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B2B Virtual Cards Move Buyer-Supplier Relationships From Manual to Meaningful

Building a successful business rarely happens on an island or in a vacuum. Typically, success comes from successful business relationships — and when one thinks about B2B relationships, at their core, they exist as payment relationships.

With the news Thursday (April 25) that WEX launched a new B2B virtual card partnership with Booking.com, the changing value proposition around the use of virtual cards for B2B payments is top of mind for enterprises.

This ongoing shift across B2B payments is not just about adopting new technology and embracing digital innovation to optimize accounts payable (AP) and accounts receivable (AR) workflows, but also about productively redefining the incumbent dynamics between buyers and suppliers.

While traditionally the balance of power when using a corporate virtual card to pay suppliers may have tipped toward the B2B buyer who was, at least historically, able to dictate the payment terms and methodologies, suppliers are now starting to use virtual cards themselves to negotiate better terms with buyers.

These better terms include things like suppliers accepting earlier payments in exchange for discounts, preferential status or guaranteed purchase volumes, and other tactics to drive more value for their businesses.

Against today’s macro backdrop of rising interest rates and geopolitical uncertainty, a growing appetite for working capital certainty and management is pervading the marketplace. It’s leading buyers and suppliers to find that the value proposition — and the cost basis — of using virtual cards for B2B payments is increasingly offering them a blend of efficiency, security and flexibility that traditional payment methods struggle to match.

Read also: Commercial Cards in Action: Businesses Gain Working Capital Flexibility

The Transformation of B2B Payments Through Virtual Cards

B2B payments make up a large part of the global economy, yet a lack of standardization and transparency has created difficulties and delays in the payments process. In today’s world, uncertainty around payments and working capital can be costly, impacting decision-making, competitive positioning, innovation and customer satisfaction.

PYMNTS Intelligence determined that firms not using virtual cards also happen to experience an average revenue loss of 4.6% from payment uncertainties. (Larger, more financially robust firms report a lower impact.)

That’s in part why B2B businesses are increasingly seeking payment solutions that provide certainty and immediacy, qualities that virtual cards deliver by enabling instant settlement of B2B payments.

“We think virtual cards are really at a tipping point,” Previse founder and CEO Paul Christensen told PYMNTS last month.

“There are trillions of dollars that are going to move to virtual cards in the next two, three, four, five years,” he added.

Because uncertainty impacts smaller middle-market firms in a bigger way, those smaller organizations may also stand to see the most benefits in integrating advanced payment solutions like virtual cards into their financial operations.

But in an era where digital transformation is imperative, perhaps the biggest advantage of embracing virtual cards for B2B payments is the step-up they give firms looking to enhance their back-end efficiency and digitization.

“The amount of paper that is still passed around in the B2B space continues to stun me, and it’s somewhat by choice, but more and more, I think businesses are looking for a better way,” Shawn Cunningham, managing vice president and head of Capital One Trade Credit, told PYMNTS last year.

See also: Death by Paper Cut: The Hidden Costs of Checks

Driving Efficiency and Transparency Across B2B Payments

Virtual cards streamline the B2B payment process by eliminating the need for physical cards, slow wires, checks or even cash. This enables businesses to make payments swiftly, reducing administrative overhead and potential delays associated with traditional payment methods.

“There’s a lot of messiness around payments, particularly very large B2B payments that might house hundreds or thousands of invoices with hundreds of associated line-item details,” Boost Payment Solutions founder and CEO Dean M. Leavitt told PYMNTS last month. “… Large enterprises on both the AP and AR side are looking for ways to automate those processes, digitize them and reduce their cost as well.”

In another study, PYMNTS Intelligence revealed that inefficient back-end processes in AP and AR departments have led to reduced cash flow visibility for 28% of companies surveyed. Manual review of payments has been cited by nearly half of companies that said they have encountered friction when making B2B payments — which indicates that automated and embedded solutions are poised to see increased embrace.

“We see from both buyers and suppliers across many different industries that the need to focus on working capital has been apparent,” Chad Wallace, executive vice president and global head of commercial solutions at Mastercard, told PYMNTS in January. “… [By using virtual cards] buyers are able to pay suppliers in a real-time fashion, so suppliers aren’t receiving late payments. And the buyers are also taking advantage of the credit line to manage their own working capital better. So, we see the benefits on both sides of the house.”

By unlocking the potential of virtual cards, businesses can drive greater efficiency, transparency and certainty across their financial operations — while at the same time trading in their reliance on traditional and clunky processes for better, more streamlined processes.

“The companies that aren’t embracing virtual cards or B2B payments innovations will be the ones that fall behind,” ConnexPay founder and CEO Bob Kaufman told PYMNTS in March. “The suppliers that are not as flexible and willing to embrace these new forms of payments are going to lose business, while the buyers who are not using them are losing revenue, which results in them not being as competitive in their space.”

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