WEX President: There’s an Urgent Need to Modernize Payment Systems for a Digital World

The business landscape hasn’t gotten the memo about moving entirely to digital payments.

Despite technological advancements and increasing calls for modernization, progress in the migration from paper-based payment systems to digital alternatives remains slow. There are still a lot of memos being passed around.

“It’s now an age-old question that we’ve been talking about for so long,” WEX President of Corporate Payments Eric Frankovic told PYMNTS’ Karen Webster.

“COVID was the most recent event that we all would have sworn would drive everybody to digitize their back office and get away from paper altogether,” he said. “And I think it did push us in that direction. But we came out the other side, and what we’re seeing is there are still a lot of companies that are just getting back to doing whatever it is that they do. And digitizing their back office is falling down the priority list.”

But while paper-based payment processes still represent a formidable iceberg of institutional inertia, companies are beginning to see the writing on the wall when it comes to embracing digital payments in earnest as the pressures of fraud, supply chain fragility and generational shifts continue to mount.

To Scale Digital Payments, Look No Further Than Virtual Cards

The reasons for the ongoing inertia across the payments landscape are complex, spanning priorities, infrastructure and entrenched cultural practices.

However, a renewed focus on fraud prevention is finally moving the needle.

“Fraud is now what we’re seeing that’s pushing more and more people to take this seriously and move it back up the priority list,” Frankovic said.

Against today’s operational backdrop, any conversation about payments innovation increasingly revolves around virtual cards, which can offer benefits like enhanced security, streamlined processes and improved working capital management.

“We’re seeing more companies that maybe have been a little resistant in the past now making outreach,” he said. “What’s going to drive adoption not only short term, but over the next five or 10 years, is going to be the sellers of these products — the banks and payment companies getting sharper, making it easier, integrating with their ERP systems, and consulting with them on the best treatment of suppliers.”

The fragility of supply chains has also contributed to a rising interest in digital payment solutions.

“The really progressive companies are getting in front of it,” Frankovic said. “… They have to cut costs, they have to control costs, they have to keep a healthy supply chain. And in order to do that, they have to start those conversations.”

From tokenized virtual cards to mobile wallets, companies are exploring various options to streamline processes. However, the conversation often pivots toward the dichotomy between big suppliers and the so-called “long tail” of smaller suppliers. For smaller suppliers, virtual cards are often the most straightforward solution.

“When you talk about big strategic suppliers as well as the long tail of small suppliers, for the long tail, it may be in everyone’s best interest just to accept a virtual card,” he said. “Maybe the transaction sizes aren’t as big, the volumes aren’t as big, and you don’t really need to rationalize anything other than getting paid as quickly as you can from the buyer.”

Digital Transformation’s Role in Future-Proofing Payments

As payments continue to evolve, Frankovic acknowledged that the adoption of new technologies will be gradual rather than revolutionary.

“I think it’s going to be a slow trickle,” he said. “It’s going to be hand-to-hand. It’s going to be a company at a time. It’s going to be payment companies like WEX differentiating themselves enough so there’s word of mouth. Company A says, ‘Hey, we’re using WEX, it’s working great. Here’s what they’re doing for us.’ And then the next company and the next company follow suit.”

However, while technology solutions are improving, they must contend with entrenched business processes that have been in place for decades.

Still, Frankovic highlighted the fact that younger generations entering the workforce have no familiarity with paper checks and expect instant, digital solutions.

“I had to explain to my 16-year-old daughter recently what a check was,” he recalled with a laugh. “When you’re trying to explain it, it sounds really insane. And she was like, ‘What do you mean, why would you do that? And where does it go?’”

“In a year from now, I think we’ll still be talking about this,” Frankovic said. “We will be talking about exactly this for five more years, and then we’ll start to see the precipitous decline of checks.”

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