Inside Amex's quest to digitize business payments

After years of being mired in paper checks, business payments are rapidly automating, creating fierce competition among payment companies as corporations modernize accounts payable and receivable.

"The way businesses buy and sell to one another has historically been inefficient and full of friction," said R.J. Ancona, vice president and general manager at American Express, which has launched several business payment-oriented products so far this year. "While consumers have embraced cards, digital wallets and paying one another at the tap of an app, the same is not true when businesses pay other businesses. That process is still predominantly manual, relying on mailed invoices and paper checks."Amex is getting more aggressive in business-to-business payments and banking as dozens of banks and payment companies compete to win clients by capitalizing on a general movement toward automation. 

"Manual payments require a lot of time and effort, which, in the business world, equates to money," said Ancona, who helps manage B2B products, partners and client management the global merchant network services organization at Amex. 

Amex CEO Steve Squeri recently said the company is poised to pursue small-business lending opportunities that the recent banking crisis may create if regional banks pull away from the sector. Squeri's pronouncement came shortly after Amex launched Business Blueprint, a cash-flow-management hub for small businesses. The hub allows access to digital financial services, and enables small businesses to access applications for credit and access payments. 

Earlier in the year, Amex acquired Nipendo, an Israeli startup that provides technology to digitize B2B transactions. Just before the Nipendo deal, Amex launched Business Link, which streamlines B2B payments for buyers and suppliers. 

There are two key trends Amex and its competitors are pursuing. The number of small businesses in the U.S. rose 8% over the last four years to reach 33.2 million last year, according to the Small Business Administration.  And the use of paper checks for B2B payments is expected to drop to 21% by 2026, according to eMarketer. That's down from about a third of business payments in 2023. A slower economy is also expected to boost B2B payments automation as firms look to cut operational costs. The seamlessness of consumer payments has a huge influence on what finance leaders expect from B2B payments, according to Ancona, by driving adoption for digitized and automated payment processes that make B2B feel more like B2C and P2P. 

"Right now, we're seeing this dynamic play out in the B2B space as buyers and suppliers navigate which of their known partners stop or start accepting different forms of payment," Ancona said. "Many companies are already well past having days where you would go into the office to print and sign checks, or when your boss would hand you a card to go out and grab supplies."

Amex is also enhancing its accounts payable and accounts receivable solutions,  partnerships with firms such as BillTrust and Versapay, which help suppliers that accept Amex virtual cards get paid faster and with an easier user experience. 

"Business technologies are typically more complex and are rarely one-size-fits-all like many consumer technologies, so innovation can take longer," Ancona said. "But today's B2B customers are looking for easy ways can make transactions fast and connect more seamlessly between buyers and sellers." 

Amex has a closed-loop model, which means it is simultaneously the payment issuer, merchant acquirer, and network operator. "We have visibility into the entire transaction flow," Ancona said, noting that Amex's multi-sided program can reach both buyers and suppliers.

American Express has traditionally focused on automating accounts payable and supply chain processes to increase Amex card usage, said Richard Crone, a payments consultant. "The key to success in this market is integrating into AP and AR workflows," Crone said. "The B2B market dynamic revolves around buyers aiming to delay payments, while sellers aim to accelerate receipt of payments.

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Despite Amex's processing fees, the card company offers businesses rich reward schemes, expense tracking, control, and fraud-reduction benefits, Crone said. 

Amex's competitors in the space include dozens of fintechs, including large payment companies like Stripe, PayPal and Block. All three of the large fintechs provide payments and financial services geared toward businesses and consumers; while PayPal and Block offer merchant credit with lending decisions based on prior payment flows. 

Other large card networks also provide a full suite of payment products. In an earlier interview, Elisa Ellis, vice president of operations modernization at Discover, spoke about Discover's efforts to apply consumer payment technology to business use cases in an effort to woo more business clients. 

"Everything has been moving away from slower paper-based manual processes to digital and increasingly online and connected communications" said Gilles Ubaghs, strategic advisor for commercial banking and payments at Aite-Novarica Group. 

That's a simple-sounding and often-repeated goal, but there are a lot of business processes to be automated. Once functions like accounting and inventory management go digital — even the smallest businesses have access to programs like Xero, Quickbooks, SAP — there's a tipping point that brings payments into the digital age even for companies that are accustomed to using checks, according to Ubaghs. 

"Checks in the mail, or other manual processes cause big slowdowns in terms of liquidity management, and also pose an element of risk in terms of missing or delayed payments, high dispute management costs, etc., on the receiving end," Ubaghs said.