive value for businesses (and their business partners) that other payment methods can't always provide.
Plastiq Broadens Plastiq Accept
Combating one of the biggest challenges of commercial card adoption — acceptance — will be imperative to driving growth for the industry. Business payments technology firm Plastiq announced this week the expanded availability of its Plastiq Accept solution to overcome that hurdle, with CEO and Co-founder Eliot Buchanan similarly citing the pandemic as a catalyst for card adoption.
"COVID-19 and the associated restrictions have caused a domino effect of late payments across the economy," he said in a statement. "As cash reserves run dry, many businesses have been unable to pay suppliers, as they simply don't have the cash on hand. This has left suppliers unable to pay their own bills due to these late or missed payments. Responding to our customers' feedback, we accelerated the development of Plastiq Accept in order to reduce cash flow burdens and unblock the flow of vital services and supplies."
PayMate Broadens B2B Payments Platform
Also working to drive commercial card adoption is PayMate, which recently launched a full-stack platform in India to digitize and automate supply chain payments.
The upgrades mean that larger enterprises can pay for their purchases with commercial cards, allowing small and medium-sized suppliers to be paid early for invoices, while corporate buyers can secure an early payment discount.
The rollout follows last year's $25 million Series D fundraise, which included funding from Visa. The payments technology company is also collaborating with PayMate to broaden commercial card innovation and adoption while enhancing cash flow for business customers.
Sri Lanka Eyes Corporate Card Opportunity
In Sri Lanka, the Commercial Bank of Ceylon has recently announced plans to roll out a commercial card product for its small and medium-sized business customers.
The bank will issue Mastercards to SMBs that fall under the Central Bank of Sri Lanka's definition of such businesses, and which connect users to value-added services like access to the bank's online banking platform, waived fees and registration on the bank's bulk payment platform, Paymaster.