Updated: Oct 8, 2020
When you talk to most businesses about accepting credit cards as a form of payment for B2B you can almost see the blood run from their faces as they get weak at the knees. It is a tough subject not for the meek in the Merchant sales profession. But, why is that? Does it have to be this way?
It is fair to say that Buyers have taken advantage of a system that is froth with rewards of every kind such as cash back, airline points, hotel stays etc. These perks put the buyer in sort of a frenzy as to where they can maximize their return on spend. I do not blame them, hell I am guilty of it myself. First a buyer will usually negotiate a sweet deal with a supplier. This can include a generous term, which the buyer will stretch to the limits and then show up to settle their debt on the exact day to maximize the due date with their Issuer. For all this, they can be the beneficiary of a ton of perks on the back end that include in some cases 2% cash back, an airline point for every dollar spent in the favorite frequent flyer program or night after night of free hotel stays for their next vacation. Seems to me the ball is firmly in the buyer’s court.
Simply put this equation is out of balance. Unlike with SMB’s, The Large Corporate market is dominated by banks and those with the deepest pockets giving rebates to buyers. When once the name of the game was Travel & Entertainment (T & E) spend, has quickly evolved into a race for vendor payable spend. Here a buyer can monetize to the max, what they were going to pay for anyway. .35bp of $100M in payables is a nice $350,000 in the pocket, if you can get a merchant to play the game. Fewer, and fewer supplier want to play this game under the old conditions that just do not work for them. As you stand back and examine the scenario, there is nothing of value for the accepting merchant. They hold the risk, until paid, they financed the debt and they swallow the entire cost of the credit card transaction. Only those with massive margins or in non-competitive industries could be happy with this. Now that is a shrinking prospect list.
In getting this equation better balanced, the pendulum must swing back to the middle where there are benefits on both sides for buyer and supplier. For the supplier that can come in the form of acceleration of payment and realizing the value that delivers to their business as opposed to waiting until the end of term and often beyond that to see payment. For the buyer getting utility to use their preferred payment method openly and without prejudice or penalty is the win, not to mention their perks. To do this, they will have to give on their term to better let the supplier into the equation. Unfortunately, this is easier said than done. Few buyers will want to give up the beachheads they have established making this a tough exercise. So, what is the answer?
Merchant Salesforces must educate B2B Merchant on establishing acceptable Credit acceptance policies for their business. Gone are the days of financing the receivable and paying the full cost of credit acceptance and for everyone in the relationship to expect the supplier to be happy. But by the same token the suppliers cannot complain without stepping up to the plate to be part of the solution. Saying you have to offer Terms to survive just does not cut it, transfer your term to an Issuer and collect your cash under your newly created policy. Because failure to do so only allows buyers to have their cake and eat it too.
Roger McNamara Bio:
Roger is a 25+-year veteran of the Payments Industry, most recently as the Director of Business Development with American Express in the US. He has worked on the largest Acquisition targets for acceptance across multiple Industries and across the globe that include : Airlines, Communications, Technology, Cruise Lines, Entertainment, Fractional Jet, Freight, Government, Healthcare, Insurance, Oil & Gas, Residential Rent, Restaurants, QSR’s, Retail, Services, Supermarkets, Travel, Vehicle Sales, B2B and Wholesale. Over that time, he has sold more than $200 Billion worth of Card processing and became an expert in Bankcard Interchange and Discount Rates, how they are calculated and what merchant pay to accept Credit and how this is dramatically different from what they believe they pay. He is an expert in Merchant Statement analysis and payment processing and the rules and regulations associated with payments and the associations. Roger has also developed the insight for Merchant Services Salesforces and salesforces in general to be able to better position their products and gain share particularly in B2B. Let him show you how you can too. He can be reached at Guide2Interchange@gmail.com