How The Corporate Card Recharted Its Adoption Course

At the dawn of 2020, commercial cards made up only a fraction of overall B2B payments volume, even as corporates continued their slow-but-sure payments digitization efforts away from the paper check.

But in the midst of the coronavirus crisis, the corporate card seemed to unlock more value for businesses large and small. It may not have been entirely expected, either. Amid shutdowns and travel restrictions, a dramatic decline in business trips had some in the industry wondering what the future of card spend would look like. After all, the corporate card is traditionally the payment method of choice for traveling employees, yet it had historically lacked a presence in the accounts payable (AP) department.

The evolution of the corporate card this year revealed just how dynamic the payment tool can be for organizations thanks to value propositions like spend controls and visibility, as well as capital float.

According to a report from Mastercard published earlier this year, the coronavirus crisis drove up commercial card adoption more than any other payment method, PYMNTS reported. One of the biggest factors behind that adoption trend is the need for small- to medium-sized businesses (SMBs) to enhance working capital management, with nearly half of SMBs surveyed by Mastercard noting they were one missed payment away from going under.

“The pandemic has made it painfully clear how labor-intensive current business payment processes are, especially for small and medium-sized businesses,” said Ron Shultz, executive vice president of New Payments Business, North America, at Mastercard, in a statement at the time. “With cash flow more critical than ever, we’re seeing an accelerated shift to digital B2B payments as businesses of all sizes look to safeguard their operations today and prepare for the future.”

Easing Cash Flow Pains

The card emerged this year as a valuable solution for organizations that quickly realized paper checks were no longer a viable option in AP and accounts receivable (AR) departments. Cards rose to the top of the priority list as organizations not only needed a digital payment solution, but one that could support healthier cash flow amid market volatility — whether that meant gaining greater visibility into spend, taking advantage of capital float, or the opportunity to pay suppliers more quickly.

Dean M. Leavitt, founder and CEO of Boost Payment Solutions, spoke with PYMNTS in April and similarly reflected on the sudden surge in commercial card interest.

“Everybody’s really concerned about cash,” said Leavitt. “The card as a credit instrument is very much on a lot of people’s minds.”

This trend has driven commercial card issuers and technology providers to not only promote adoption among payers, but introduce new solutions to help suppliers accept cards, too.

“So far, we’re seeing what seems to be, from our vantage point, a pretty collaborative effort on the parts of most stakeholders to get payments made,” Leavitt added.

Part of that collaborative effort involves enlightening both ends of a B2B transaction to the potential benefits that card payments offer. For buyers, of course, there is the added capital float and opportunity to enhance spend visibility and control. For suppliers, meanwhile, the potential to get paid more quickly can be an invaluable benefit during times of a cash crunch.

The Virtual Card Perks Up

Efforts to drive commercial card adoption weren't limited to the physical card, either.

Indeed, the virtual card had a big year in 2020, with the likes of Visa and Wells Fargo among several solution providers to dig their heels into the technology.

Visa, for instance, announced Visa Commercial Pay in collaboration with Conferma Pay, a solution that enables on-demand virtual card issuance for businesses to empower their employees with a controlled spending solution. Wells Fargo debuted its own virtual card solution, the WellsOne Virtual Card Payments Service, that supports the creation of one-time-use virtual cards in the AP department. Both solution providers cited the remote working environment as a key driver of the virtualization of the commercial card.

“We don't really see any reasons to carry plastic anymore,” Conferma Pay Director of B2B Partner Development Nick Reid told PYMNTS earlier this month.

A Recharted Future

Whether it be in response to SMBs' working capital constraints, or the friction of professionals working from home, the commercial card technology community has accelerated innovation efforts to tackle some of the biggest pain points that organizations continue to encounter amid the pandemic.

According to Sanjiv Razdan, global head of commercial payments at Nium, who spoke with PYMNTS in July, the corporate card industry has always been interested in expanding the technology's presence beyond travel and entertainment (T&E). The pandemic simply widened that opportunity for the sector to showcase the value and flexibility of the corporate card in use cases like AP.

“The fact remains that issuers and networks have always wanted to address this opportunity beyond travel and entertainment,” said Razdan.