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Will My Suppliers Accept a Card Payment

09 February 2011  |  5664 views  |  2

In the B2B world, generally speaking, buyers and suppliers both understand the benefits of moving to electronic payments.  These benefits include higher rates of straight-through processing, reduced bank fees, improved security, quicker settlement, and reduced costs.  Typically, electronic invoice payments are made over ACH networks. Now, in addition to this traditional payment method, virtual card technology is being used to make invoice payments.  This is one of the hottest topics in B2B A/P payments today.

The rebates generated by card programs account for a large portion of their appeal.  Rebate amounts which vary based on payment volumes and rebate percentages (which themselves vary based on credit terms) make it possible to transform an A/P department from a cost center to a revenue generator.  But upon learning about this payment option, most everyone asks, “Why would a vendor accept a card payment for an invoice and pay the interchange fee?  There are several reasons.

Many suppliers already accept invoice payments via card so they will likely accept them from you too; especially if they place a high value on you as a customer and wish to accommodate your payment preference.  Additionally, they may do the cost/benefit analysis regarding the interchange fee and decide that their margin is sufficient.  Or, perhaps you have enticed them with the offer of better terms or a higher concentration of spend.

But there are other important reasons that are not immediately apparent.  Suppliers do want to receive electronic payments.  They do want to reduce their lockbox fees.  They do want to automate their A/R process and achieve higher straight-through processing rates.  They do want their payments to clear more quickly. 

Additionally, using ACH as a payment method requires providing banking information.  Whether housed by you in your ERP system or housed in a third-party database, some suppliers are cautious about sharing their bank account and routing information.  Following best practices such as the use of ACH debit blocks or debit filters, and using reverse positive pay do go a long way toward mitigating this risk.  In fact, the 2009 AFP Payments Fraud and Control Survey indicated that ACH credits enjoyed the second lowest incidence of payment fraud. Yet many suppliers prefer to accept payments via card because it allows them to enjoy the advantages of electronic payments while addressing their need to keep their banking information private. 

What about your company?  Are you willing to share your banking information with your customers?  Is this a hurdle?  Could accepting invoice payments via card provide a solution?  Tell me what you think!


Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 11 February, 2011, 12:57


I learned from a recent experience as a supplier that, even in the B2B world, there are certain payments that are small enough to be authorized by VP-level of people in the customer organization. Such payments can be made in minutes by VPs using their credit cards and then claimed back from their company via their standard claims reimbursement process.

This experience exposed "frictionless payment initiation" as one more reason why suppliers should consider accepting credit card payments, especially for cross-border transactions. In fact, in such situations, acceptance of credit card boosts the chance of the sale happening in the first place. 

On the other hand, when I wasn't able to accept credit card payments due to issues being faced by PayPal in India, the following alternatives proved to be extremely painful and almost killed the sale:

  1. EFT. According to their company policy, only the Group Chairman of the customer organization was authorized to initiate EFTs. When this person could finally find the time for this activity amid his busy schedule, they discovered that their bank - a local community bank in Illinois, USA - apparently lacked knowledge of terms like BIC involved in cross-border payments and hence had to regret inability to process such a transaction.    
  2. Western Union / MoneyGram. Could be used to make payments only to me as an individual, not to my company. So, this option was also ruled out. 
  3. Cheque. While this was the option that worked eventually, it took 35 days to sight good funds in my company's bank account, not to mention that it attracted some fees.

While my experience possibly pertains only to a small percentage of B2B payment types, it does illustrate the merits of accepting credit card payments in such niches.


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A Finextra member
A Finextra member | 12 April, 2011, 16:47

We are happy to use AMEX to pay suppliers and many will take it - good for airmiles to use on business when you rack up £20k of spend at a time on equipment etc.  £1m spend pa is a lot of air miles!

Smaller suppliers are put off by the higher AMEX fees but I think this is more a perceived higher cost than anything that makes a real difference.

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