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Commercial Card Volumes Up as Card Companies Invest in B2B

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Commercial card payment volumes have hit a five-year high of US$2 trillion, according to the 2018 annual reports of Mastercard, Visa and American Express.

by Ben Poole

Updated: September 25, 2019

Mastercard’s 2018 annual report revealed that its commercial payment flows have risen to US$657bn, up over 12% year-on-year.  The follows a variety of investments and launches the firm has made in this space. Speaking on the earnings call, Ajay Banga, Mastercard’s president and CEO picked out the new fleet co-brand product they are developing with U.S. Bank and a partnership with MYOB to develop the international profile of Mastercard’s B2B Hub model for particular attention.

American Express also reported growth in its annual commercial payments volume in its 10-K filing released on 13 February, with the headline figure of US$486bn demonstrating a 10.9% increase on 2017. The company is benefitting from the focus it is putting on the small and medium-size business demographic. AmEx’s chairman and CEO, Steve Squeri, noted that the investments the firm has made in commercial payments are one of the key reasons that small and medium-size businesses continue to be one of the organisation’s fastest growing customer segments worldwide.

In its Q4 2018 earnings report, AmEx showed that billed business growth of US SMEs grew 10% year on year, while international SMEs saw a jump of 21%, and billed business growth of large and global corporates was up 7% compared to the prior year. The global commercial card portfolio accounts for 41% of AmEx billings.

The announcements from both Mastercard and American Express mirror similar results in the Visa 2018 annual report, which also showed nominal payments volume up in the US and internationally. Commercial payments volume was at US$562bn in the US, up 11%, while internationally the nominal volume hit US$363bn, up 19% on the previous year.

On a January 2019 earnings call, Visa’s CEO Al Kelly credited the company’s continued investment in partners to innovate and grow the B2B payment offerings the firm has across both core card and new payment flow solutions. He cited the collaboration with Billtrust in November 2018 on their Bill Payment network, designed to streamline the delivery of B2B payments to suppliers, as a prime example of this. “This collaboration reflects our increased focus on B2B accounts receivable and on improving the overall supplier experience when accepting B2B payments” Kelly noted.

The combined global total for Visa of US$925bn was the highest level of commercial payments volumes among the three main issuers, amounting to 11.5% of total annual payment flows for the company. Visa’s ratio of commercial payment volumes has remained relatively flat in the 11% range across the past five years. Mastercard’s ratio has risen by three percentage points over the past five years, reaching the 11% range. While Amex has also seen this ratio rise (up 3 percentage points over five years), the firm stands out from the crowd as 49% of its total payment flows are accounted for by B2B payments.

Investment in growth

The past 18 months have seen the big card companies investing in new solutions specifically targeted at the B2B space in order to expand their offerings in this market segment and to continue to drive growth. At Mastercard, this is evident in launches such as the Mastercard B2B Hub, in partnership with AvidXchange, which takes an entire payables file and manages the execution of payables on behalf of that business to optimise the transaction across the different forms of payment available. Another example is MasterCard Track, which launched in September 2018. In collaboration with Microsoft, this is a global trade platform that seeks to streamline and automate the procure-to-pay process.

Ajay Banga, President & CEO, Mastercard. REUTERS/Ruben Sprich

In the US, the company is expanding virtual card distribution through a partnership with bill.com and Com Data. “This partnership integrates our virtual cards within bill.com automated accounts payable solution and that should enable us to reach their 60,000 customers who currently make over US$60bn in annual payments” said Banga. “The addition of these virtual cards creates a safe seamless and secure way for businesses to be paid and provides the data needed to help merchants easily match payments with receivables.”

Visa has also been investing in expanding its B2B offering. As well as the partnership with BillTrust, the organisation acquired software-as-a-service (SaaS) transaction management solution company Fraedom in 2018. This acquisition was designed to enable financial institutions to improve the corporate card experience offered to their business clients, allowing them to better track corporate expenses and eliminate traditionally manual processes.

Visa is also continuing to expand its commercial card relationships globally. “In Europe, Ixaris will shift their business to Visa and expand the range of virtual travel payment products it offers to online travel aggregators, global distribution systems and other participants in the travel industry” Kelly said. “We also renewed our Citi commercial card partnerships by seven years in Europe and five years in Central Europe, Middle East and Africa”.

AmEx began rolling out blockchain-enabled B2B cross-border capabilities just over a year ago by integrating Ripple into its FX International Payments (FXIP) platform, allowing non-card payments to be routed through RippleNet. More recently, the company has partnered with WEX to allow business and corporate cardholders to make supplier payments using single and multi-use virtual cards, and launched American Express Go. This is an expense management tool aimed at mid-sized and large corporates, which incorporates a virtual card for employees that may not have a corporate card.

With card issuers investing to expand their remit for B2B payments management, commercial cards issuers are in robust health.