Are U.S. Card Programs Focused on the Wrong Things?

Sometimes it is hard to know what we are missing unless we look beyond our own borders. In the United States, we often focus on just one or two benefits of Commercial Cards, such as revenue share, and lose sight of the valuable big picture. Not so in other countries, as described below in the article by Mark Silverman, PayTech Group, What the U.S. Commercial Card Market Can Learn from the Rest of the World. Recharged Education invited Mark to share some of his vast global insights, so we can all broaden our horizons and, in the process, strengthen our card programs.

What the U.S. Commercial Card Market Can Learn from the Rest of the World

by Mark Silverman, PayTech Group

U.S. commercial card usage, both for physical cards and virtual cards, continues to grow at a healthy pace year over year. The marketing of these product lines in the United States relies heavily on two factors:

  • The dominance of checks, which are perceived to have fewer advantages than card-based solutions, in the B2B payment space (roughly 50% of all U.S. business-related payments are still made by check)

  • The continued reliance on aggressive rebate/revenue share back to the end-user organization

What’s interesting is that these are two advantages that most other commercial markets in the world are not able to take advantage of. In many if not most European markets, the dominant B2B payment methods are already electronic, not check based. And the financial incentives that corporates receive in markets outside North America are nowhere near the 100+ basis point levels seen in the United States. The pillars for success in these global markets include:

  1. A focus on capturing transactions versus volume ($) 

    Without the ability to look primarily at card programs as having a straight financial benefit, the value then shifts to other benefits that are more volume agnostic like compliance (e.g., travel/purchasing policy) and fraud mitigation, where the benefits of capturing a small transaction via card are equal to a big-ticket item.

  2. More emphasis on T&E 

    Similarly, in the U.S. where rebates are king, there is often an emphasis—both from buyers and sellers of card programs—on big-ticket payables when it comes to implementing a card program. Conversely, in other markets like Europe, T&E card programs have not lost their prominence in relation to AP spend.

  3. Marketing of card programs as a technology solution   

    This is also related to overseas providers’ inability to sell card programs purely as a rebate-centric solution to the end-user. For payables-based solutions, these companies have to rely on other benefits and, in most cases, especially among FinTechs, the way these offerings are marketed often revolve around their respective technology.

Similar to other industries, in commercial payments the U.S. is often seen as somewhat of a front runner. Yet as regulatory and market pressures here continue, the U.S. might be best served to look abroad to “future proof” the marketing and selling and buying, of commercial payment solutions.

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About the Author

Mark Silverman is a Senior Consultant at PayTech Group, a payments advisory and consulting firm, specializing in helping both issuers and buyers of commercial payments via engagements ranging from sales effectiveness to research to vendor selection. He has shared his expertise in commercial payments while chairing and moderating panels at payments conferences sponsored by EuroFinance and NAPCP. Prior to consulting Mark spent several years at both American Express and U.S. Bank in a variety of leadership, business development and marketing roles. Mark can be reached at mark@paytech.no.

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Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. 

The Payments Iceberg: Innovation and Realities

In the 1970s, anthropologist Edward Hall developed the iceberg model of culture to express how visible aspects like fine arts are dwarfed by what is hidden below the surface (e.g., relationships, attitudes, approaches). The concept could be applied to the payments industry as well. This month, while at the Cards and Payments on Campus Conference by PDG, I attended sessions about emerging technology that dazzle the mind and represent the tip of the iceberg. There are lots of great things happening. Yet, I also encountered—as I do every time I am at an event—challenges that have plagued end-user organizations for decades. It’s the reality that sits solidly under water. As a result, I have formed three conclusions, as outlined below. Take a look and see what you think. I welcome comments and always enjoy hearing different perspectives.

Three Conclusions

  1. Innovation has multiple personalities.  
  2. Gaps between different entities keep getting bigger.
  3. Payments do not always make the priority list. 

The Multiple Personalities of Innovation

At the conference, Matt Dill of Visa addressed the future of payments. Some advancements, like Amazon Go (“a new kind of store with no checkout required”), perfectly illustrate how innovation can be baffling, appealing, and necessary all at once. We may not always understand how something works, but we think it is cool. The practical, necessary side of innovation include factors like payment convenience and security. Payments have to seamlessly mesh with our ever-expanding, technology-driven world. Innovation will continue. It’s exciting.

Widening Gaps

I heard attendees ooh and aah over what Matt showed. Then, during Q&A at the end, some questions pertained to longstanding struggles end-user organizations have (e.g., trying to pay remotely for the hotel stay of a traveling employee and hotels requiring a copy/photo of the card). Throughout the conference, end-users shared the same types of challenges that I heard 15 years ago.

On one hand, technology is soaring. On the other hand, some organizations have not changed anything about their payment strategy in decades. Providers have solutions for common challenges, but some organizations are not pursuing them. The gaps are widening, which leads to the last point.

Payments Do Not Always Make the Priority List

In many cases, executives within end-user organizations have too many initiatives to manage and sales goals to meet. No one has time to address something if it is not absolutely broken, so B2B checks remain. Checks are costly and inefficient, but, as some execs would argue, they get the job done. 

Real, across-the-board change will not occur within the end-user community until there is an overhaul of decision makers. We need more leaders who: 1) embrace payments innovation at a consumer level, and 2) see the value in similarly aligning B2B payments. Finally, the decision makers need to be at industry conferences to see what is possible. 

See more about payment strategies.


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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Staff members are a wildcard.

When we talk about expanding electronic payments, things like technology and work flow often surface, but are we forgetting the people aspect? The employees who manage or support purchase-to-pay processes—namely, procurement and AP—often wield just as much power as senior management in the success or failure of a new payment strategy. Organization leaders who are ready to modernize payment operations need to address two aspects of the staff members responsible for executing their plan: attitude and skills.

In case you missed it... Staff members are not the only culprit in a laggard payments environment. The previous blog post shares an example highlighting how internal culture driven by management can plague B2B payments.


Attitude

People are unpredictable. Even employees who are generally flexible might resist a change in payment methods, processes, and/or technology. I have heard of organizations who avoid such conflict by holding off on implementing something new until “so-and-so” retires. It does not make business sense to sacrifice quantifiable benefits of a modern payments strategy to appease one or more employees. 

Resistance often stems from fear. Senior management should be planning appropriate communications to ease employees’ fears about the unknown. This includes explaining:

  • the reasons for making a change and

  • the anticipated impact on jobs

Some organizations go a step further by offering incentives if/when staff achieves certain goals related to adopting a new initiative. This could range from monetary rewards to something basic like a celebratory lunch. Those who do not display the right attitude could be subject to a change in job position or status.

The other dilemma management could encounter is employees who have the right attitude but lack the necessary skills to accommodate a change. 

Skills

Key questions for management to explore include:

  • What skills do employees need to help the organization succeed with the new plan?

  • Are the right skills attainable? Conversely, are employees simply not suited for what lies ahead, regardless of possible training?

An organization should decide how much it is willing to invest in employee development in order to fulfill a vision. 

Which employees are ready to support improvements to the organization’s payments plan? Ensure they possess the skills to meet new job demands.

Which employees are ready to support improvements to the organization’s payments plan? Ensure they possess the skills to meet new job demands.

Conclusion

If management is committed to payment improvements, they should do the following as early as possible in the process:

  1. Assess the impacted staff members to identify potential roadblocks related to attitude and/or a shortage of skills

  2. Determine how they will address the identified potential issues (e.g., training, employee restructuring, incentives, etc.)

Finally, once the dust settles, policies and procedures, as well as job descriptions for procurement and AP personnel, likely need to be refreshed to reflect the organization’s new path.

See more on payment strategy from Recharged Education.


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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