B2B

By Jeff Green for @pymnts
Virtual card use is gaining momentum in the B2B market, with their use growing particularly in travel, invoice and health care payments, where use of paper checks remains common. But not all companies favor network automatic opt-in rules tied to acceptance of virtual card products.

Through virtual card products, issuers provide to companies specific 16-digit card numbers they may use online or by phone to apply to specific transactions or payees, thus providing an extra layer of security compared with traditional card products. There is no actual plastic card issued.

Visa reportedly soon will launch a B2B tool to make it simpler for corporations to pay supplier invoices using virtual payment cards. The offering would complement a cloud-based payment initiative Visa launched last year using the SAP Financial Services Network.

Virtual card use for invoicing is especially important for the card brands, as nearly half of all corporate payments are still paid by check, according to Visa, which estimates global commercial consumption expenditures at US$112 trillion.

Firms may embed the Visa tool, which is scheduled to launch later this summer, into their general ledger software, reports FierceFinanceIT.com. In doing so, companies would make it simpler to choose Visa’s virtual credit card offerings when companies pick their payment method online.

“One of the big areas of opportunity for the B2B payments industry is moving upstream into the accounts-payable process, where corporations are making decisions on how to pay invoices,” Tad Fordyce, Visa head of global commercial solutions, told the publication. “Visa has virtual card products that address this opportunity, and one of the challenges we face, as checks are being displaced by electronic payments, is we want to make sure that Visa’s virtual card solutions are present and available for the corporates to use at that time of the payment decision.”

Visa said it expects a new solution in launched recently with SAP to help corporations who want to move toward electronic B2B payments and easily automate and process their invoice payments without the need for significant investment in custom software.

“As companies shift from labor-intensive, paper-based processes to more efficient electronic procurement systems, having the option to pay with Visa will help simplify the process and bring many benefits,” Fordyce said in a Visa/SAP announcement. “We anticipate that being able to make Visa payments via connection to the SAP Financial Services Network will help corporations streamline accounts payable processing, while avoiding the upfront and ongoing costs that would be associated with custom software for the payment process.”

Opt-out request

Virtual cards also have caught the attention of health care providers, which have mixed feeling about the products when used to settle claims.

Last month, a hospital representative told the Department of Health and Human Services’ National Committee on Vital Health Statistics Subcommittee on Standards that some health plans are automatically using virtual credit cards to pay claims, resulting in significant banking charges and administrative work for health care providers.

In his testimony, Doug Downey, speaking for Hospital Corporation of America (HCA), said the committee should discourage health plans from imposing a transaction fee for electronic payment or requiring hospitals to “opt out” of virtual card payments.

Health plans or their agents switch payments from check to virtual cards with no business discussion between the two parties, effectively automatically enrolling the provider in the program automatic opt-in. Health plans or their agents are also incorrectly leveraging the card-network rules, which apply to consumer-to-business payments, and applying these rules to B2B payments, Downey said.

“This is a misapplication of the rules,” he said. “HCA merchant credit card fees in 2013 increased by an estimated $3 million as a result of the un-negotiated use of [virtual credit card] payments by health plans and/or their clearinghouse/aggregator payment service agents.”

HCA is not opposed to virtual card use because it may be appropriate for some providers, but it is against network rules that automatically opt in providers to accept such payments, Downey said.

A long history

Virtual cards have been around for some time. One of the first companies to introduce them was Ireland-based Orbiscom, which MasterCard acquired in 2009. MasterCard also works with other virtual card companies, including Europe’s Conferma, which also does business with Visa Europe issuers, according to Business Travelers News.

Though initially marketed primarily as a way for consumers to improve the security of online payments, virtual cards more recently have gained the interest of B2B companies, including firms in the travel industry.

Last fall, MasterCard announced MasterCard Travel Controller, which provides companies with information necessary to allocate charges to appropriate cost centers and allows them to expand control over travel spend by setting customer virtual accounts for each transaction.

Virtual fleet cards

Fleet card specialist Wex is among the major issuers of B2B virtual cards, providing a MasterCard-branded product to its fleet customers.

Last year, the company added 700,000 new fleet cards globally, growing its virtual card volume by 20 percent, according to the company’s fourth quarter earnings release.

In April, Wex’s European unit signed an international deal with Conferma, bringing to that company a prepaid virtual product for the first
time. It enabled Conferma’s partners to optimize travel payments by selecting the payment method that is most appropriate for each transaction type.

Source: http://www.pymnts.com/in-depth/2014/why-some-businesses-dont-like-virtual-cards/#.U7wHBRb2pnE

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At the inaugural Wired Money conference Tom Blomfield, founder of online payments start-up GoCardless, declared a long overdue revolution in B2B payments that could leave 90% of accounts teams redundant.

Speaking at the conference in London on Monday, Tom told audiences that business-to-business payments are stuck in the dark ages, whilst payment providers have made consumer payments online instant, convenient and intuitive.

“In the 90s the biggest problem on eBay was transferring money to another person,”

says Blomfield.“PayPal innovated around that problem. The same revolution is needed in business-to-business payments.”

With a lack of innovation in online payment and billing, businesses are forced to rely on antiquated payment methods such as cheques. Audiences were shocked to hear that 80% of B2B payments in the US are still made by cheque. Accounts teams are left to contend with a laborious job of sending invoices, chasing late payments and manually reconciling bank accounts. The result is that UK businesses are suffocating under GBP30bn of late payments.

“At GoCardless we want to make business to business payments easy. We do so by making it simple for companies to take Direct Debit payments online, which puts them in control of when they are paid without the need for a merchant account or expensive credit card fees.”

He went on,

“By being resolutely data-driven, we’ve built a fully automated payment system. It has helped small to medium sized enterprises such as the Ask Driving Schools reduce their accounting time by 80%, and double in size in just a year. Using GoCardless with their accounting software means Ask don’t have to re-key invoices and receipts. With the right authorisations in place, we make computers do the hard work for us – and can render 90% of accounts teams redundant.”

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Source: http://www.paymenteye.com/2013/07/05/the_b2b_payments_revolution_will_eliminate_90_of_accounts_te/#.Udrb3z5AREA

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Alto Global Processing: “The B2B payments revolution will eliminate 90% of accounts teams” – GoCardless