The Commercial Card Embraces A Season Of (Major) Change

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The year 2020 began inconspicuously — but in a few short weeks, everything changed. For businesses, the world market was thrown into volatility, yet soon, new opportunities emerged.

In B2B payments, the commercial card has experienced a dramatic spike in adoption this year as organizations accelerated their digital transformations and, unable to physically enter the office, began to rely on electronic payments to conduct their business.

For the corporate card, 2020 has been a season for dramatic shifts in how the payment tool is used and the value it adds to the enterprise. This Labor Day, PYMNTS travels back through some of these pivots since the beginning of the year.

Winter Blues

At the commencement of 2020, the commercial card was continuing to find its footing in a world of B2B payments in which supplier acceptance remained limited. The biggest hurdle in this regard, of course, is the interchange fee, which can place a significant financial burden on smaller suppliers in particular.

But those fees aren’t the only headache for both buyers and vendors.

Indeed, the U.S. Federal Trade Commission even took up this issue when filing a complaint against commercial payments conglomerate FLEETCOR in December, alleging the company charged “at least hundreds of millions of dollars in unexpected fees” for use of its fleet card and other commercial card products.

In March, American Express — the largest commercial card issuer — was next in line to face criticism for its commercial card fees, with accusations that sales associates misled small businesses with regards to rewards and fees on the company’s SMB card products. The Wall Street Journal alleged that the company was “strong-arming” small business owners to adopt the payment tool, a claim that Amex denied.

Amid these controversies, smaller commercial card FinTech startups like Brex continued to add new competition into the market.

Spring’s SMB Support

As the pandemic spread across Europe, and eventually the U.S., Spring began in dramatic fashion.

With a sense of intense urgency, the corporate card arena began to explore how to support some of the companies that were struggling the most as a result of an economic shutdown: small businesses.

In late-March, Bloomberg reported that large U.S. banks began to limit small businesses’ ability to draw down on their revolving credit lines in an effort to brace for and mitigate inevitable market volatility. As a result, SMBs struggled to access the capital they needed to survive what was, for many, a complete ceasure of revenue.

At the same time, many commercial card companies began to introduce new features to support small businesses in their search for necessary capital — as well as other tools to ease the pains of business closures.

Many traditional FIs began to lower or eliminate card fees for both consumers and small businesses, while Brex introduced new rewards geared towards employees spending while working from home. Similarly, Comdata, a FLEETCOR company, introduced Comdata QuickPay, an invoice financing solution for users of Comdata fleet cards, which also facilitated the receipt of funds same-day.

Mastercard in May launched its Track Business Payment Service, again with a focus on working capital optimization for both buyers and suppliers and added value through enhanced remittance data collection and automation.

Summer Trips: Canceled

As the year pushed forward, government initiatives to support small businesses eased the cash flow burden on these firms. Yet another major challenge remained: business travel, historically the biggest use-case for corporate card products, had almost entirely vanished — and remains muted to this day.

As a result, corporate card innovators began to explore how to introduce new use-cases for the payment tool and add value for business users large and small.

Nium, formerly known as InstaReM, continued to focus on supporting small business working capital needs through its solution BizPay, announced in June, which converts credit limits into working capital. It’s a solution with a focus on driving commercial card use in the accounts payable department, once again moving vendor acceptance to the top of the industry’s priority list.

Industry heavyweights, facing renewed competition from smaller FinTechs, began once again to drive adoption of the commercial card in new ways through a focus on vendor acceptance and value added services.

American Express rolled out its American Express One AP tool, a platform to streamline AP workflows with support for ACH, checks, and — of course — virtual and physical commercial card payments. Visa, another industry heavyweight, struck up a partnership with Accrualify in July to allow the FinTech to launch its own Corporate Card Module with value-added offerings like real-time spend tracking, pre-approval capabilities, fraud control and more.

That same month, J.P. Morgan Chase linked up with Marqeta to issue virtual commercial cards compatible with mobile wallets like Apple Pay, while Mastercard broadened its collaboration with Tide in the U.K. to allow the challenger bank to become a commercial card issuer.

And at the broad level, many of these solutions aimed to accelerate digitization of enterprise payments as a whole, through use of physical cards and virtual payments.

Payroll cards, for example, saw a significant jump in adoption, according to ADP data released in July, with paper paychecks no longer a viable option; B2B Payments, meanwhile, reflected a gradual return of the focus on employee spend with its its prepaid card solution.

Autumn: What’s Ahead

What the coronavirus crisis brought to light was just how dramatically everything can change in a matter of days.

For the commercial card market, the industry is not where it was back in January — and for many, that’s a good thing. According to a recent Mastercard report, the pandemic drove commercial card adoption up more than any other digital B2B payment method.

“The pandemic has made it painfully clear how labor-intensive current business payment processes are, especially for small and medium-sized businesses,” said Ron Shultz, executive vice president of new payments business, North America at Mastercard. “With cash flow more critical than ever, we’re seeing an accelerated shift to digital B2B payments as businesses of all sizes look to safeguard their operations today and prepare for the future.”

It’s a shift that will almost certainly continue into the autumn and winter months towards the closure of 2020. And with new use cases identified, and new ways to add value introduced, the commercial card will continue to find opportunities for businesses of all kinds to embrace digital payments and optimize their spend.

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