American Express wants to bring more of its technologies and services to the small-business market to expand its base beyond those companies that use only its payment cards.
Small and midsize businesses represent an important segment for Amex, accounting for 21% of its total global loan mix and 34% of its total global card member receivables in the first quarter ending March 31, 2021. Steve Squeri, Amex’s chairman and CEO, said in the New York company's earnings call that growth in its commercial business has been and will continue to be driven primarily by small and medium-size enterprises.
“A key element of our longer-term growth strategy is to deepen our relationships with current SME customers and attract new clients by offering a range of supplier payment and cash flow management solutions, both on and beyond the card, giving business owners more tools to help them manage their businesses,” Squeri said.
Amex isn't alone in this effort, but it counts on its bank charter to make the process more seamless.
“The three major U.S. card networks have each been prioritizing B2B solutions and expanding beyond card rails now for several years,” said Steve Murphy, Mercator Advisory Group’s director of its commercial and enterprise payments advisory group. “The key difference is that Amex is a closed-loop scheme and drives distribution through its end-to-end network ownership. Amex also has a bank and can offer loan funding and supply chain finance, whereas Visa and Mastercard distribute through their core bank clients and try to provide value-add services in cards and increasingly outside of cards.”
The three card networks all aim to expand their B2B relevance by doing similar things but in different ways, according to Murphy.
“Mastercard offers the Mastercard B2B Hub through a partnership with AvidXchange for automated payables,” he said. “It’s building out the Mastercard Track business information exchange and directory for buyers and suppliers that is expanding into a payments network. Visa collaborates with Billtrust on a Business Payments Network to further automate the cash cycle process through receivables. “
In going beyond its client base for payment cards, American Express hopes to build relationships with more small businesses.
The American Express One AP accounts payable automation platform enables U.S. businesses to pay suppliers using Amex cards, virtual cards, paper checks and ACH transfers. Amex acquired the platform, which was originally called Acompay, from Acom Solutions in 2019.
“We’re marketing the platform to existing Amex business clients as well as to companies which don’t have a relationship with us, to help them automate their AP department,” said Dean Henry, Amex’s executive vice president for business financing and supplier payments.
In March and April, Amex conducted a survey of businesses of all sizes in Australia, Canada, Japan, Mexico, the U.K and the U.S. Nearly half (47%) of surveyed businesses said they plan to automate or further automate their process of receiving payments from business customers over the next 12 months, while 45% of surveyed businesses plan to automate or further automate their supplier payments over the next year.
Environmental Landworks Company worked with Amex to automate its accounts payables.
“Nowadays, more and more things are automated, so wherever a business can introduce automation, they should do so,” said Mindy Stewart, office manager and payroll accountant at the Golden, Colorado-based company.
The timing of these efforts stems in part from COVID-19 lockdowns, Henry explained. "Accounts staff couldn’t go to their office and write and mail paper checks. So during the pandemic we saw big growth in digital solutions.”
In addition to its AP automation technology, Amex works with enterprise resource planning, procurement and accounting platform providers such as Bill.com, Coupa, Sage Intacct, MineralTree and SAP Concur to enable SME clients to reconcile invoices and purchase orders with payments.
Amex offers SMEs the same tools it offers its global corporate clients to pay suppliers who can be either on or off the Amex network. By automating and streamlining payment terms, corporate buyers can deal with a wider range of SME suppliers. “Many of the suppliers paid through our buyer-initiated payments platform are SMEs,” Henry said.
Because it handles their B2B payments, Amex is able to leverage its knowledge of its SME customers’ transactions to offer financing, working capital and business loans.
Amex wants to replicate Kabbage’s one-stop-shop approach in the mid-market company sector.
“We can provide merchant financing or 12-, 24- or 36-month business loans that aren’t tied to a card to mid-market companies,” said Henry.
“We leverage the data we hold about our clients’ Amex card transactions and their non-card payments taking place through our B2B systems plus the fact that we’ve conducted KYC on them,” said Henry. “So we enable them to connect and do business with each other through platforms such as American Express One AP, and we can also provide them with insights into their transactions.”
Amex, Visa, and Mastercard offer their business clients the ability to make cross-border payments to foreign suppliers through their networks. But, unlike Amex, Mastercard and Visa have both expanded their non-card cross-border payments capabilities through acquisitions, Mercator's Murphy said.
“Mastercard’s 2016 acquisition of Vocalink positioned it to be a direct player in real-time payments and expand its account-to-account transfer capabilities through Mastercard Send,” Murphy said. “Visa is expanding its
