by William Meek
Evolving consumer payment trends are influencing changes in business payments. The increased availability and acceptance of consumer technology has created “back-end innovation” that’s “simpler, and cheaper, for payments companies,” and it’s moving more B2B payments to virtual payments. Last year, acom.com reported that “B2B virtual payment volume will double between now and 2018 and skyrocket to over $500 billion by 2024.”
A digitaltransactions.net post on 2018 payment trends noted that this year all invoicing for US government payments must be electronic, and that’s expected to affect the US B2B market as a whole. “In 2018, expect more chief financial officers to begin to realize the efficiency benefits of digitizing B2B payments.”
While there’s been a rapid increase in B2B virtual payments overall, travel has been slower to adopt this financially beneficial option. But, that seems to be changing. Debra Moss of Acquis Consulting talked with smarterware.com about the “sudden growth in T&E [travel & entertainment] virtual payments.” Moss cites “technology infrastructure” catching up “with the security, control, and data visibility benefits that are inherent within virtual payments” as one reason for the uptick.
Moss’ second reason is about demographics. “As more and more millennials enter positions of leadership in these organizations, the overall level of comfort with virtual payment technology increases. All of this points to a future in which virtual payments are commonplace.”
Virtual payments=reduced costs
Travel companies and suppliers each benefit from alternative forms of payment, particularly virtual card numbers (VCNs) that reduce or even eliminate fees. International travel payments can include FX rate mark-ups and cross-currency transaction fees, which can average 3% per payment, and many of these can be avoided using VCNs. Companies also improve cash flow with VCNs, and suppliers are paid in their home currency.
According to digitalcommerce360.com, “the last five years have seen dramatic changes in A/P departments with the introduction of VCNs. These have become popular with A/P departments, because it allows them to monetize their A/P spend in the form of rebates. That’s something every chief financial officer wants to hear: how to turn an expense area into a revenue stream.”
Virtual payments=increased efficiency
The unique single-use numbers associated with VCNs mean billing and reconciliation are consolidated because each payment ties back to a specific invoice. Plus, data matching is easier and happens automatically—saving hours of administrative time, and reporting is improved because data is captured more effectively.
Virtual payments=greater control + less risk
Unlike traditional accounts with one card that is used multiple times for multiple suppliers by multiple employees, VCNs aren’t prone to abuse nor are they a security risk. Restrictions can be set on single-use virtual payments that limit the amount, date and merchant. Transactions are only processed if they meet the specifications.
In addition, VCNs provide favorable chargeback rules and protect companies from disputed charges and supplier default.
How virtual payments can work for you
With the growth in virtual payments, now is the time to learn more about how your company can reduce costs, increase efficiency and gain greater control over your B2B payment system.