To encourage businesses to make large payments to vendors electronically, Bank of America Corp. has introduced an automated payment service that links accounts payable systems to card-like accounts.
"This is the way clients want to see payments transformation happen," Steven P. Vaglio, a senior vice president and the director of global card solutions at Bank of America Global Treasury Services, said in an interview Wednesday.
The ePayables Solution, which the Charlotte company unveiled Tuesday, is aimed at large and midmarket businesses. Mr. Vaglio said Monster Worldwide Inc., the New York company that operates the Monster.com job board, is already using the service, and so are several other companies, which he would not name.
Many companies use purchasing cards for small-ticket purchases. ePayables takes that concept a step further by having companies use the same type of accounts to pay suppliers for large purchases.
Such payments are commonly made by check, and Mr. Vaglio acknowledged that ePayables would not completely replace checks, because "the trading partner at the other end has to be willing" to pay an interchange fee.
ePayables uses an automated payment platform based on technology that B of A acquired when it bought the Austin vendor Works Inc.'s assets in October.
Mr. Vaglio said B of A began pilot testing ePayables in April. He compared it to conventional purchasing card systems, which are typically used for low-value, high volume point of sale transactions, such as office supply purchases. Purchasing cards, which are often regarded as a substitute for petty cash, offer companies monthly reports on employee spending.
Though similar in concept, "ePayables is in a different space," he said. For example, companies authorize the payments in advance and send instructions to B of A for execution. And even though the payments are sent over the Visa and MasterCard networks - B of A issues both types of cards - ePayables does not use a plastic card.
The ePayables accounts, which Mr. Vaglio called "ghost accounts," have a zero credit limit until the customer authorizes a payment. B of A then notifies its processor, Total System Services Inc. to raise the credit limit to the authorized amount. B of A e-mails the information to the supplier, which can then initiate the transaction.
When B of A receives an acknowledgement that the payment has been accepted, it notifies TSYS to return the credit limit to zero.
Jennifer L. Petty, a B of A senior vice president a senior product manager, said this approach helps companies manage their credit risk. "The supplier cannot charge more than what you have authorized for them."
David C. Robertson, a partner at Treasury Strategies Inc., a Chicago consulting firm that serves banks, corporations, and other large organizations, said the B of A service sounds much like one that General Electric Co. introduced in December 2001.
The vPayment service, offered by GE Corporate Payment Services, also connects a corporation's accounts payable or procurement system to a credit card authorization system, Mr. Robertson said.
JPMorgan Chase & Co. of New York also offers a virtual-card payment service, as part of an online invoicing system, which enables buyers to initiate a transaction over the MasterCard network. W. Gregory Kerwick, the vice president of emerging payments in the J.P. Morgan Treasury Services unit, said that "what Bank of America is doing is a validation of what we've had for a couple of years."
Mr. Robertson said the marriage of corporate procurement and card networks "makes a lot of sense from the company standpoint."
He also said that the Works technology has "very robust capabilities" that might differentiate B of A's service from the others.
Lawrence Forman, the associate director of the national cash management practice at Ernst & Young in New York, said that ePayables could help shift more corporate payments, and larger ones, to the card networks.
"People have been looking for a way to get purchasing cards to move up into higher amounts, for obvious reasons. This is a way to do that," he said. "It sounds like an interesting tack."
But Mr. Forman said the B of A approach shifts the transaction's cost from the payer to the payee and replaces a check fee with a card one that could be higher.
"What's the win from the merchant side?" he asked. "I'm not certain what is the upside for the payee."
