16 November 2020
In today’s context of digital transformation, B2B payments represent a real opportunity for optimization companies processes. To dig deeper into this topic, we were particularly interested in getting Mastercard’s vision on how B2B payments represent a real chance for corporations looking at digitizing their operations and procurement procedures. Olivier Pinon, Commercial Cards Product Manager for Mastercard, kindly agreed to share his insights…
In France, inter-company payment flows (known as ‘B2B’) represent annual volumes of 2,600 billion euros. The majority of these payments are currently made by SEPA Credit Transfer.
Companies devote significant management efforts to pay and be paid within the time limits set by their contractual obligations and legislation. These payments represent real challenges for their cash flow and internal operations. Despite these efforts, the latest annual report of the “Observatory of Payment Deadlines” indicates that late payments reached an average of 11.5 days at the end of 2019. Other studies indicate that late payments are responsible for the bankruptcy of 1 in 4 SMEs.
Craftspeople and SMEs are more penalised by payment delays. The large corporations are more closely monitored by the public authorities (DGCCRF), which have adopted the practice of “name and shame” and have increased controls on payment times (1,500 controls in 2019).
Beyond the financial aspect, payments must also adapt to companies’ organisational issues in terms of fraud prevention, the efficiency of procurement processes and payment reconciliation.
Card is a standard for B2C payment method. At Mastercard, we believe that it also has a lot to offer in B2B transactions. Virtual card solutions in particular, which are often little-known, offer real benefits.
This is a unique card number, generated on demand, for a single payment, online or performed remotely, with many possibilities of controls on the transaction (amount, frequency, categories of expenditure…). This type of payment allows the safe delegation of purchases. Or even their automation, depending on the volumes considered. As virtual card payments can be integrated into existing company tools such as “Procure-to-Pay” systems, buyers benefit from all the necessary visibility on their expenditures, not only on payment flows, but also on related data: invoice number, cost centre, etc. The matching of payments is thus greatly facilitated because a card number can be associated with a paid invoice.
Virtual card programs are often accompanied by deferred payment. For purchasing companies, this is an opportunity to reduce their working capital requirements. For suppliers, it is the possibility and the guarantee to be paid earlier because card transactions are generally settled on D+1 or D+3. Being paid by credit card can avoid the need to resort to alternative short-term financing solutions such as invoice trading or factoring. Indeed, by accepting the bank card, the supplier receives a cash payment, he does not need to “transform” his invoice into cash, which is the principle of invoice trading.
In the future, 2 major evolutions are taking shape. They are linked to the increased digitalization of exchanges. The first is the strengthening of the payment ecosystems. Mastercard has thus developed the Mastercard Track platform to connect millions of companies, to make relationships between buyers and suppliers more fluid and finally to offer them different payment methods under the same interface. All this while avoiding the multiplicity of payment environments and methods (procure-to-pay tools, PSPs, ERPs and even… Excel file exchanges!). Mastercard Track should also make it possible to standardise the procurement data processing.
The second development is related to a usual obstacle encountered in B2B payments: lower card acceptance by suppliers. In the near future, the buyer will no longer have to worry about whether his supplier accepts card payments. The buyer will anyway be able to pay by card thanks to an innovative solution made available to banks and Mastercard partners for their professional clients. The supplier will receive the payments directly on his bank account.
Streamlining B2B payments is a game changer to transform procurement operations within companies. The virtual card, for a supplier, is the guarantee of being paid earlier with a rapid availability of funds. It is also a guarantee of transparency and fluidity in the purchasing process. For a buyer, the virtual card makes it possible to optimize working capital requirements, to delegate expenses while keeping them under control and to obtain a global view of these expenses in a dedicated reporting tool.
Stay tuned till next year to find out more…
