Martien's notebook article page banner 36px

2021 – A conquest year for contextual B2B payments on card rails


$120+ trillion in annual global B2B spend is in play, according to Goldman Sachs research. With 2020 being a year of abrupt Covid-19 adjustment, we expect 2021 to be a year of contextual B2B payments.

by Frank Martien

Created: November 30th 2020

What do we mean by “contextual”?

Many payment solutions are positioned to satisfy clients’ functional needs. Any organization will have accounts payable (“AP”) and accounts receivable (“AR”) objectives to automate and improve working capital management – all the more relevant now to cope with the pandemic. With functional positioning, payment solutions are tuned to support AP and/or AR across most conceivable client journeys/use cases for broad applicability. Providers perform implementations to configure these solutions for large corporates while mid-market companies self-configured plug & play renditions.

To complement functionally positioned payment solutions, we now see an increasing array of solutions contextualized for specific client journeys/ use cases. On the AR side, for instance, integrated software vendors (“ISVs”) have designed business process automation for specific merchant/supplier verticals and monetized in part through embedding card acceptance. We anticipate 2021 will be a watershed year for contextualized solutions for an increasing array of B2B use cases.

Frank Martien, Managing Partner, Windward Strategy Inc.

Imagine a hypothetical fintech called “WFH” whose mission is to tailor buying experiences for work from home. One publication has sized this opportunity at close to $300 per employee (ITProPortal, 30 June 2020).

On its home page, WFH asks a user to click “owner” or “employee.” Owners configure and curate appropriate merchandizing/subscriptions, purchase restrictions, approval workflows, reporting, and expense coding for specified employees or position profiles. Suppliers gladly sell via this specialized online marketplace understanding a purchasing or virtual card are embedded for payment. Employees register and purchase what they need to be productive from home while being prevented from making excess/ non-sanctioned purchases.

Owners of small companies administer and monitor workflows while large corporates rely on HR file integrations, anti-fraud AI, and other technology for enterprise-grade solution delivery. While the owner or corporation could have deployed purchasing or virtual cards with limits and restrictions for employees to use at specified digital marketplace, big box, or office supplies brands, they come to WFH for greater curation and control over purchases.

WFH targets several companies already prominently featured as offering support according to CNBC:

$1,000 office set up allowance Basecamp, Shopify, Twitter
$500 office set up allowance Buffer, Chegg, Indeed
$200 annual tech stipend Buffer
Covers monthly internet bill Buffer, Chegg

Through enhanced market relevance driven by contextualization, WFH achieves significant share of the ~$15 billion U.S. employee work from home total addressable market (“TAM”), combining figures with estimates for those working from home from Stanford University.

More broadly speaking, substantial commercial card spend has already been generated by organizations pivoting T&E credit lines to purchasing, seeking to maintain revenue share thresholds, and expanding virtual card use for buying (e.g., manufacturing, media, technology) and supplying (e.g., personal protective equipment (“PPE”), government, non-profit, gig economy workers), according to panelists at the recent CPI Global Summit.

Undoubtedly, contextual payments will drive tremendous virtual card growth. Juniper Research optimistically predicts global virtual card spend could reach $5 trillion by 2025 with B2B comprising 80% of this amount and North America having a 60% share – implying a $2.4 trillion B2B virtual card spend market in North America in 2025. Even if this figure only reaches a more realistic $1 trillion, this market would still quadruple.

Frank Martien is Managing Partner of Windward Strategy Inc.