The migration from paper payments to electronic payments continues in a steady and inexorable fashion. Helping to accelerate this movement are the card networks and technology providers who are enabling businesses to efficiently execute B2B transactions. In this multi-part series, we’ll take a look at the factors driving adoption of card programs for traditional invoice payments.
MasterCard and Kaiser Associates conducted several studies related to commercial card acceptance costs and the incremental revenue to be gained through card acceptance. While cynics may question the validity of the finding, we can attest that we receive comparable feedback from suppliers who are paid through our own payment network. The findings are significant, and provide answers to the question that I hear from so many people – “Why would a supplier ever agree to accept a card payment?”
Here are some of the research highlights:
- Suppliers stand to gain additional revenue by accepting cards from business customers.
- Non-accepting Suppliers risk losing order volume to card-accepting Suppliers
- Buyers may purchase more often with card-accepting Suppliers
- Card acceptances leads to improved customers satisfaction and account longevity
- Suppliers can use card acceptance to phase out early pay discounts.
#1 Increased Volume per Customer
Suppliers may be surprised to learn of the extent that Buyers will alter their spending habits in order to maximize the benefits of their card programs. 49% of Buyers were “likely” or “very likely” to increase purchasing volume with a previously non-accepting supplier once it began accepting card payments. The study traced this increase in volume back to three key drivers:
1) Card acceptance is a significant decision driver in the consolidation of vendors. 38% of Buyers consolidated Suppliers within a spend category due to card acceptance at one and not the other.
2) Buyers have indicated a willingness to substitute card payments for early pay discounts. Suppliers incentivize Buyers to pay speedily through early pay discounts albeit at the expense of top-line revenue. By accepting cards, often payments can be speeded up without a reduction in price for the Supplier. The study suggested that Buyer’s see cards’ value in excess of the early pay discount – 51% of Buyers were “willing” or “very willing” to forego an early pay discount in favor of paying via card.
3) Ad-hoc purchases which circumvent the traditional procurement processes are common, especially when a time-sensitive purchase needs to be made. Cards provide a level of control and fraud prevention that’s often beyond what traditional payments methods such as checks, case or ACH. By accepting cards, Suppliers make themselves more available for this type of purchasing.
We’ll drill down further into this report in future articles. Please let us know your thoughts!