Broadly speaking, innovation in B2B payments over the past decade has been the result of a digital transformation designed to eliminate transactional friction. AP and AR departments sought to streamline how they made and accepted payments; how they could gain more visibility into their enterprise data; how they could more efficiently manage their cash; and how they could accomplish all the above cost effectively. As B2B payments continue their migration towards a fully electronic environment, these outcomes have become a reality. And it is good news for the bottom line too, as traditional methods such as cash, check and wire are expensive, inefficient to manage and are generally devoid of adequate reporting capabilities for higher velocity buyer-supplier relationships.
Looking ahead, as more and more companies and institutions look to digitize their payments experience, Boost’s primary focus will remain on developing and deploying products that meet the specific needs of today’s sophisticated commercial trading partners. These will include the establishment and enforcement of rules of engagement for commercial card acceptance, so that buyers and suppliers can treat the way in which payments are exchanged between them as merely an extension of their broader contractual relationship. Such rules may include “right-sizing” the cost of acceptance through the deployment of proprietary interchange rate constructs, enforcing payment timing rules, securing transactions by eliminating buyers’ and suppliers’ exposure to sensitive card data and completely automating the payment and reconciliation process via straight-through processing technologies.
Pricing. For commercial cards specifically, a trend that we’ll continue to see over the next several years is the extension of dynamic discounting capabilities to card-based transactions via technology platforms like Dynamic Boost, through which proprietary interchange rates can be deployed for the purposes of either reducing the cost of acceptance or simplifying the way in which card-based transactions are priced. Traditionally, there has been little transparency into how commercial card payments are priced, which has made it very difficult for suppliers, who typically bear the burden of such costs, to budget such expenses. This is already changing, as the traditional rigid and opaque pricing structures associated with cards are becoming more malleable, transparent and business friendly. Invented over 70 years ago and never envisioned for B2B transactions, the traditional “card rails” have now become the most flexible and efficient way for businesses and institutions to pay and get paid, which has resulted in more and more entities migrating their invoice-based payments from check, wire and ACH over to their commercial programs.
Enforcement of Rules of Engagement for Electronic Payments.
Promises are often made between buyers and suppliers relating to when payments will be made; however, even if they are memorialized in agreements, those promised are often not kept. Technologies have recently been developed that can enforce the agreed-upon rules, thereby ensuring the payment behaviors of trading partners are what they are supposed to be and dramatically reducing the angst often associated with commercial card use and acceptance.
Security. Fraud is a massive and ever-growing issue that can impact a business’ revenue as well as its reputation. Unfortunately, fraud threats exist both internally and externally and businesses that utilize card products are increasingly being identified as primary targets by fraudsters, so it is imperative that companies engaged in the use or acceptance of card products protect themselves from card-based breaches. Whereas traditional protection methodologies have focused entirely on the manner in which card data is received, processed, passed, protected, stored and even destroyed, Boost’s philosophy has always been (and will always be) to simply not allow the card data to get anywhere near the enterprise by deploying a 100% straight-through processed payment strategy, thereby eliminating the possibility of a card-based breach for card-accepting suppliers.
Reporting and Reconciliation. Payments among trading partners, especially large ones, can be very complicated. Single, multi-million-dollar payments can represent hundreds or even thousands of invoices, all of which need to be properly posted. Regardless of the payment method, this has been a significant and expensive pain point for enterprises since the beginning of modern-day commerce. Additionally, as ERP platforms become ubiquitous, the thirst for enhanced remittance data has become insatiable. While lockbox services have successfully fulfilled the need for reconciling checks, wires and ACH transactions, commercial card transactions – and especially e-mail-based virtual card transactions – have until recently been relegated to a parallel universe, where manual activities fraught with human error and latency represent the current state of the art. However, much has been done to address this issue and platforms now exist that can completely automate the reconciliation process for both buyers and suppliers. As we enter 2020, simplifying, automating and expediting the reconciliation processes for AP and AR departments will become a major priority for corporations, institutions and government agencies and FinTechs will continue to lead that effort.
By Dean M. Leavitt, Founder and CEO, Boost Payment Solutions