B2B payments may finally see widescale innovation according to some market participants, with both Visa and Mastercard bolstering their business payments services this month.
“We’ve seen a huge amount of interest in innovation in general at this stage,” says Paul Raymond, director of strategic relationships, Conferma Pay. The fintech announced a partnership with Visa to provide virtual corporate card payments earlier in May.
According to Raymond, the challenges brought on by the pandemic are causing corporates to re-evaluate their payment processes.
“Why would we do this in the way that we’ve always done it simply because we’ve done it that way? Can we reduce costs? Can we make this more efficient? Can we make sure that what these issues hit again – if they do hit again – that we are managing processes better and we are not as affected as we were this time?” he says.
Business payments have been behind the development curve compared to retail payments. Corporate card payments feature greater complexities, with banks required to run authorisation processes and increased reporting that aren’t present with retail cards.
“B2B payments have been slow to take off for a number of reasons … The commercial card relationship within a corporate card payment process is different to that within a retail environment. Up until recently rebate is paid by most banks to large corporate customers on the spend that they put through on a corporate card. That means that they’re less profitable in terms of individual accounts, but they are significant in terms of the volume that they put through. So there’s a different commercial model there,” says Raymond.
The growing volume of B2B payments is significant; already accounting for the largest scale of cross-border payments by volume and revenue, they grew by four percent in 2019, according to McKinsey findings.
Following Visa and Conferma’s announcement, Mastercard launched a plan to “modernise” business payments through its Track Business Payment Service on May 12. The solution will automate the exchange of payment data between buyers and suppliers via platforms such as Velo Payments. According to Drew Weinstein, chief executive of Velo Payments, the current market highlights the importance of managing payments efficiently.
“Cost and flexibility are key in this new market. Businesses are looking for solutions that can keep up with the increased pace of change and the new forms of payment from wallet to card and account,” said Weinstein in an email, adding that legacy institutions are costly and clunky.
“We’re going to see a massive wave of change in the industry as a result of coronavirus.”
According to Raymond, the impact of coronavirus on corporate travel will have long-term implications for the B2B space.
“I think there could be more stringent corporate governance rules, forcing organisations to demonstrate that they are dispensing the duty of care when they are asking people to travel on their behalf, that they are giving them the tools that will allow them to protect themselves should they need to. And I think the virtual payment pieces is an obvious point in question there,” he says.