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05:00 PM
Bob Sneed
Bob Sneed

Setting the Stage for Growth of Holistic Payment Programs

Banks can help corporate customers create holistic e-payment programs that gain management support and buy-in from accounts payable, procurement, and finance.

A recent study published by MasterCard, Kaiser, and Comdata illuminated some key differences in the perceptions of buyers and suppliers with regard to the acceptance of virtual card payments. While buyers believed they had minimal influence over the method of payment their suppliers would accept, the suppliers surveyed felt quite the opposite. When asked how much negotiating power they believed they had, 63% of buyers believed they had “a low degree of control.” In contrast, when asked how likely they were to accept a card program if it were mandated by an existing buyer, 82% of suppliers indicated they were “likely or very likely to accept.” Other highlights from the study show:

  • 75% of suppliers indicated that these solutions require equal or fewer resources to accept as other methods.
  • 36% were “satisfied” or “very satisfied” with customer demand to use these products.
  • 23% of those surveyed indicated that accepting payments of this type has led to additional B2B customers.
  • 79% of respondents indicated an increased level of customer satisfaction as a result of accepting cards.

The majority of large organizations surveyed indicated they valued their relationships with suppliers and did not want to upset or alienate these companies by mandating a method of payment. They preferred to ask if suppliers would accept cards, rather than mandate acceptance. However, the survey results clearly showed that it made little difference to suppliers when cards were positioned as the mandated method of purchasing or simply offered as a method of payment. The lack of alignment on perceptions seems to indicate that many corporations have underestimated the degree to which suppliers have already accepted and put processes in place to accept e-payments.

[How Single Use Virtual Cards Can Improve Digital Payments Security]

The value of holistic payment programs
As market needs emerge, the number of bank-neutral financial services providers for accounts payable (AP) disbursements has proliferated, creating more flexible options for companies of all sizes. These organizations can play a major role in helping their business customers create a holistic payment approach by providing a comprehensive set of payment methods, including ACH, credit or single-use cards, wire transfer, and virtual cards which may involve both push and pull payments.

A holistic strategy helps companies reduce costs, improve margins, and provide enhanced control of the corporate spend. In addition, taking this approach has the added benefit of positioning the buying organizations as good partners to their supplier bases. Financial services providers can offer the technology and resources to ensure effective delivery of funds and remittance advice for large, geographically dispersed companies. Larger organizations often have multiple enterprise resource planning (ERP) systems. The ability to push all of their payables files to a central hub for disbursement can be an attractive option.

From a strategic perspective, financial services providers can assist in designing and executing a holistic e-payment program that includes best practices in gaining management support and organizational buy-in from AP departments, procurement, and finance to ensure that all organizational stakeholders are engaged and involved. Assisting with branding the program in a way that is specific to the company can facilitate enterprise-wide acceptance by essentially simplifying the messaging around all the components of the plan.

Another important role is actively engaging on supplier enrollment and communications. A procurement department typically can only manage a certain segment of its supplier list and maintain a high level of communications and discount management. By taking a systematic approach to communications, financial services providers can identify opportunities across the entire spectrum of the supplier base to negotiate volume, payment, or other forms of discounts. Looking across the supplier list, they can also analyze what combination of payment methods would make the most sense for any given company. That might consist of travel, purchasing or fleet cards, or moving the company to an AP process that could leverage ACH, card, and wire check processing.

Enrolling vendors should be a continuous process as new companies are socialized into the buyer organization. They can be automatically guided to the payment method which will yield the greatest return and not allowed to set up a manual process. Consistent campaigning via direct mail or telephone to support onboarding represents a strong commitment by the financial institution to the overall strategy of vendor conversion to an automated payables solution set. Onboarding can also include helping firms that don’t currently have the ability to accept card payments by providing merchant-acquiring services.

Vendor readiness
As the study shows, vendors are more amenable to accepting card payments than purchasing organizations believe. Over the last few years, major corporations have expended significant resources on the customer-facing side of their businesses. Having largely accomplished the goal of streamlining expenses, they are now increasingly looking at cost-saving opportunities in back-office operations. Financial services providers can, and should, play a key role in helping companies design, implement, and provide ongoing support for a holistic, automated AP solution. The business benefits accrue to the financial institution as well as its customers and suppliers, creating a winning scenario for all parties. 

Bob Sneed is the senior vice president of corporate payment solutions for Comdata. He is responsible for business development and growth of corporate payment solutions into large markets. During Sneed's 20-year tenure with the organization, he has used his extensive ... View Full Bio

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