MasterCard Inc. has taken the wraps off an automated payments network that uses both purchasing cards and automated clearing house transactions to link businesses with their suppliers.
MasterCard is at least the third major financial company to make a serious push into the business-to-business payments space this year. It is targeting smaller companies than its rivals in the hope of attracting users to MasterCard Payment Gateway, which it is to announce today.
American Express Co. and JPMorgan Chase & Co. have both developed corporate payments ecosystems that connect companies’ accounts payable systems with those of their trading partners. Both systems are aimed primarily at the large business users that have the clout to require their suppliers to implement a new remittance system.
Art Kranzley, an executive vice president at MasterCard and its executive in charge of advanced payments, said the Purchase, N.Y., company expects its initial Gateway users to be large corporations, but MasterCard wants to build a large user base by offering the system to smaller banks, and their smaller business clients.
“There’s a host of medium-size and smaller banks that want to supply these services to their buyers and suppliers,” he said in an interview.
And unlike Amex and JPMorgan Chase, which are offering their payments systems directly to corporate users, MasterCard is working through financial companies, and has already won a name bank customer, Wells Fargo & Co.
The vast majority of corporate payments are still done by paper check, and banks and payments companies are eager to get businesses to shift to electronic payments.
Philip J. Philliou, a partner in the New York health-care and financial services consulting firm Philliou Selwanes Partners LLC, said MasterCard’s system would appeal both to the large users that are the current target market for such payments systems and to the mass-market users the card company hopes to reach. “It will help large corporates,” he said, and “in the same way, it will help the middle market.”
Offering the service through financial companies could strengthen the ties between corporate customers and their banks, Mr. Philliou said. “Companies tend to have multiple banking relationships: p-card with one issuer, international with somebody else,” he said.
Combining these capabilities within a single gateway “gives one view to the bank and the corporate. Visibility, transparency — that’s powerful,” he said. “This could change the way that banks interact with MasterCard.” (Mr. Philliou is a former MasterCard e-business executive.)
Kris Chester, a senior vice president at Wells Fargo and the manager of its disbursements product group, said the San Francisco banking company has already integrated MasterCard’s purchasing card capabilities into Wells Payment Manager, a system that cash-management clients use to send payments files to the bank that include check, ACH, and wire transfer instructions.
“It gives them a lot of payment flexibility so they can maintain front-end control,” Ms. Chester said. “This allows them to add payment card as well.”
Purchasing cards have proven popular in areas such as travel and entertainment and small-order purchasing, she said. “It’s now extending into the payments arena.”
With the inclusion of remittance information, “when you look at the opportunity in accounts payable, it’s huge,” Ms. Chester said. “I’d say the demand is enormous.”
Wells is testing the MasterCard system with a few customers and plans to begin wider marketing of it once the test concludes.
Wells Payment Manager is part of the company’s commercial banking portal, Corporate Electronic Office.
Stephen Orfei, a senior vice president in MasterCard’s advanced payments unit, said MasterCard is already using the system with its own suppliers. “With our reconciliation file, the supplier will know exactly what the payment is for,” he said.
Mr. Kranzley said the gateway enables corporate customers to transmit remittance information electronically to suppliers, along with payment using a MasterCard purchasing card or an ACH credit. It was designed to support straight-through processing of payments by allowing a buyer’s electronic files to pass automatically through the network to its suppliers.
“We built it internally within MasterCard, so it’s integrated with our systems,” he said. “We will interface to multiple systems,” including corporate accounting systems from Oracle Corp. and SAP AG.
This is a contrast to the payments system Amex unveiled in March. That system, S2S eInvoice&Pay, requires companies and their suppliers to use the same application, which is based on the payments capabilities it obtained through its December acquisition of the B-to-B payments vendor Harbor Payments Inc. Mr. Kranzley called this a “closed loop.”
JPMorgan Chase expanded its corporate payments offerings this year, using the technology it acquired in May by buying the electronic invoicing company Xign Corp. The Amex and JPMorgan services offer both p-card and ACH payment options.
Shari Krikorian, a senior business leader in MasterCard’s advanced payments unit, said the flexibility of the gateway would enable banks to customize their offerings to meet the needs of their clients.
“We’ve crafted the gateway so it’s modular in nature. They can do some of it themselves. That was the case with Wells,” she said. “We’re agnostic whether they are doing this in a Xign environment or an Oracle environment.”
Alenka Grealish, the manager of the banking group at the research and consulting firm Celent LLC in Boston, said banks need to offer their corporate clients better electronic processing systems.
“This is the direction that payment infrastructures are going,” she said. “Corporates would love nothing more than decreasing the number of bank interfaces that they have to maintain. If they had their way, they would have one payment gateway, their own.”
As a result, banks must provide broader electronic services, Ms. Grealish said. But at the same time, corporate clients are cautious about overhauling established payment systems. “We can do it incrementally,” she said. “I think Wells Fargo recognizes this.”
