Virtual Cards Nudge Supply Chain Modernization in Right Direction
A few centuries ago, Shakespeare, using the Gloomy Dane as a mouthpiece, noted, “the readiness is all.”
And for logistics, for supply chains moving across borders, we’ll take another quote from Hamlet:
What can they strive to be — or not to be?
Payments will provide the answer as to how, when and even whether transportation, logistics and shipping will move, truly into the 21st century (and beyond).
Of course, in an environment where complexity reigns and paper invoices (even checks and faxes) dominate, the greenfield opportunity or challenge is there.
Virtual cards would be a good, strong, tailwind toward getting buyers and suppliers and freight forwarders and truckers to move beyond those pain points. Virtual cards, after all, can have some real benefits when it comes to fighting fraud and setting spending limits and can help improve fund flows across the globe.
Acceptance is Muted
As PYMNTS data shows, nearly half of the firms in those verticals don’t accept or use that payment option, citing the fact that their current systems cannot support virtual cards. And about 35% say there is a lack of supplier and customer interest.
And the report, “Accelerating the Time to Realized Revenue,” a PYMNTS and Mastercard collaboration, also finds that there is a general feeling that in-house expertise needs to be in place to create/deploy and use those cards to maximum effectiveness.
As we’ve noted in this space, third-party providers to access virtual cards can help mitigate some of these issues, without any required technical heavy lift.
Earlier this year, RJ Ancona, vice president and general manager, B2B, global merchant and network services at American Express, told PYMNTS that difficulty paying via check during the pandemic sped up adoption, but companies soon discovered other benefits, including improved cash flow and visibility. “I see that as a trend that is going to continue as accounts payable and accounts receivable departments look for efficiencies,” Ancona said as 2022 dawned.
Cash flow visibility and transparency improve as a result, which boosts suppliers' financial security.
Read Also: Virtual Cards Streamline B2B Commerce During Uncertain Times
And, the positive ripple effects accrue. As recently as the end of last year, we noted that the trade gap — measured in outstanding receivables — stands at $3.1 trillion. Other insight gleaned from our proprietary research has found that 42% of financial institutions cited those invoice reconciliation and supplier portals when they were asked about common problems their corporate clients face when paying suppliers. We’re seeing the emergence of platforms (such as Echo Global Logistics) that bring automation, interactions between shippers and carriers and embedded finance into the mix, with advanced technologies and artificial intelligence (AI) parsing and analyzing data throughout it all.
A work in progress, to be sure, but refashioning supply chains and improving the payments flow between buyers and suppliers, far-flung is work that must progress.
Read Also: Embedded Finance Takes on Supply Chain Challenges