Rising Interest a Boost to Commercial Cards as Working Capital Source

Commercial transactions make the world go ‘round, and around the world, B2B transactions are evolving.

Treasury automation, virtual card adoption, and the financial advantages of commercial cards are reshaping the way businesses manage their working capital.

“One of the biggest topics still [in the B2B space] is the elevated interest rate environment,” Seth Goodman, chief revenue officer at Boost Payment Solutions, told PYMNTS.

Within this macro environment, firms are increasingly digitizing and modernizing their accounts payable (AP) and accounts receivable (AR) operations to optimize working capital, Goodman said.

This shift benefits both buyers and suppliers, and Goodman noted that commercial card usage in the B2B payment sector has become another rising topic of interest.

“Virtual card adoption is certainly a key tool in this tool belt … with today’s rates, commercial cards are actually more financially advantageous for buyers and suppliers than supply chain finance. We are seeing more and more customers beginning to mandate adoption of virtual cards as their default AP payment method,” he said.

Suppliers prefer receiving payments through cards as it helps shorten their days sales outstanding (DSO) and improves working capital.

And the emphasis on — and investment in — efficiency and automation isn’t just taking place in the U.S. It’s occurring across the entire global ecosystem of B2B payments.

As international trade continues to grow, the challenges of cross-border B2B payments are being addressed through innovative solutions.

Optimization of Global B2B Programs Through Digitization

“We are projecting significant expansion in both domestic and cross-border [B2B] card payments,” Goodman said.

This move is driven by a shared focus on working capital optimization for both buyers and suppliers and a preference for leveraging technology for financial efficiency.

Still, as global B2B trade gains momentum, Goodman highlighted that U.S.-based buyers are grappling with the complexities of paying suppliers overseas.

“Education is key,” he said. “There is a perception that card payments are not streamlined for cross-border B2B payments, but Boost is leveraging innovative approaches such as proprietary interchange rates, buyer-funded models, and card-to-account transfers that actively lower the cost of international B2B transactions.”

This allows suppliers to receive payments on their terms, streamlining the cross-border payment process.

As Goodman explained, “having local boots on the ground” is crucial to serving international markets due to the need to support local nuances, including language, time zones, and to provide market expertise that can’t be found outside of the geography.

Scaling Internationally by Leveraging Regional Dynamics

The need for education around the benefits of commercial card payments remains, and it should be tailored to the operational realities and entrenched behaviors of each market.

In the Asia, Middle East and Africa (AMEA) region, there is strong growth, but education on the value proposition of B2B cards remains crucial, Goodman said.

As for Europe, the region “is less of a credit focused region, and treasurers are less familiar with the working capital and rebate advantages of paying by card,” he noted.

Latin America is showing exciting activity, Goodman said, especially in countries like Brazil and Mexico. Local banks in the region are beginning to adopt B2B card payments and launch programs, marking a positive development.

But it is the Asia-Pacific (APAC) region that is showing the most adoption and innovation outside the U.S., he said, noting that paying cross-border is “particularly challenging” in Asia, making the streamlined method provided by cards particularly valuable for cross-border transactions in Asia.

As for what Goodman sees the future holding for B2B payments?

One notable shift, he said, is the prospect of a consistent cost of payment, irrespective of payee or location, streamlining global supply chains and financial processes for businesses.

The rise of hybrid payments, where transactions begin with a card payment and conclude with direct account transfers, is expected to offer both flexibility and efficiency, Goodman added.

He ended by noting that, as we look towards the future, the adoption of commercial cards, the development of hybrid payment methods and the focus on the middle market are expected to grow.