For decades, the rules that establish the price at which cards can be accepted has hindered the growth of commercial card programs.
Fixed, rigid pricing that has no relationship with the payment terms established between commercial trading partners has stymied the adoption of commercial cards, allowing traditional forms of B2B payments — including checks, wire and ACH — to prosper.
Commercial cards, however, are entering a new era. And innovative technology is transforming their use and acceptance into a competitive advantage. That is, if they can be liberated from fixed pricing.
For those suppliers who use a straight-through processing (STP) commercial card platform, automation of card payments allows for easy reporting, better pricing and enhanced security. For buyers, commercial cards can offset AP costs via rebates, expand working capital and provide mission-critical data to which they may not otherwise have access with other payment methods.
Unfortunately, the card rails weren’t originally envisioned for B2B use cases. Similarly, the pricing constructs that accompany them aren’t a great fit for B2B use either.
To make commercial cards more viable, stakeholders in the B2B payments ecosystem need to break down these constructs and put into place a way to dynamically price card transactions so that they complement the commercial relationship between buyers and suppliers — not burden them as they often do now.
To simplify commercial card pricing, buyers and suppliers need the ability to set prices based on their mutually agreed upon trading terms. A win-win for card issuers and their corporate customers, introducing dynamic discounting for commercial cards would also expand card acceptance and migrate would-be check, wire or ACH spend onto a card.
As an example, trading partners should be able to add rules to their pricing terms that dovetail with their commercial arrangements, including transaction-based, volume-based, time-based, or just about any other agreed upon rule, and then allow built-in logic to adjudicate the rules to set the price of acceptance on the fly. (For instance, suppliers who receive payments beyond the established payment terms should have a lower cost of acceptance.)
Dynamic discounting on commercial cards would benefit businesses in several ways. Suppliers would, for example, have more power to incentivize good payment behavior, ensuring that their buyers pay on time. For buyers, dynamic discounting encourages card acceptance and reducing attrition, making commercial card programs more powerful.
Applying dynamic discounting to commercial cards would be a giant step forward towards modernizing the rails on which they ride and it would dramatically simplify the pricing process, which would result in a significantly more viable B2B payment vehicle. All cards need to do now is break free.
