Mastercard signaled a new direction for corporate payments when it
When Mastercard Track rolls out next year, Mastercard will invite corporations to route payments through new payment rails stitched together from key providers Mastercard has bolted on — and cards won’t receive special treatment.
Payments on Mastercard’s new platform could ride on VocaLink’s real-time account-to-account service, or leverage its ACH and account-to-account payments reach in the U.K., Sweden, Singapore, Thailand and the U.S.
Companies could also use Mastercard Track to route payments on
Another option will be Nets’ corporate payments operation connecting to millions of accounts in Europe and Asia — with faster payments technology and bill payment services — which Mastercard recently
Mastercard Track aims to steer businesses to the ideal payment method based on myriad variables, and for the first time there will be no bias toward card payments, said James Anderson, Mastercard’s executive vice president of commercial products.
“We’ll let corporations decide whether to use a card and when, giving them access to all of the rails,” Anderson said.
The move marks a departure from Mastercard’s decades-long campaign to emphasize commercial cards over other payment options, touting the lucrative rebates and discounts often available to buyers.
Commercial cards will remain in the mix with the new B2B platform, but Mastercard is betting that its card payment volume will actually rise if it broadly expands the payment methods available to its corporate customers, giving them more flexibility and control.
“Many companies are using intelligent guesswork to decide whether they want to pay early or on time, use a card, split the payment, and which rails to use, while their trading partners often ignore the official payment terms. Most are not getting the best deal,” Anderson said.
Whether Mastercard can significantly increase its overall share of the $125 trillion global corporate payments pie with this strategy is hard to say, according to Steve Murphy, director of commercial and enterprise payments at Mercator Advisory Group.
“Mastercard wants more share of B2B flows, and Mastercard Track is designed as a trade management platform including payables and receivables features,” Murphy said.
Habits are hard to change, and Mastercard’s history as a purveyor of cards could make it tough to recast as a neutral payments-routing adviser.
Anderson argues that Mastercard's card expertise is an advantage as digital payment technology breeds new B2B payment channels.
“Commercial payments are conducted on account-to-account rails and as a result, we’re had the intellectual and product freedom to look at that over the years, ask questions and find answers,” he said.
Where Mastercard sees the greatest immediate opportunity for growth is replacing manual, paper- or spreadsheet-based processes at corporations around the world, where many companies’ accountants lack the time to shop around for other payment methods.
Mastercard Track aims to deliver an easy-to-use centralized directory with more than 150 million company registrations worldwide, with tools to gauge the most advantageous way to handle a B2B payment using an account, a card or a bank transfer.
Payments flowing through Mastercard Track also will have purchase and invoice details attached, a longstanding advantage of commercial card payments that more rudimentary B2B payment methods like ACH traditionally lacked.
Achieving scale could be one of the concept's biggest challenges. Initially nine B2B networks and procure-to-pay solution providers including Tradeshift and BirchStreet have agreed to roll out Mastercard Track to their users next year, powered by Microsoft Azure.
Mastercard Track will face plenty of competition. Digital payments technology has accelerated rivalries in the B2B arena, with startups targeting different trade niches and large operators expanding their franchises, Murphy noted.
One example is Visa recently adding JPMorgan Chase & Co. as the first issuer participating in the
“Between them, Amex and Mastercard and Visa get about 2% of all available B2B commercial payments through cards," Murphy said. "Services like Mastercard Track can augment their existing business as checks decline, and it also protects against the trend toward alternative payment types, since increasingly those are part of the mix.”
There's much work to be done before Mastercard Track rolls out.
Mastercard's deal to buy Copenhagen-based Nets is still pending, and Mastercard is deep in the pilot stage with the platform, Anderson said.
Mastercard also continues to explore ways to add blockchain resources to its B2B platform. A recent
Anderson predicts that its new corporate payments strategy will drive greater use of virtual cards, even though Mastercard Track will no longer specifically favor card payments.
“We’re in the midst of a big transition, from a cards company to a payments company, and we think that by expanding the choices we offer, we’ll see overall gains in all our products,” Anderson said.
Erica Baumann, senior wholesale banking analyst for Aite Group, said it’s too soon to predict how successful Mastercard’s new B2B payments approach may be.
“I see a ton of potential here," Baumann said. "What remains to be seen is how effectively Mastercard can package all the pieces to provide a true multi-rail platform with data capabilities that corporates need to remove the manual processes, and friction from cross-border payments.”
