Commercial Cards Fuel The Next Wave Of Bank-FinTech Competition

Commercial card adoption is on the rise as more organizations not only want to digitize their payments but take advantage of growing value-added opportunities that other payment methods like ACH don’t offer.

From access to rewards programs to early payment discounts, commercial cards heighten their attractiveness to business users through integrated features and functionality. But as businesses’ demand for a robust card offering intensifies, the financial institutions (FIs) offering these card products face mounting pressure to roll out solutions that are more complex than ever before.

The ecosystem is creating yet another opportunity for banks to embrace FinTech collaboration, said Corserv Chief Business Officer David Luther. Speaking with PYMNTS, Luther explained how industry tie-ups and use of applications programming interfaces (APIs) support the kind of flexibility that financial service providers need when rolling out their own corporate card products.

And that flexibility will become increasingly important as the commercial card landscape evolves, he said.

Value-Added Demand

Banks’ business and enterprise clients will no longer be satisfied with a corporate card product that can merely facilitate electronic payments. Even rewards programs tied to that card may not be enough to meet the needs of corporates.

Instead, said Luther, firms seek commercial card offerings that are paired with a range of value-added services. That may include integrated spend controls, expense management automation, or support for organizations wishing to migrate their own suppliers toward card acceptance.

The challenge, however, is that launching a commercial card offering solo is a resource-intensive process for any bank. Adding sophisticated features on top of that can be unachievable for FIs that go it alone.

“Larger banks are looking to have their own credit card, but to do so, they typically have to hire credit card expertise and develop their own credit policies, and a whole lot of things that cost them time and money,” explained Luther.

FIs want to retain ownership of the card program, control underwriting and service their own clients. But when banks deploy direct issuer programs offered by card processors directly, much of that control is lost, Luther noted.

That was initially the strategy of Columbia Bank, he said, before the FI decided to collaborate with Corserv to roll out its own corporate card offerings. FinTech collaboration enables FIs to maintain oversight of credit decisions and customer services, without having to build out capabilities and hire staff within their own internal infrastructure to support the card program.

Rising Expectations

Collaborating with a FinTech partner isn’t only valuable to getting a commercial card program off the ground, either. Amid rising expectations among businesses for new features and functionality, FinTechs can offer the agility and flexibility that FIs are looking for when deploying solutions.

Some of that functionality is technology related. Tools like expense management portals, virtual card issuance capability, transaction data aggregation and self-service portals are key today, said Luther, making APIs a valuable technology for third parties and their financial service collaborators that need seamless integration and customization.

But there are other kinds of value-added services that corporates increasingly expect today that aren’t easily addressed through automated technologies. For instance, businesses that wish to use a corporate card in accounts payable (AP) — an accelerating trend, according to Luther — continue to face the hurdle of working with suppliers that don’t accept the payment method.

FinTechs can provide services that aid FIs’ corporate customers in understanding which suppliers already accept cards, and then can work with the vendors that don’t accept them to ready their back offices for card acceptance in the accounts receivable (AR) department.

“The bank doesn’t want to hire a bunch of staff to go do this,” Luther noted.

Supporting Evolution

The last several years of increasing FinTech innovation has made it abundantly clear for traditional FIs that legacy business services no longer cut it. The landscape has also raised awareness into the importance of remaining agile and continually evolving to match corporates’ shifting needs.

Corporate card adoption is only expected to increase, and along with it, so are expectations among business end users. Once again, Luther said, APIs are critical to not only aiding financial service providers in integrating key features and functionality, but to adjusting their offerings to keep pace with demand.

That’s especially true as more non-bank FinTechs are stepping into the commercial card arena, looking to innovate with unique corporate card offerings. These providers can similarly benefit from collaboration and an API-focused strategy, Luther said.

“We’re seeing more FinTechs enter the commercial card space, coming up with creative solutions,” he said. “Whether it’s cards being converted to term loans at retail terminals, or converting it into a term loan, FinTechs think they can capture a market segment that’s not being addressed today.”

Just as the financial services landscape witnessed in small business lending and, increasingly, small business banking, the emergence of FinTechs will drive renewed levels of competition that can yield more value-added corporate card products and services than ever before. Working with the right partner, said Luther, will be an important strategy to usher in this new, innovative age of the corporate card.