Visa and Mastercard Take Aim at Reducing Friction in Electronic B2B Payment Adoption
For years, one of the most pressing questions in the commercial payments market has been “when will companies stop using checks and begin to embrace electronic payments?” In short, the answer remains ‘not yet.’ Despite significant advancements made in electronic payment solutions, it is estimated that in 2016 companies in North America still used checks for nearly half of their B2B payments (see Figure 1). And while the answer to the question of when the tides will turn remains unclear, both Visa and Mastercard hope to accelerate that timeline with two recently announced initiatives.
Mastercard B2B Hub
On June 8, Mastercard announced that later this year it will be launching the Mastercard B2B Hub, a web-based electronic invoice processing and automated payables solution targeting small to medium sized business (“SMB”: $5M-$1B in annual sales) customers. The Hub, which will be offered through Mastercard-issuing banks, will provide SMB end-users with a variety of payment automation tools to help manage their cash flow and securely initiate electronic payments on received invoices from within their existing accounting software. AvidXchange, a provider of payment and invoice automation solutions, will provide the underlying technology for the solution through its existing infrastructure which can be plugged into 130 different types of accounting systems and will include full integration with Mastercard’s InControl virtual card product.
While partnerships between fintechs and traditional players in the B2B payments ecosystem are not rare, a few aspects of this arrangement are particularly noteworthy:
- SMB Focus: The Hub’s target client base, SMBs, represents a market segment which has historically been the slowest to adopt electronic B2B payments. On the heels of Visa’s recent virtual card partnership with Viewpost (also focused on SMBs), this may signal a more deliberate effort on behalf of networks and issuers to target the relatively untapped market of SMB B2B payments.
- Integrated Payables: The Hub will support an integrated payables solution, meaning it will provide a single platform for a variety of different payment types including ACH and cards. This is significant as it shows Mastercard’s willingness to invest in the efficiency of supply chain processes as a whole, even if it facilitates non-card spend. For Mastercard, the initial objective is likely to provide a platform to begin reducing check usage in the hopes that the adoption of electronic-based processes will open the door to incremental card spend down the line.
- Supplier Benefits: The AvidXchange platform will not only help buyers, but it will also give suppliers access to an online portal through which they can manage their invoices and receive rich payment data. Thus far, a major hindrance to the growth of electronic payments has been that the value proposition has failed to resonate with many B2B suppliers. A shift in focus from buyers to suppliers by Mastercard and other key players could play an important role in accelerating the adoption of electronic payment acceptance.
Visa Ready Program for Business Solutions
Just a week after the Mastercard B2B Hub was introduced, Visa announced the launch of the Visa Ready Program for Business Solutions, a strategic framework to help B2B fintechs quickly integrate with Visa products. The program will allow technology providers to become Visa Ready-approved by passing Visa’s vetting for compliance with the payment network’s commercial payments security standards and technical specifications. Visa has already announced that the initial group of Visa Ready technology providers includes Bottomline Technologies, CSI globalVCard, MineralTree, Bora Payment Systems, and Priority Commercial Payments (see Figure 2).
While the Visa Ready program will provide value in streamlining the implementation process between fintech providers and Visa-issuing banks, its greatest impact may be its ability to spark innovation in the B2B market. Visa Ready-approved partners will have access to a number of Visa commercial payment tools as well as the Visa Developer Platform. This will allow these companies to further explore Visa’s technology, which may not only improve the implementation of existing products, but also open up a variety of new use cases that can make electronic payments even more attractive to both buyers and suppliers.
Neither Visa’s nor Mastercard’s announcement will provide the silver bullet to make B2B check payments disappear, but they are certainly steps in the right direction. Perhaps most significantly, both initiatives suggest that the payment networks are beginning to look beyond the narrow scope of the payment process and focusing on the efficiency of the broader supply chain ecosystem for buyers, suppliers, and technology providers, which may be the true catalyst for electronic payment adoption.
For more information, please contact Patrick Gillece, Manager, email@example.com, specializing in Commercial Payments and Bankcard Issuing.
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