Programmable Money: How Virtual Cards Are Improving T&E Management

February 16th, 2023 Keith Axelsen Leave a comment

It’s hard to imagine companies funding employee travel and expenses (T&E) without plastic credit cards. They offer the ultimate flexibility for employees to get whatever they need when they’re away on company business. However, these cards are not always the best – or most lucrative – option.

The biggest challenge with physical cards is that companies don’t want every employee to have a corporate credit card. When you have plastic walking around, it can be lost, stolen, or used fraudulently. The majority of employees don’t make enough corporate purchases to warrant that risk.

In the back office, it’s an administrative nightmare to keep track of cards that aren’t actively being used. So, companies often need to limit the number of cardholders to people who utilize them regularly.

For employees that don’t have a corporate card, the traditional option has been to let them use their personal credit card. Then they submit a reimbursement form, attach all of their receipts to their paperwork, and present a justification for the expenses – resulting in a time-consuming, tedious process.

With this process, companies expect their employees to float the company money – sometimes for 30 days or longer if the reimbursement process is slow. That can cause cash flow problems for them. Some employees are okay with this because they’re getting all the points or rebates on company spending, but for the business, they’re both losing out on rebate revenue potential while causing undue stress on employees.

The solution? Virtual cards. Programmable virtual credit cards offer companies a more customizable solution for when they want more control over T&E spending. They also address the challenges that plastic cards present for both companies and employees.

Virtual card Application Programming Interfaces (APIs) open the door to a better solution for everyone. You can connect to a virtual card issuing platform that lets you manage your virtual cards quickly and easily. You can then allow these cards to be used for limited spending by a specific person, even for a defined purpose and frequency, all within a specific time frame.

For example, let’s say you’re sending someone out on the road for a week and their hotel has already been paid for by the company. You don’t need to give them a card with a $4,000 credit line for that. You can simply issue a virtual card and set the controls so that they can spend up to $150 each day.

You can also set controls so that the card can only be used for purchases within certain Merchant Category Codes (MCCs). These MCCs can include restaurants, limo services, taxis, and even big box stores like Walmart or Target. You can even narrow the purchases down to specific items, like a toothbrush or aspirin. Essentially, if you don’t set the purchase as an MCC, it’s restricted.

You set the controls, and when the card is presented, you can perform real-time authorizations using all of the data from the authorization message. These cards are secure by their very nature, which allows your business to know about any potential fraud within seconds.

All of this is done instantaneously through APIs and webhooks. It’s all application to application. No people are involved.

You can also use User-Defined Fields to attach metadata that’s meaningful to your business. The metadata flows through your systems throughout the lifecycle of the card, and comes in handy when reconciling and categorizing payments.

You can even customize your card art, and supply the virtual card directly to the recipient’s digital wallet for frictionless point-of-sale acceptance.

This is what we call “Virtual Card as a Service.” It’s taking existing virtual card technology and automating it so that corporate travel administrators can create, manage, and supply these cards as needed. They could be for employees who don’t need to be carrying around a company card, and even for contract workers or temporary employees.

Nobody has to float the company money. Nobody has to contend with a manual expense reimbursement process, and the company gets the rebates.

Plastic T&E cards aren’t going away anytime soon. Whether they’re issued by the company, or people use their own cards and get reimbursed, they’re still considered a convenient way to pay for non-invoiced spending. But there are a lot of different ways that people spend a business’s money, and some ways benefit the business more than others.

The ability to program virtual cards with embedded controls gives companies more control – and more benefits – than ever before.The cardholder can pay at the point of sale with the same ease as plastic, and they don’t have to hassle with reimbursements. The company’s spending controls are enforced automatically, and they don’t have to take on the risk of having plastic cards outstanding. The customization is unmatched and ultimately safer for the businesses, making virtual cards the better way to manage T&E purchases.

Archives, Banking, Global Trade Daily

6 B2B payment trends in 2022

March 8th, 2022 Rick Fletcher Leave a comment

CFOs face a daunting list of challenges in 2022: Managing cash flow and controlling overhead. Getting access to capital. Protecting the organization against fraud. Supply chain chaos. The Great Resignation and the talent shortage. Digital transformation.

How a business makes its payments touches on all of them.

The new imperatives of work from home drove more change in the long overlooked area of B2B payments than we’ve seen in decades. But there’s more room for improvement. This is a huge market–$22 trillion domestically–where banks still have 90% market share. The bank to fintech share shift movie we’ve seen in consumer payments over the past decade is really just beginning to play out in B2B. Here are some of the things I think we’ll see unfold in the year ahead:

Check use declines

Just a few years ago, over 50% of US B2B payments were made by check. Now we’re closer to 40%. That’s still a lot of checks, but the percentage will keep dropping. In Europe and LATAM, they don’t use checks, period. They have to transmit data to the government to report and remit VAT. They have to be able to transmit data across borders and banking systems. Imagine trying to do all that using paper.

Checks have persisted in US businesses because they are the only payment method that enjoys near universal acceptance. But as the whole world becomes more digital, maintaining manual check processes will become an increasingly unacceptable burden.

Greater focus on efficient processes

According to the 2022 AFP Payments Cost Benchmark Survey, efficiency–rather than cost savings–is now the top reason for moving to electronic payments. But just shifting to electronic payment types doesn’t create efficiency.

What does payment process efficiency look like? Technology that gives you a single workflow for any type of payment; centralization of digitized information in the cloud; support services such as error resolution, and outsourced vendor enrollment and data management.

Fintechs gain market share

There are a lot of companies in the check elimination business, but not all approaches are equally effective. Banks mainly offer check replacements such as cards or ACH. They’re not offering the combination of technology and services that companies need to become fully digital.

For example, enrolling vendors for electronic payments, and managing and securing their data has historically been a big obstacle to digitization. It can be cost prohibitive to do in-house. Fintech providers use both technology and services to offer a complete solution.

Cards see wider adoption

The percentage of card payments will rise because credit cards simply offer too many benefits to ignore.

On the customer side, you get an electronic process that reduces costs and makes expense tracking and reconciliation easier. Cards free up working capital, and generate rebates. They fight fraud–it’s easier to cancel payment, and to control spend through limits and category blocks.

On the vendor side, payments are received and cleared faster, and they don’t bounce, all of which means improved cash flow. You get better remittance data than you do with an ACH or even with a check. Perhaps more subtly, it enhances the image of your business when you’re big enough to accept credit cards.

Fighting fraud at scale

Criminals always follow the money. When money moved by stagecoach, they robbed stagecoaches. When it moved by train, we had train robbers. As money moves digitally and more people become computer literate, hackers are the new robbers.

Unfortunately today’s robbers enjoy all the same advantages of scale that legitimate businesses do. As it gets harder and harder for individual companies to keep up with fraud at scale, they’ll turn to payment service providers that take on the risk for them.

Blockchain yes, crypto not yet

Cryptocurrencies and NFTs made headlines in 2021. But, it’s still too early to fully understand how cryptocurrencies and blockchain/distributed ledgers will impact business payments.

Blockchain has made banks a tad bit uncomfortable with promises of being able to offer close to real-time transactions while reducing operational costs. In fact, FLEETCOR already partners with RippleNet in our global payments business. Their distributed ledger technology lets our clients pay their beneficiaries in hours instead of the days it would take using the SWIFT settlement network. For customers that are on RippleNet, all the KYC (Know Your Customer) and AML (Anti Money Laundering) information is vetted and there are bank accounts–not crypto accounts–on either side.

Cryptocurrencies still don’t have those required regulatory frameworks in place. Their untraceable nature, volatility, and lack of widespread acceptance are big challenges that must be overcome before we see mainstream business adoption.

In a nutshell

The digitization of B2B payments is happening. It will take a lot longer than it has with consumer payments, because change happens slower and the market is so big. There’s also more complexity. It’s not enough just to move the money electronically. You have to make all the surrounding processes electronic too.

In 2022, we’ll continue to see companies replace checks with electronic payments. But we’ll also see a growing realization that this isn’t true digital transformation.

Even if you’re making 100% of your payments via ACH and credit card, you still have people doing manual work that could be done much more efficiently through a full service payments provider. That reduces your costs, frees up people and capital, generates rebates, and makes your vendors happier because it’s more efficient for them too.

Rick Fletcher, Group President of Corpay Payables, entered the world of payables through leadership roles at Deloitte Consulting, GE Capital, and Comdata. His passion lies in helping customers operate better through making better decisions and gaining payment efficiency. Rick holds a degree in management from Northwestern University.

Archives, Banking, Global Trade Daily

9 Ways to Improve your Cash Management Systems

November 27th, 2021 Mark Penserini Leave a comment

Cash management is always important, but it’s certainly gotten a lot more attention in the past 18 months. The COVID-19 Pandemic spurred me to realize that the enterprise cash management process has a lot of room for improvement.

Amidst all the uncertainty, companies have to keep a very close eye on cash. At the same time, remote work can make cash management harder. It’s hard to keep track of all the paper the payment process traditionally requires when everyone is working virtually.

When virtual work became imperative, there was a cash management scramble. Suddenly, all eyes were on the amount of time and manual effort cash management required. AP professionals were shuffling back and forth from the office to pick up paper invoices and check stock. AR professionals were trying to figure out how to get to the post office or lock box and get checks deposited to the bank. Invoices and checks could be sitting for many days before they could be processed. It was hard to know what was going to happen and when. The lack of consistency, visibility and control were in plain view.

This pain and urgency caused some people to take action. Cash and paper check payments declined 16% year-over-year in 2020, slipping to 45% of B2B payments. Automated Clearing House (ACH) payments rose above $10 trillion for the first time in history.

We saw a lot of companies fast-track payment automation in response to the COVID-19 Pandemic. Nvoicepay has been in business for 12 years, and a third of our customers signed up for payment automation since the start of the COVID-19 Pandemic. We also saw a 26% leap in vendors in our supplier network hopping off the check-only wagon and reaching out to enroll to get paid by virtual card or ACH.

45% is still a lot of check payments, though. Companies are still sending out thousands and thousands of checks every day. Too much time and effort, and too little visibility and control is still the story wherever check payments are being made. Organizations have simply learned to live with the pain.

Why does anyone tolerate such a painful status quo? Either they don’t know there’s a better way, or they’re so absorbed in managing day-to-day efforts that they can’t imagine a different future or feel it may be too costly to change from the way things have always been done.

There is a better way,

When you stop to consider the full impact of payment automation on cash management, it becomes obvious how much better the future could be:

Reduced process costs. By reducing the cost of making payments you’ll improve cash flow right away. Paper costs go away. All that printing, signing, stuffing, stamping and mailing is replaced by just a few clicks. All payments can be made in a single workflow, instead of the three or four you’re probably running.

Card rebates. When you let go of paper checks, you’ll be able to pay more vendors by virtual card. Virtual card payments can generate rebates, which certainly helps with cash flow.

Less time fixing errors. Payment errors are expensive time-wasters. Even though it only takes about 10 or 15 minutes to fix an error, it adds up. It leads to interruption–you have to stop whatever else you’re doing and fix errors repeatedly.

Fewer hiccups. It takes time to void and reissue checks and get the right amount of money to the right place which complicates cash management. When you automate your payments, you don’t have to go hunting for old checks or piles of invoices.

Less opportunity for fraud. Checks still carry the highest fraud risk of any payment methods. Your bank account and your routing number are right there–no phishing or hacking required. The last thing you need when cash is tight is to have money stolen.

Reduced ACH fraud costs. ACH fraud is rising, mainly through business email compromise schemes (BECs). Effectively managing and safeguarding vendor data might require a lot of IT and staff time. Most companies don’t have the resources to do it effectively. Payment automation companies often are able to do that work for you.

Less time handling inquiries. Payment automation companies can handle vendor and customer questions, further freeing up staff time.

Greater visibility. Cash management is so much more efficient when you can see the status of all your payments in real time. With the right payment partner, you should gain access to detailed reporting and insights on your cash flow.

More flexibility. When you can pay everything electronically, and all it takes is a few clicks, you can time your payments with precision. This precision allows you to let go of trying to manage float.

Though the COVID-19 pandemic put a spotlight on painful, inefficient cash management issues, the reality is that the enterprise cash management process has been struggling for a long time.

Efficiency, visibility and control are the most important facets of cash management. If you’re doing paper processing, you might be missing something important on one of those three fronts. When you take advantage of digital payment methods, automate processes and manage your staff’s time better, cash flow management becomes significantly easier.

__________________________________________________________________

Mark Penserini is the Vice President, Partner Management at Nvoicepay, a FLEETCOR company. He has over 25 years of operational and technical experience specializing in project of management across Healthcare, Finance, and IT operations.

Archives, Banking, Global Trade Daily, Special Reports

Why Credit Cards Could Be the Next Big Opportunity in B2B Payments

June 22nd, 2021 Rick Fletcher Leave a comment

With the advent of widespread remote work, businesses have made impressive leaps in eliminating checks and adopting electronic supplier payments. These changes primarily translated to increasing the number of ACH or Direct Deposit payments made. According to Nacha—the governing body for the ACH network—business-to-business payments for supply chains, supplier payments, bills, and other transfers increased by almost 11% in 2020. But as organizations adopt electronic payment processes, there’s another strategic opportunity for AP to consider: electronic credit card.

Most companies’ payments flow through AP, yet few AP departments today are making significant use of credit cards to their fullest potential. Historically, companies use credit cards as a decentralized way to manage expenses. In order to do their jobs, employees need to spend efficiently, without going through a bureaucratic process. Traditional commercial programs have been focused on companies giving their employees purchasing cards (p-cards) or travel and entertainment cards (T&E cards) which they could use for supplies, meals, or departmental expenses such as software subscriptions, and marketing expenses—items that would be classified as indirect spending. However, while the benefits of these programs are clear, even in a depressed travel environment, it falls short of the full potential of complete credit card utilization.

Old vs. New

Companies can establish guardrails for spending on these cards. They can add controls to limit employee spending or only allow them to spend in certain places. There are also mechanisms in place to do post-transaction reviews and allow for remediation for inappropriate spending. Due to the combination of convenience and control, finance departments often think about cards as tools for employee productivity, with customizable spending controls.

This only touches on one aspect of company spending, however. Companies spend far more of their budget through traditional purchase orders and invoices for direct expenses like materials, components, freight, and labor. The idea that AP could utilize a card for direct expenses has still not been widely accepted.

Cards provide easy access to working capital and offer rewards like cash back or points. Many companies appreciate that cards are a better electronic payment option due to these benefits. The question then becomes: how do you build a successful card program in accounts payable? Generally, businesses have to make card processes work within their pre-existing AP infrastructure, which usually includes a supplier interaction component and a technical component that traditional players (banking institutions) in this space are not fully equipped to handle.

For example, banks primarily look at credit cards as another form of lending. They offer credit lines, which their customers spend against and pay back. Paying supplier by card usually enables businesses to reach their top 10 or 20 suppliers. That’s usually considered a successful lending program, but to interact with more suppliers, integrate with an ERP, or offer enhanced reconciliation data, banks don’t usually have the technical resources, because it’s beyond their traditional lending model.

Incorporating the New

Bank business models usually focus on building and maintaining a vast merchant acceptance network. You can walk into tens of millions of locations worldwide and if they have the Mastercard or Visa logo, you can use your credit card there, no questions asked. But when it comes to payments for suppliers, the acceptance network is inconsistent. Some suppliers don’t accept payment by card, or only accept them from certain customers depending on speed of payment, the margins, and the type of product that they’re selling. Due to these factors, paying by bank-issued card requires the vendor engagement process to include finding suppliers that already accept specific card types, ensure they accept that payment type from other customers, and locate new card-accepting suppliers.

That’s where fintechs really shine, because their business models are built to incorporate a supplier engagement process aimed at getting more spend on cards. Where banks generally looking for the top 10 to 20 suppliers, which might account for 70 percent of your total spend, fintechs go after the tail—that 30 percent of spend that probably accounts for more than 60 percent of your suppliers and takes more work to get on board. Essentially, they build out a B2B acceptance network inside the credit card acceptance network.

Scaling the Mountain Towards Change

Operationalized re-engagement models are a particularly important component of this business model because most companies churn 10 to 20 percent of their suppliers each year. Within two years, business’ supplier pools are different by 20 percent from when they began, so they must reach out constantly to maintain certain payment acceptances. While banks don’t always have the capacity to offer supplier acceptance maintenance, fintechs thrive when they include those services in their business model.

There are multiple benefits of capturing tail spend on cards. For example, doing so opens the door to paying more suppliers electronically, earning businesses more working capital and a higher potential for rebates. Virtual cards come with security and controls that plastic cards do not usually possess, including single-use numbers that are tied to unique suppliers and payment amounts. Tag on reconciliation data options, and the system becomes something that benefits accounts receivable as much as accounts payable. This opens more suppliers up to the idea of accepting electronic forms of payment.

Fintechs—technology-focused by nature—build their systems with a holistic viewpoint in mind, preferring to create software that doesn’t sacrifice one business’ operations for another’s. By enhancing the system end-to-end, previously reluctant accounts receivable teams, who felt strong-armed into giving up outdated payment processes, often become more willing and interested to learn about electronic alternatives.

_____________________________________________________________________

Rick Fletcher is the Comdata President of Corporate Payments, where he specializes in sales, marketing and product strategy, operations, and customer service.

Archives, Banking, Global Trade Daily

It’s Time to Revisit the Benefits of Virtual Card

August 6th, 2020 Kristin Cardinali Leave a comment

In the wake of the many changes this year has brought, companies are moving toward making more of their supplier payments electronically. It’s a welcome thing. Check payments have dwindled in consumer life, but across US industries, nearly half of all supplier payments are still made by check. As accounts payable departments went into work from home mode, it became difficult to cut checks. They rushed to set suppliers up for ACH payments, skipping over what might be a better opportunity: paying them by virtual card.

Not every supplier accepts virtual cards, however. Before you set your suppliers up for ACH, you should at least ask about cards—there are compelling benefits for both buyers and suppliers with that option. For suppliers, getting paid by card is the fastest way to get their money in the bank. On the buyer’s side, virtual cards are the most secure payment method, and they can also generate rebates. To get the promised rebates, you need to find the right card program for your business and have a solid plan for continually enabling suppliers. For most companies, it makes sense to consider virtual cards in the broader context of automating the entire payment process.

To be clear, I’m not talking about p-cards. P-cards are a physical card that AP uses to pay suppliers over the phone. Virtual cards are 16-digit “card” numbers issued to a named supplier for a specified amount. These “v-cards” can’t be processed by anyone other than the supplier, or for anything larger than the authorized amount. And, if somehow a fraudulent transaction should occur, virtual card issuers offer the same protections as they do with plastic cards. When it comes to check and ACH payments, money that falls into fraudulent hands can be challenging to get back. Card processes are more traceable and are, therefore, easier to reverse.

There are Challenges of Maintaining In-House Processes

It’s possible for your team to own their own card payment processes instead of handing the reins over to a payment automation partner. But the work required often dissuades companies from doing so.

One of the main reasons checks have persisted as the top payment type in the business world is the minimal setup required. This makes checks an attractive payment method on paper, especially for companies who do business with thousands of suppliers. But the actual process is more labor-intensive because each check must be approved, printed, signed, and mailed—a process that can take days for some companies.

On the reverse side, card payments require an enablement component. Someone must reach out to each supplier to confirm their payment preference. The up-front work often prevents decision-makers from pulling the trigger on implementing such a system. Ironically, many companies turn to ACH or wire as an alternate solution, but these are even costlier and more time-consuming. For these payment types, companies must collect supplier bank account information. Then they must validate store them securely, and maintain tight, protective controls on them.

For smaller companies that are more focused on generating an additional revenue stream, a standalone virtual card program can be a decent option. The caveat is that without a strong enablement effort, any projected rebate may have to be invested back into your process to maintain it.

Standalone Programs Aren’t Permanent Solutions

An independent program works well when companies are highly integrated between their ERP system and their bank. In these scenarios, the company usually has most of their suppliers set up to receive ACH payments, simplifying the reconciliation process. However, adding more payment automation over the top of existing automation would be redundant, closing the door on additional revenue that might be generated from a card program down the road.

Larger companies should look at comprehensive payment automation solutions with virtual card embedded into them, even if you don’t plan to use them right away.

How Does Payment Automation Resolve These Problems?

Automated solutions wrap all payment types into a single workflow, making it easy to offer several options to suppliers without adding to AP’s daily workload. Because suppliers are continuously enabled for electronic payments via a supplier network, most companies can immediately pay a significant percentage of their suppliers electronically with no effort. Paying by check also becomes as simple as submitting a pay file and approving it. This simplified process cuts out a significant portion of AP’s manual tasks, leaving them more time to focus on higher-level initiatives.

By automating the whole payment process, including enablement, reconciliation, and error resolution, AP teams usually see cost reductions of up to 70 percent. When you add revenue from card payments into the equation, AP can become a profit center.

Card payments still only account for about five percent of B2B payments. There’s a significant opportunity that companies have been missing out on, either because they haven’t researched virtual cards, don’t want to do the supplier outreach, or haven’t found a partner that can help them make it work. Due to processing fees, not every supplier will accept card payments. Still, a surprising number—around 20 percent of suppliers, in my experience—will say yes if they’re asked.

Now that cash flow is king, companies are shifting to accommodate more ACH enablement outreach. While you’re reaching out to your suppliers, it may be worth your time simply asking if they would accept card payments. Wrapping these initiatives into a payment automation solution may enable your AP department to run lean in the cloud indefinitely.

_______________________________________________________________

Kristin is Vice President of Regional Sales at Nvoicepay, a FLEETCOR company. Her experience in sales and sales leadership spans 16 years, and includes positions held with companies like Capital One and Billtrust. With Nvoicepay, she delivers scalable payment solutions to mid-market and enterprise companies. Kristin has received several accolades, including Sales Rep of the Year & Quarter, and multiple President’s Awards.

Programmable Money: How Virtual Cards Are Improving T&E Management

There is a better way,

most viewed today