Account-to-Account Payments Challenge Virtual Cards in B2B Sector

There’s a reason why the well-worn phrase “Like money in the bank” is shorthand for security and peace of mind.

For B2B suppliers especially, money in the bank — in its most literal sense — is among the most critical components of security. Cash in the coffers is what helps make sure that operations can keep going, that the next payment to be made for inventory or staff can in fact be made.

PYMNTS Intelligence has noted that late payments are an ever-present headache for companies across all industries. In fact, a third of invoices take more than 90 days to be paid — which indicates that funds are flowing well beyond the stated terms of agreements between buyers and suppliers. Add in the fact that roughly 40% of B2B payments are made by paper check, and the strains are real when it comes to cash flow, because it takes days for those checks to settle.

The transformation of B2B payments is ongoing, and is center stage this month as PYMNTS explores the technologies, strategies and collaborations that are re-imagining what commercial payments could be, in terms of efficiencies and ecosystems.

Bank-to-Bank and Cross-Border Payments

It may be the case that, as part of those innovation efforts, direct bank-to-bank payments see a boost from B2B, as suppliers can rest easier that the goods or services they’ve provided will be paid for with surety and speed. That growth from the commercial realm would come as separate PYMNTS Intelligence data have shown that 36% of consumers use pay by bank, so some cross-pollination may speed growing use of more direct options. Consumers are, after all, businesspeople, and businesspeople are also consumers.

Announcements through the past several weeks have highlighted the appeal and the widening availability of the direct payment method.

Most recently, as reported last week, Bank of America launched Virtual Payables Direct, a B2B payment solution that among other features is offering buyers in the EMEA region a new enhancement that lets suppliers be paid through a direct bank transfer.

Visa has also been busy in the bank-to-bank payment space, opening up newer avenues of revenues and payments volumes that notched growth in B2B virtual cards but also expand beyond card-focused transactions.

As for those cards: The virtual options are seeing their use as a speedy method of funds transfers between card credentials, according to its most recent earnings report, and with detail on Visa Direct, overall transactions grew 41% for the quarter to 2.6 billion transactions and commercial volumes up 7% year over year in constant dollars.

The company’s filings with the Securities and Exchange Commission noted that nominal commercial payments volume in the U.S. was up 6% to $253 billion, and international commercial payments volumes surged by 9% year over year to $149 billion. Visa B2B Connect, which operates as the payment firm’s non-card-based payment network, and is available to over 100 countries on six continents that enables bank-to-bank cross-border business transactions, has had new partners in the past few months.

Over the summer, and in related Visa B2B Connect news, the Bahamas-based private and corporate bank Deltec Bank joined Visa B2B Connect. This partnership will enable faster cross-border payments for Deltec Bank’s corporate and institutional clients, the firms said in July.

In April, Standard Chartered partnered with Visa to facilitate cross-border B2B payments for the bank’s corporate clients as the bank joined Visa B2B Connect.

For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.