- Though digital technology has transformed many parts of the business landscape, commercial payments have been slower to adopt automation.
- There are many benefits to automation, including improving cash flow.
- Mastercard recently introduced Mastercard Track Business Payment Service, which allows buyers and suppliers to more seamlessly connect and share payment-related data.
Digital technology has radically transformed many parts of the business landscape, but one key area has lagged far behind: commercial payments. Many companies still use paper checks, manage payment terms in spreadsheets, and manually reconcile invoices — all of which can lead to costly payment delays, confusion, and mistakes.
The past few months have only complicated the situation. More people are working from home, and businesses and their employees are adjusting to new processes, while trying to maintain and bolster their operations. Automating business payments can significantly improve cash flow at a time when many companies are cash constrained. One thing is clear: The $125 trillion global commercial payment market is due for a shakeup.
Last September, Mastercard outlined a vision to modernize business payments: It wants to eliminate paper-based processes for buyers and suppliers and improve how buyers and suppliers pay and get paid. The result is Mastercard Track Business Payment Service. Managed through a single, open-loop network, it allows buyers and suppliers to connect and share payment-related data using common rules and standards. As a result, buyers and suppliers don’t waste time going back-and-forth about payment-related issues. Suppliers have access to rich, usable remittance data with every payment, reducing the number of inquiries they need to make to buyers and the amount of time they have to spend on reconciliation.
“Business-to-business payments are complex. Due to the lack of standardization and the bilateral nature of our ecosystem, there is a challenge for businesses to manage cash flow,” says James Anderson, executive vice president of global commercial products at Mastercard. “It’s time for commercial businesses to get value out of the accelerated digital shift through improved cash flow.”
The cost of outdated processes
As business becomes faster and more global than ever, commercial payments have become increasingly complex. Customers and their payment partners have different systems and practices for accounts payable and accounts receivable, as buyers and suppliers are scattered across the world.
However, even as companies have leveraged technology to provide efficiencies in industries such as manufacturing and marketing, as well as many other areas, systems are marked by outdated communication methods — emails, phone calls, faxes, portals — that slow things down.
Accounts payable employees spend 30%1 of their time on manual tasks and answering payment-related questions. These inefficient, mistake-prone communication processes are costly and time-draining. Suppliers are left to make sense of information spread out between disparate systems for reconciliation. Every month, most suppliers have to log into more than 10 portals to retrieve critical data.2
These issues can have a dire impact on business growth. The lag between invoice-receipt and payment can delay delivery of goods and services, disrupt cash flow, and impact buyer-supplier relationships. In fact, nine out of 10 business-to-business suppliers in the US reported frequent late payments by their customers2, with an average payment delay of 33 days — beyond the standard 30-day window.
Fraudsters have taken notice of the flaws in the current payment system as well. Inefficient processes and risky methods of sharing information contribute to the $3 billion in annual losses through business email compromise3.
Worldwide efficiency and security
Mastercard Track Business Payment Service drives efficiency for all parties in the transaction, with suppliers in particular gaining more control over their cash flow by systematically enforcing payment preferences and terms through parameters such as transaction size. They also receive the critical information they need for each transaction — rich, real-time data exchanges that enable simple and seamless reconciliation and revenue recognition. For buyers, the solution improves working capital as it optimizes opportunities for card payment rebates, and early payment discounts. In addition, the solution satisfies the needs of global commerce, providing one connection for multiple payment types. The open-loop network allows for connectivity to many payment agents, payment types, and currencies across numerous countries.
Mastercard Track Business Payment Service also provides heightened security. Every enrolled business and agent receives a unique payment ID to codify transaction counterparties and safeguard sensitive bank account information.
Expanding around the globe
With the launch of Mastercard Track Business Payment Service in the US, Mastercard is now expanding it into Latin America, Europe, the Middle East, Africa, and Asia Pacific in 2020. Later this year, automated clearing house (ACH) payments will be added to the service and cross-border payments will arrive in 2021.
Digital technology has become intertwined with how people live, allowing them to pay bills, order takeout, and do countless other tasks simply by pushing a few buttons. It’s long past time for business payments to enter the digital era, and for businesses to benefit from these same digital, simple, and seamless experiences.
Find out more about Mastercard Track Business Payment Service.
This post was created by Insider Studios with Mastercard.
1. B2B, How the next payments frontier will unleash small business, Goldman Sachs, 2018
2. Apex Analytix, 2017 Financial Leaders’ Benchmarking Report
3. “Business E-Mail Compromise: Cyber-Enabled Financial Fraud on the Rise Globally,” Federal Bureau of Investigation, February 2017
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