Buyer-Initiated Payments: To BIP or Not to BIP

Sometimes referred to as “push payments,” buyer-initiated payments (BIP) did not exist until the specific requirements of a buyer’s payables obligation eventually crossed paths with the advent of virtual Point-of-Sale devices. BIP, which is a type of commercial card transaction, differs from conventional card processing in one huge, meaningful way:

• With conventional card processing, the seller must collect the card account information from the buyer and combine this with other transaction information, such as the sale amount, certain required seller content, and possibly Level-3 line item detail. Then the seller enters this transaction information into their card acceptance technology to be delivered into the card interchange system. If all goes according to plan, the seller will eventually be funded for the correct amount of the sale, and the buyer’s credit card will be billed for that same amount.
• With BIP, the seller does … well … nothing.

That’s a little bit of an exaggeration. The vendor must still send a bill (invoice) to the buyer, but this usually occurs regardless of the payment medium. But just as the name implies, buyer-initiated payments transfer the task of making the card transaction from the seller to the buyer.

What’s in It for Buyers?

But why would a buyer want to incur all of this additional effort when they have to make a payment anyhow? There is one primary reason — to encourage seller acceptance of card payments for invoices, so that buyers can take advantage of the administrative and financial benefits associated with commercial card use (such as rebates and various types of payment and purchase controls).

What’s in It for Suppliers?

With BIP, the transaction process for the seller is reduced to two simple functions — (1) sending the invoice and (2) receiving the payment. It can’t get any easier than that.

Where Has BIP Been?

As great as this sounds, BIP remains a relatively obscure offering, for two primary reasons:

• The first is that promoting BIP to sellers is a relatively complex conversation, requiring staff with deep domain expertise.
• The second is that BIP usually requires closer-than-normal coordination between the card-issuing and card-acceptance components of the transaction-processing environment.

What Is BIP Best Suited For?

• If the program design requires it.
  BIP is very effective as an engineered component of complex processes. Certain vendor payment programs that require specialized invoicing and “information management” processes work more smoothly when the payment is “performed” by the buyer. This is especially significant in the medical arena and in certain government programs, including past projects run by the Department of Veterans Affairs and some divisions of GSA. Without BIP, these programs would not have been effective at meeting the requirements of using the federal purchase card for payment.
• When the seller does not accept cards for B2B payments.
  Credit cards have been available as a payment option for more than half a century and prominent in the corporate payments arena for more than 20 years. It’s safe to assume that almost every seller in the country has been contacted many times over the years regarding accepting cards for payment. If they have not chosen to participate by now, they must have strong justification for rejecting such a widely used payment medium.

While BIP can’t create 100% acceptance with sellers who have deliberately avoided taking card payments, it can address the two most widespread reasons for not participating.

o The perception of additional expense in the form of card acceptance fees. — Regarding the fees, many BIP programs include Level-3 line item data into each card transaction. This can reduce the seller’s cost of card acceptance by as much as 40%. This is more easily accomplished in an automated manner by BIP technology than when the effort to collect and input this additional information is performed by the seller. This meaningful reduction in fees is a strong incentive for reluctant vendors to finally agree to card acceptance … using BIP technology.

o The condition of not being administratively organized to accept cards rather than checks or ACH. — Many sellers have established processes that do not accommodate accepting card account information from a buyer, logging this information in a manner that meets the security standards required by the card groups, entering this information into a payment engine, and interfacing with the required accounting systems. When the buyer performs most of these functions on behalf of the seller, BIP comports with the familiar seller administrative routines already in place for checks and ACH payments.

Deploying a BIP solution into a buyer-seller environment requires careful planning, an engaged buyer and an experienced solutions provider. The up-front complexity of deploying BIP into a seller community is offset by its ease of use, cost effectiveness for both buyer and seller, and the intrinsic accuracy that virtually eliminates payment processing mistakes. Trust me — any staff who has the job of tracking down and remediating the occasional erroneous payment will be the most enthusiastic supporters of buyer-initiated payments.