We’re in a different business environment than we’ve seen in decades. And according to John Weinrich, head of U.S. sales at Boost Payment Solutions, there’s an opportunity for enterprises, regardless of size and vertical, to consider or reconsider card acceptance.
Inflation is top of mind and the cost of capital is high.
Suppliers, in particular, said Weinrich, grapple with the fact that they see pressures they’ve never faced before. At least in purchasing power, the value of a dollar has declined markedly, which means that waiting 60 or 90 days steadily erodes the value of the cash that hits that supplier’s account.
The high cost of capital, at more than 5% for many smaller firms, renders funding operations by virtue of lending unpalatable. Most businesses don’t have prime credit scores, which means they’d have trouble accessing the funding in the first place.
“For those reasons and for a host of others, I would strongly urge businesses to think about their commercial card acceptance policy,” he said.
He noted that virtual cards, in particular, are here to stay and are the fastest growing segment of the commercial card market, growing by more than 20% annually. The global value of virtual card transactions was about $1.9 trillion in 2021 and in just a few years might be more than half of commercial card spending, marked by the virtues of straight-through processing.
Against that backdrop, we’re a long way from card ubiquity, said Weinrich. Historically, there’s been a perspective that commercial cards only held value for the buyer through rewards, rebates or extending their days payable outstanding. Many businesses and suppliers avoided accepting commercial cards for the B2B receivables because the conventional wisdom has been that it’s cumbersome and costly to implement — and that compatibility of infrastructure remains a concern.
“Asking companies to try something new in the B2B space can be especially daunting in this environment,” said Weinrich. But he noted that platforms like Boost could make implementing AP and AR automation easier. More executives realize that automating AR is a strong way to increase a customer’s lifetime value.
Card acceptance, he said, can help both the buyer and supplier manage cash flow more efficiently in an inflationary environment, as they offer opportunities to monetize payments and avoid late payments, which in turn can cause a strain on business relationships.
Weinrich noted that fraud is lower with commercial cards and virtual cards — at just 3%, versus double-digit rates for other payment types. He added that processing automated clearinghouse (ACH) and checks can have its own concerns, including manual errors, particularly for smaller companies with overburdened staff.
The advantages accrue up and down supply chains, he said, as it becomes easier to reduce DSOs and track customers and transactions. Firms accepting cards can protect existing revenue from the competition and potentially increase sales from existing customers.
The urgency is there, as 56% of buyers demand several payment options.
“Delivering benefit back to their buyers is truly a win-win,” he said, adding that “the use and acceptance of commercial cards can increase the chances of retaining customers and winning new business.”