Virtual Cards Drive Consumerization Of B2B Payments
With employees seeking to use company cash in the same way they make purchases in their personal lives, T&E has experienced rapid consumerization of workflows compared to other areas of B2B payments, like accounts payable (AP).
But the B2B payments landscape is shifting dramatically as a result of accelerated digitization and the emergence of new technologies that can broaden that consumerization approach to other areas of corporate spend. As a result, the lines that once separated T&E from other B2B payment workflows are blurring, according to Conferma Pay CEO Simon Barker and Barclays President of Payments Marc Pettican.
In a discussion with Karen Webster, Barker and Pettican explored the rise of consumerization of B2B payments and how virtual cards are supporting this evolution without forcing finance chiefs to give up the control and security that is so vital to successful corporate payments.
A Corporate Spend Convergence
With T&E transactions looking so much like consumer payments, corporates often view T&E as the low-hanging fruit of optimization. Employees are used to adopting technologies like virtual cards and mobile wallets in their personal lives, so the transition to using these tools as professionals is relatively friction-free.
Today, as organizations accelerate their B2B payment modernization efforts, they’re looking to take some of the lessons they’ve learned through the consumerization of T&E payments into other B2B payment workflows.
“The differentiation between T&E and B2B payments has broken,” said Barker. “Organizations across the board are looking to digitize and build in some of the best practices that they’ve built up over the years in T&E into other areas of spend.”
Part of that strategy increasingly involves the migration of commercial cards, and especially virtual cards, within functions like AP. The same level of control and oversight that business managers are able to obtain when arming employees with virtual cards to spend company funds is a valuable asset in controlling procurement spend, too, while the data generated from these transactions can also strengthen efforts to automate reconciliation and analyze spend.
One factor behind T&E as an early adopter of virtual cards has been universal acceptance. Just like in consumer payments, card acceptance is ubiquitous across the merchants at which employees need to make payments. Other B2B payment workflows haven’t seen such an easy adoption journey, however, with card acceptance among suppliers one of the biggest barriers to modernization efforts.
Expanding The Virtual Card Value Prop
In recent years, it’s the buy-side organization that has carried the burden of driving card adoption in B2B payments, thanks to the fact that historically, the benefits of virtual card payments have typically landed with the payer.
In addition to enhanced spend control and visibility, the ability of virtual cards to integrate directly into AP, enterprise resource planning (ERP) and other key back-office systems has proven vital for corporates’ broader modernization initiatives. Opportunities for early payment discounts are also encouraging adoption of commercial card technology.
But the benefits of the virtual card can only be realized if a supplier is willing to accept that card — and the costs that come with it. As a result, the B2B payments ecosystem has ramped up efforts to elevate benefits for both buyers and suppliers, with straight-through processing a critical component of that effort.
“Very early on, I saw that straight-through processing was the thing that really starts to make B2B payments scale,” said Pettican. “You need to take the friction out. Once you’ve generated that virtual card, how do you get it into the merchant account?”
Straight-through processing, he continued, helps both AP and accounts receivable (AR) departments by streamlining acceptance and integration for the receiver, driving further automation, a reduction in paper, and a lower chance for bottlenecks and late payments.
As the enterprise continues its exploration of how to optimize B2B payment workflows, from T&E to AP, the value proposition of virtual cards continues to expand.
On one hand, the virtual card supports the consumerization of B2B payments by arming professionals with familiar, user-friendly technology. In today’s work-from-home environment, the ability for employees to make payments via integrated platforms online, or via smartphones in person, is imperative. On the other hand, the virtual card can also adapt to B2B payment needs that are more sophisticated than consumer payments, including spend control, integration and data analytics.
With more businesses prioritizing sustainability and a reduction in plastic, it’s possible that the physical card will fall by the wayside in the far-off future. Until then, businesses still face plenty of hurdles to optimizing B2B payments through virtual cards, not least of all the challenge of overcoming the inertia and resistance against change.
“At the end of the day, change is a risk,” acknowledged Barker.
According to Pettican, B2B payment solutions providers must understand that no single technology is one-size-fits-all, no matter how prolific the value proposition is. In order to drive true progress in B2B payment optimization, technologies are to recognize that every business is unique.
“It’s not cookie-cutter” he said. “Some companies are hell-bent on payments being digital. Some want a really good experience and don’t mind a bit of manual intervention. No two customers, even in the same vertical, are the same.”