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A new reality – the digital transformation of commercial payments
The digital transformation of the B2B payments space is having a profound effect on every stakeholder in the commercial cards ecosystem, from the card companies and issuing banks to the end user cardholder. The opportunities and challenges of digital were a hot topic at the recent CPI Global Summit in New York City.
The opportunities that digital presents for traditional players in the commercial payments value chain can sometimes be mistaken for threats – neo banks in Europe have a much better digital footprint for example. But the message from the CPI Global Summit 2019 was that traditional banks must overcome any fears and embrace digitisation.
Seizing the digital opportunity
“We just need to invest in it and be equally as digital savvy as some of the new players on the block” commented Maria Parpou, chief product officer at Barclaycard Commercial Payments.
The opportunities exist in the way that banks can engage with customers through digital channels, which can streamline costs as it is taking people off the phone and cutting out manual processes. Fraud prevention is another benefit of digital, from stopping suspicious transactions to notifying cardholders of a fraudulent transaction.
The last touch point on the value chain, expense reporting, also offers ways for banks to improve their customers’ lives.
“We have the opportunity to fix [expense reporting] and enhance the data” noted Bradley Matthews, SVP, head of Middle Market Bankcard Product & Marketing with US Bank. “The drive to adoption is the opportunity for us and if we don’t take advantage of it, it becomes a threat. The second part is it really allows us to be able to fix new problems and to do it further upstream, that enable other partners and capabilities that weren’t there before”.
While the opportunities were broadly agreed upon, the challenge that all stakeholders in the industry face is to deliver great digital experiences to the end user. This requires time, investment, and a thorough understanding of digital workflows and technologies in order to provide the optimum user experience (UX) and user interface (UI).
“There’s nothing as hard to do as something that is incredibly simple-looking” said James Anderson, EVP, Commercial Products at Mastercard. “What some of the digital players do is incredibly hard to do. Don’t bite off more than you can chew. If you’ve got a customer base and you can put good functionality in front of them through good UX, good UI and smart use of APIs, that’s a powerful strategy. The other strategy is to leverage the APIs and partner on the UX if it is not something you are capable of doing yourself”.
Driving digital adoption
Of course, card companies and banks can innovate and put out digital products, but it is then up to the corporate clients to want to adopt them. This is a multi-tier issue – there are corporates making buying decisions, but there is also the demand generated by the end user or business traveller.
“Currently the biggest problem is that the build-up of demand isn’t there” said US Bank’s Matthews. “They don’t know the true benefits – and that’s on both sides, the business traveller and the corporate buyer. Once we get past the muscle memory of reaching for a physical wallet instead of a digital option as a consumer, we start to get adoption and drive commercial demand”.
Any gap between a cardholder’s experience in their consumer life and when they pull out their corporate card is a potential problem to the industry to grapple with. “That’s what drives non-compliance and commercial programmes failing out or stalling out, because the cardholders are passively resisting and preferring to use a personal card” Mastercard’s Anderson commented. “Equally, that gap is what will get the pull-through of new functionality on T&E programmes. On the B2B side it is a little different because there you’re talking about workflow redesign or adjustment. The driver here is the efficiency play – how many staff hours are saved, what’s the cost of implementing and what’s the benefit”.
Preparing for digital adoption is another challenge for corporate card users, something that will require a lot of work on corporate policy. “Companies don’t know how to handle the ‘bring your own device’ component, they don’t know really know what to make of digital wallets and so a lot of them don’t have the policies and know-how to incorporate that” Matthews said. “We need to look at how we equip corporates to understand the benefits and then start the adoption drive”.
Changing the game
Adopting digital solutions offers a number of huge game changing possibilities for the commercial payments world. For Jørgen Christian Juul, founder and CEO of Danish fintech Cardlay, the potential for end-to-end automation is the biggest change that digitisation offers.
“I don’t mind if you pay with your iris or a chip in your hand, we have to ensure that the digital transaction process is 100% automated” Juul said. “When I take that train, the reconciliation has to be automated by the recognition of data”.
With the speed that automation brings, the pressure is then on for industry solution providers to regularly and quickly enhance their services. This also has to change the mindset of the solutions provider, as US Bank’s Matthews explained: “We have to be more accepting of failure and to some extent celebrate the failure because of the learnings it brings. Failures lead to the successes that we can then deliver to the end user, which is where we are going to win and perhaps drive the adoption”.
One of the biggest game changing opportunities that digital presents is the chance to take the physical card out of wallets worldwide. There was an appetite on stage for this transformation to take place quickly.
“I want to see the end of plastic” stated Barclaycard’s Parpou. “I know that plastic never runs out of battery but there is a cost associated with it and it takes days to arrive. Digital instant issuing is exciting, putting virtual cards into apps and then using them in wallets. This creates an environment where we can show our corporates that only 20% of their employees are regular travellers and yet they are giving everyone a plastic credit card. We can offer a better and more cost efficient solution for these infrequent travellers. In Europe, as interchange might go down, we need to think about more innovative ways of servicing customers and still be profitable, so digital payments could be the game changer there”.
Digitisation also opens up the possibility for providers and corporates use data in fundamentally better and more intelligent ways.
“We are so deficient in leveraging the data that is generated, even by a basic transaction” commented Mastercard’s Anderson. “People all around the world are typing into expense reports day in, day out. The Heathrow Express train only runs from Paddington to Heathrow and back and yet millions of people around the world are writing on their expense reports ‘Heathrow Express – Paddington to Heathrow’. It is the most monumental waste of human effort and is completely addressable through smart use of data and AI”.