How American Express has bulked up its B2B services

To win over more small and midsize businesses — and better compete against Visa and Mastercard — American Express has been making acquisitions, developing digital business-to-business payments technologies and partnering with fintechs. 

The most critical elements of this strategy are the development of new capabilities in accounts receivable and accounts payable automation and the expansion of its multi-rail B2B networks. But some experts say Amex is at least partially playing catch-up. 

Another factor is simply the vast opportunity that the small and midsize B2B market represents for all card brands.  

According to the U.S. Small Business Administration, the number of small businesses increased 7% between 2020 and 2022, to 33.2 million. Research by Boston-based consultancy Celent shows that small-business lending for loans under $250,000 rose by 13% from $191 billion in 2019 to $242 billion in 2021.

"We're developing multirail B2B networks to bring together buyers and suppliers who are our clients," said Anna Marrs, Amex's group president, global commercial services and credit and fraud risk. "These B2B networks will go beyond cards to tackle" a small or medium-size enterprise's "full payment file."

As part of this strategy, Amex is working to build its supplier network in verticals such as construction, health care and technology, Marrs said. 

Amex has been behind Mastercard and Visa in the B2B market, according to Erika Baumann, director, commercial banking and payments at Aite-Novarica. 

"Mastercard and Visa have built, mainly through acquisition, complete B2B payment networks with very robust capabilities," Baumann said. "As Mastercard and Visa are dominant in the B2B network space, it's a logical response for Amex to figure out where the opportunities are."

Anna Marrs (left), group president for global commercial services and credit and fraud risk at American Express; and Raymond Joabar, group president for global merchant and network services. "To succeed, Amex will need to build new capabilities ourselves as well as make selective acquisitions and establish partnerships with fintechs in the accounts receivable and payable areas," Marrs said.

Amex brings some advantages to the B2B market — particularly its ownership of a bank, according to Steve Murphy, director of Mercator Advisory Group's commercial and enterprise payments advisory group. 

"Because Amex owns a bank, it can offer loan funding and supply chain finance," Murphy said. "Also, Amex drives distribution through its end-to-end network ownership. This contrasts with Mastercard and Visa which distribute through their core bank clients and provide value-add services in cards and increasingly outside of cards."

In November 2020, Amex embedded a pay-over-time revolving credit capability for U.S. small and midsize-enterprise cardholders, which led to significant growth in small-business cards, said Raymond Joabar, Amex's group president, global merchant and network services. Previously, pay over time was available on an opt-in basis for Amex's SME cards, with 55% of cardholders taking advantage of the feature.

In 2020, Amex acquired Kabbage, a U.S. small-business lending platform which includes a digital business checking account and working capital solutions for companies with revenues over $1 million.

Another aspect of managing cash flow is accounts receivable and accounts payable automation, which give companies visibility into their invoices and payments. According to Amex's 2022 Global Business Spend Indicator survey, 56% of U.S. business buyers plan to further automate payments to suppliers, while 63% of suppliers want to expand their current degree of accounts receivable automation.

These efforts are paying off for Amex. Between the fourth quarter of 2019 and the fourth quarter of 2021, Amex saw 25% growth in SME card loans, according to an investor presentation. In 2021, Amex had 3.2 million U.S. SME customers who generated $354 billion in U.S. billings, defined as transaction volumes including cash advances on payment products issued by Amex. These SMEs represented around 40% of Amex's total billings and 86% of its total commercial billings. 

While cards are a great tool for small businesses, they are not all an SME needs to manage its working capital, said Joabar. 

"In a higher interest rate environment, working capital becomes even more important, and suppliers can manage this with digital tools supporting faster payments," Joabar said. "We're also investing in creating our own receivables dashboard within our multi-rail B2B network." 

Amex has several services for managing working capital. Its Early Pay system helps large companies improve working capital by offering discounts to buyers for early payments, as well as financing for buyers' invoice payments. 

Marrs sees the development of new capabilities in accounts receivable and accounts payable automation as critical. 

"To succeed, Amex will need to build new capabilities ourselves as well as make selective acquisitions and establish partnerships with fintechs in the accounts receivable and payable areas," she said. "For example, we partner with key accounts receivable players to ensure Amex is integrated into platforms where our customers are already automating their receivables."

Earlier this year, Amex announced partnerships with Billtrust and Versapay to enable suppliers to accept Amex-branded virtual card payments. Billtrust's platform enables suppliers to have a real-time view of their outstanding invoices and cash flow, while accepting virtual card payments from buyers. Versapay provides an accounts receivable network of buyers and suppliers, which includes virtual card payments.

In 2019, Amex acquired the Acompay accounts payable automation platform from Acom Solutions, which it rebranded as American Express One AP. The platform enables U.S. businesses to pay suppliers using Amex cards, virtual cards, paper checks and ACH transfers. "American Express One AP lets SMEs hook Amex into their accounts payable function and route the payment via their rail of choice," said Marrs. 

For spend management, Amex has partnered with U.S.-based corporate spend management platform Airbase, enabling users to set budgets for staff expenditure. "If an Amex client wants spend management capabilities, we aim to be the payment method of choice embedded in their spend management platform," Marrs said. 

Amex has also been enhancing its B2B payments services, which account for nearly half (45%) of its total billed business and over 70% of its total commercial billings, Joabar said. 

In October 2021, Amex launched its own-branded SME business bank account and debit card, and in August 2022 introduced American Express Global Pay, which enables U.S. SMEs to pay suppliers in 40 countries from their business bank accounts and track their payments. Global Pay, which is integrated into Amex's accounts payable platform, competes with cross-border B2B payment services from Mastercard and Visa.

Amex provides virtual card and ACH payments capabilities to buyers by plugging into B2B fintechs such as Airbase, the invoicing platform Bill.com, Billtrust, the accounts receivable management platform HighRadius, Versapay and the accounts payable provider Wex as well as to Goldman Sachs Transaction Banking. 

"After businesses adopt one of our AP automation solutions, we see a 43% average lift in Amex card spending, indicating how our 'beyond the card' offerings also reinforce our cards business," said Joabar.

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