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Inside WEX

How digital payments, virtual cards, and AP automations can keep your business strong through economic fluctuations

April 9, 2024

Welcome to the fourth installment of WEX’s six-part series on navigating the economic rollercoaster. Misconceptions about the economy are common. While a jobs report a few weeks ago suggested a resilient labor market, the polling that day did not seem to reflect the data. Many Americans report a lack of trust in the economy and an overall sense that the marketplace needs to be fixed for them and for their families.

These impressions may be reflective of an acute reality that economists are not in tune with. A recent New York Times article explored the challenges faced by many in the current workforce citing erratic work schedules and uncertainty about whether workers would have enough hours any given week to qualify for benefits. The article paints a different picture when compared to the rosy jobs report – yes the jobs are there, but what are those jobs like? This could be one clue to what’s causing dissonance between the data and the polling.

Other concerns facing American consumers today include high interest rates, making housing unaffordable for many Americans. Shrinkflation – the art of reducing the size of products while keeping pricing static – has taken its toll on consumer confidence as well. When consumer confidence takes a hit, that impacts business well-being as people tend to reduce spending when they perceive a pinch on their wallets. Businesses are also facing economic concerns beyond a softening of consumer confidence which include inflation, high interest rates, and an ongoing labor shortage.

So what can you do to help your business ride through these ups and downs in the marketplace? There are many ways your business can prepare. Today we’ll talk about how digital payments, the use of virtual cards, and accounts payable (AP) automation help create efficiencies for businesses of all sizes, reduce capital costs, and improve a business’ bottom line. 

The three key factors we’ll cover are:

  • How flexibility and scalability of digital payment solutions can help your business
    • Enhance security and reduce fraud
    • Streamline expense management and reconciliation
    • Improve cash flow management
  • How transitioning from paper checks to virtual cards can improve your bottom line with streamlined, automated processes
  • How greater efficiencies through AP automation
    • Improve efficiency and accuracy
    • Enhance visibility and control
    • Strengthen compliance and security
    • Streamline vendor relationships
    • Garner cost savings and efficiency gains

Flexibility and scalability of digital payment solutions will help your business thrive and grow

Digital payment solutions offer businesses unparalleled flexibility to adapt to changing economic conditions. Unlike traditional payment methods, digital payments can be initiated and processed quickly, allowing businesses to respond swiftly to fluctuations in demand, market trends, and cash flow requirements. Additionally, digital payment platforms often offer customizable features and integration capabilities, enabling businesses to scale their payment operations seamlessly as they grow and expand into new markets.

The benefits of real-time insights and analytics for informed decision-making via digital payments

Digital payment solutions give businesses real-time insights into their financial transactions, enabling informed decision-making and strategic planning. By leveraging data analytics tools and reporting functionalities, businesses can take note of spending patterns, identify cost-saving opportunities, and optimize cash flow management. Real-time transaction monitoring also helps businesses detect anomalies and fraudulent activities early, mitigating financial risks, and enhancing security.

The value of payments technology integration with existing financial systems and processes

When shopping for a digital payments provider, look for a payments partner who offers seamless integration with existing financial systems and processes to ensure your business’ successful implementation of digital payment solutions. One way to ensure a smooth integration is through the use of Application Programming Interfaces (APIs), which connect right to your existing technology. 

Jump on the bandwagon: Growing adoption of digital payment solutions by businesses

COVID accelerated the adoption of digital payment methods as remote work and social distancing became the norm. The industry is still growing. Global Newswire recently reported that the B2B digital payment market size is projected to grow from $4.2 billion in 2023 to $8.2 billion by 2028. Business owners understand the benefits of digital payment solutions, which include:

  • Enhanced efficiency: Digital payment solutions streamline payment processes, automate reconciliation, and reduce administrative overhead, improving operational efficiency and productivity.
  • Improved customer experience: Businesses can provide seamless and convenient payment experiences to their customers, helping to enhance satisfaction and loyalty.
  • Expanded market reach: With digital payment solutions, businesses can reach customers beyond geographical boundaries, facilitating cross-border transactions and international expansion.
  • Data-driven insights: Customer behavior, preferences, and spending patterns become legible, informing strategic decision-making and marketing initiatives.
  • Regulatory compliance: Digital payment solutions offer built-in compliance features and audit trails, helping businesses comply with regulatory requirements and helping to mitigate the risk of fraud and financial crime.

Advantages of digital payments over traditional methods:

Digital payments offer numerous advantages over traditional payment methods, contributing to their widespread adoption by businesses and consumers alike. Some key advantages include:

  • Convenience: Quick and hassle-free transactions, eliminating the need for physical cash or paper checks.
  • Accessibility: Smartphones, tablets, computers, and point-of-sale terminals can all be used for digital payments, making transactions seamless and ubiquitous.
  • Security and fraud prevention: Digital payments offer enhanced security features, such as encryption, tokenization, and biometric authentication, reducing the risk of fraud and unauthorized transactions.
  • Cost-effectiveness: The cost of manual processing, paper-based documentation, and physical infrastructure is minimized with digital payments.
  • Real-time processing: Digital payments facilitate real-time transaction processing and settlement, enabling businesses to expedite cash flow and improve liquidity management.

Move away from paper checks: Switch to virtual cards and prepare your business for global economic shifts

While 60% of businesses have now converted to digital payments and are no longer writing paper checks, 40% of businesses haven’t made the leap. Here is how a switch to virtual cards can help your business better prepare for economic volatility:

  • Enhanced security and fraud protection: Virtual cards offer advanced security features, such as single-use functionality, reducing the risk of fraud and unauthorized transactions. Since virtual card details are generated dynamically for each transaction, they are less susceptible to interception or misuse compared to traditional card payments.
  • Streamlined expense management and reconciliation: With virtual cards, businesses can track expenses more efficiently, as transactions are captured electronically in real time. Businesses can set spending limits, allocate funds to specific purposes or departments, and reconcile transactions seamlessly with accounting systems, reducing manual effort and errors associated with traditional expense management processes.
  • Improved cash flow management: Due to the on-demand payments virtual cards make possible, businesses can delay payment until the transaction is initiated, extending payment terms and preserving liquidity. Additionally, virtual cards offer real-time visibility into spending, enabling businesses to identify opportunities for cost savings and optimization.

Adopt accounts payable (AP) automation to best set your business up for financial resilience

In the quest for financial stability and resilience, businesses see that accounts payable (AP) automation is a strategic tool to streamline processes, optimize cash flow, and mitigate risks. AP automation refers to the digitization and automation of accounts payable workflows and includes automating tasks like invoice processing, payment approvals, and vendor management. Here’s how AP automation will contribute to the financial resilience of your business:

Improved efficiency and accuracy with AP automation

AP automation eliminates manual data entry and paper check processes, reducing the likelihood of errors and delays associated with manual processing. By automating repetitive tasks and workflows, businesses can accelerate invoice processing times, improve accuracy, and free up valuable time for finance teams to focus on higher-value activities.

Enhanced visibility and control with AP automation

Stakeholders in businesses with AP automation can track invoice status, monitor payment trends, and identify bottlenecks in the workflow. With centralized dashboards and reporting tools, businesses can gain actionable insights into their payables operations, facilitating informed decision-making and proactive management of cash flow.

Strengthened compliance and security with AP automation

Businesses can more easily maintain compliance with regulatory requirements and internal policies when using AP automation, by enforcing standardized processes and approval workflows. Built-in security features – such as encryption, authentication controls, and audit trails – safeguard sensitive financial data and mitigate the risk of fraud and unauthorized access.

Streamlined vendor relationships with AP automation

By automating payment approvals and reconciliation processes, businesses can build stronger vendor relationships. Both timely payments and the avoidance of discrepancies between invoices are key to good working relationships. AP automation helps businesses form these strong ties. Businesses can optimize vendor management, negotiate favorable terms, and build trust and goodwill with suppliers. Look for a payments technology provider who offers supplier enablement. This will take the time-consuming and sometimes onerous work of onboarding vendors into your digital payments systems out of your hands and free you up for the more important financial services oversight for which you’re responsible.

Cost savings and efficiency gains with AP automation

AP automation delivers tangible cost savings. By streamlining AP processes, businesses can achieve better operational efficiency, improve cash flow management, and reinvest savings into strategic initiatives for growth and expansion. By embracing AP automation technologies and best practices, businesses can position themselves for success in today’s dynamic and competitive business environment.

Embracing digital transformation for financial resilience

In the pursuit of financial stability and resilience, businesses that leverage the full spectrum of digital tools and technologies available to them will prevail. From embracing digital payments and virtual cards to harnessing the power of accounts payable (AP) automation, the time for digital transformation is now. If you start navigating the complexities of a volatile economy today, you can build a foundation for long-term success.

Financial stability serves as a cornerstone for businesses to weather uncertainties, seize growth opportunities, and cultivate trust among stakeholders. By prioritizing financial stability, businesses can position themselves as resilient entities capable of thriving in even the most challenging economic conditions.

The benefits of digital payments and virtual cards are undeniable. Businesses can streamline processes, optimize cash flow, enhance security, and mitigate risks, thereby bolstering their financial resilience in an ever-changing business landscape.

In September, we explored strategies for trucking companies to handle economic volatility, and in November, we delved into cost-saving measures for small businesses. In January we unveiled five straightforward tactics to maximize your benefits and bolster personal savings. Today we talked about how payments technology can help your business face any volatility in the marketplace. Check back in with us next quarter where we’ll dive into how electric vehicles (EVs) can help your business’ bottom line.

Learn more about how WEX payment solutions can be tailored to your business, so you can accelerate and streamline operations while creating lasting growth and success for your organization.

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