Andrew Stewart, director of global card and comprehensive payables at Bank of America, said there has been a seismic shift in commercial (B2B) payments.
He noted that there has been a doubling in B2B payments made via cards — not just in terms of volume, but also in the value (in dollar terms) tied to those transactions.
“When we think about buyer-supplier relationships, at the core they exist as payment relationships,” he said.
The shifts away from the paper checks — at least in part — are due to several tailwinds in place, said Stewart. There’s a labor shortage affecting many companies, and that means firms are tasked with turning to technology to help them scale operations because they may not be able to find the right hires to staff accounts payable and receivable departments. Technology can also help improve operating margins, said Stewart.
In the meantime, modernizing and digitizing B2B payment flows helps ensure that companies are managing their working capital effectively and bolstering their defenses against fraud (particularly fraud committed when paper checks are intercepted).
Asked by PYMNTS about the ways commercial cards are changing the dynamics between buyers and suppliers, Stewart said, “we’ve seen now more of an equilibrium as B2B payments have become a core part of the sourcing and procurement process” between the two sides of the B2B relationships. Where the traditional balance of power might have been tipped a bit toward the buyers — who dictated payment terms and methodologies — now there’s more of an intent to understand and agree upon payment terms at the very beginning of a transaction.
Among the key questions asked and answered: How are suppliers willing to be paid, and what types of payments are they most interested in? Faster payments may come with card acceptance, and Stewart noted that cards help guarantee that payments are tendered on the right date, with the right amount, and according to the terms agreed upon by buyers and suppliers.
“Everyone’s on the same page,” he said.
Faster payments are valued, especially in a rising interest rate environment, and many firms want to decrease the length of time, measured in days, it takes to get paid. Cards, he said, enable suppliers to go to their buyers and state that in exchange for getting paid on net 30- or 15-day terms — rather than 60-day terms — they’ll accept cards, perhaps even for a slight discount. The supplier gets faster access to their cash, and the buyer saves a bit of working capital.
“It’s a win-win for both sides,” Stewart said, for transactions involving commercial cards offered by financial institutions such as Bank of America.
The benefits of using cards also extend beyond the balance sheet impacts. Stewart added that commercial cards, and especially virtual cards, can help ensure that — with controls in place — decentralized spending remains efficient.
Looking ahead, in the bid to continue displacing the paper checks, he said there will be more education needed from financial institutions as they interact with their corporate clients and a continued standardization of the back-office processes. The network effect of moving to digital channels to get B2B payments done safely and efficiently will take shape over time, transforming even the most smokestack of verticals such as construction, manufacturing and real estate.
Over the longer term, he predicted, with increased education and technological advancements, “the check is absolutely going to go away.”
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