The pressure on U.S. companies to rein in corporate spending, including reducing expenses such as travel or office supplies, is creating an opportunity for a handful of large banks. They've discovered they can sell electronic payments as a way to improve controls over corporate spending while removing paper from transactions.
Comerica, for example, is positioning digital payments cards and Web/mobile access as a way to improve negotiating power with suppliers, bring more visibility into cash positions and process payments faster.
"People are used to using a commercial card for travel and entertainment or for fuel, but they haven't thought about paying health care benefits or office supply vendors," says Bridgit Chayt, national director of treasury management services at Comerica.
The bank is giving its clients the ability to sell their suppliers on the benefits of digital payments. It's a business strategy as much as it is a technology strategy, with Comerica pitching the control and cost savings provided by digital payments. The bank is even providing training and support that helps companies explain to vendors why online payments are good for them.
Nancy Atkinson, a senior analyst at Aite Group, says that electronic corporate payments have been slow to mature, and many small and midmarket companies don't have the information technology resources to support electronic payments. But there is a visibility benefit provided by electronic payments, especially for big companies with complex supply chains.
"For the larger and upper middle market, there's a lot of advantage in having some form of electronic payments. It's easier to keep track of payments coming in, who's making the payment and how much they are paying compared to the full invoice amount, or if they are paying at a discount," Atkinson says.
FEW BLANK CHECKS
Large banks and consortia such as Syncada, an electronic corporate payments processing consortium founded by U.S. Bank and Visa, and MasterCard's inControl (which provides rules-based spending controls and electronic processing) have made some headway in automating corporate payments over the past couple of years. But paper checks and invoices still prevail in the business-to-business payments space for most corporate suppliers and service providers.
"Sometimes it's a 'crawl, walk, run' strategy where we may have customers that are just starting to automate payments, but don't take full advantage of the commercial card opportunities or all payments types," Chayt says.
Comerica integrates various payments types into a single Web view for the corporate client, which can see scheduled payments, past transactions, bills due, etc. This information can be matched with the business rules engine via a direct integration with the corporate's back-end accounting system, which makes processing faster, more accurate and viewable through a centralized portal.
"If [corporates] get more information, it helps them do cash forecasting with stronger internal budget tracking," Chayt says.
Since there's also more visibility into the billing activities of actual suppliers, Comerica is positioning the service as a way to optimize or scale the spending on specific items or purchases made at individual suppliers.
"Middle-market or large corporations may not realize that different departments were using the same vendor. This consolidation helps you realize that you're spending more with a single supplier than you may have thought, and that gives you more negotiating power with that supplier than you may have thought," Chayt says.
Atkinson says that while large companies with a centralized accounts payable function would likely be able see invoices going to different departments from the same supplier, not all large companies handle suppliers and procurement in a centralized manner.
"Many handle [accounts payable] by region, and there may be some items under a certain dollar amount that are done locally," she says.
While a discount for bulk purchases across a large organization may not be immediately attractive to vendors, Chayt says the faster processing and quicker resolution of issues connected to payments can be used as a lure for vendor participation. "It's a win-win. Some vendors say they are not interested in paying discounts. But what we have found is if you interact with those vendors, the fact that they get their funds faster and they will have ease of payments helps [address] those barriers."
BIG BANK PLAYS
Other banks are also selling corporate clients on tools that help with corporate spending and vendor management. Bank of America, JPMorgan Chase and Citigroup are among those that have recently introduced services.
Citigroup is attempting to lure corporate clients by using digital payments processing as a way to increase visibility into transaction data. It's providing full remittance details via commercial card payments and a CTX addendum, an exchange format that enables the transmission of invoice and reference numbers, payment codes and the amount of payment. Citigroup is also making remittance data available on demand through a supplier portal and/or email notification.
Citigroup contends clients are increasingly expressing interest in commercial cards, which use file-based technology to allow information on a large volume of payments to be updated in aggregate where applicable, such as managing a large number of payments to the same supplier. Citi also is actively marketing the Citi buyer initiated purchasing card, a commercial payments solution that includes visibility into a list of payments as well as allowing buyers to "push" a payment directly to a supplier's merchant account.
"BIPC provides clients with the benefits of capturing post-approval invoice spend on a card, while leveraging existing accounts payable processes, approval workflows and ERP and other systems. [It] allows clients to determine the timing and amount of supplier payments, to keep sensitive data, including card numbers, shielded from vendors, and provides robust remittance details," says Deirdre Ives, head of wholesale cards and person-to-person payments in North America at Citigroup.
JP Morgan's commercial card offers bank clients and their suppliers a range of payments choices to better manage their working capital. Payments options include recurring and single-use card, automated clearing house, check and wire. In addition, the bank provides tools to help suppliers get their payment faster, including electronic invoicing, supply chain finance and dynamic discounting.
In a statement to Bank Technology News, JPMorgan spokesperson Edward Kozmor said the single-use account "is one of our fastest growing commercial payments products as it provides the controls of a check without the processing cost. Today, most merchants receive a single-use account through email or our Web portal. We see this shifting to payment directly to the supplier's account as suppliers become more comfortable with virtual card payment and more merchant acquirers support this technology."
Bank of America Merrill Lynch in July launched "exact auth override," an enhancement to its ePayables card solution that provides greater payment control for the corporate client by authorizing payments to suppliers for only a specific amount to avoid differences between invoice and payment amounts.
Another recent addition to ePayables includes a push payments feature that lets clients automate supplier payments by disbursing the funds directly to a supplier's account. The straight-through process requires no supplier intervention, resulting in auto reconciliation for clients as well as efficiencies for suppliers.
According to Bank of America Merrill Lynch, push payments also enhance compliance with Payment Card Industry standards, and reduce the potential for fraud, since no card account information is exchanged in the process.
"A benefit on the supplier side is they can get payment directly deposited into their account as opposed to having to initiate the transaction on their own," says Jennifer Petty, card product executive for the Americas for Bank of America Merrill Lynch.
BOTTOMLINE
Electronic payments can be a way for banks to grow relationships with corporate clients and shed paper.
