Barclaycard on the benefits of virtual card payments in the B2B world

Paying suppliers is often an arduous and bureaucratic process for organisations. Uploading invoices into an ERP system, followed by an approval and payments process, often results in manual checks and workarounds, introducing unnecessary efficiencies.

Barclaycard is hoping to change that for the B2B world. It is now offering virtual card payments - dubbed Precisionpay - which is integrated into a company’s ERP, allowing for seamless payments, as well as easier management and approval controls.

This is something that is common in the consumer world and has been driven by online travel agencies, which act as a go between for consumers and hotels, airlines and other travel providers.

I got the chance to speak to Maria Parpou, product director at Barclaycard Commercial Payments, at Oracle’s Modern Business Experience event in London this week, who explained the benefits of the B2B world adopting a more online, modern approach to paying suppliers. She explained that corporate payments have been slow to keep up with the experience in the consumer space. Parpou said:

Normally people would associate banks with sleepy institutions. I don't think that is the case here. I think, it is fair to say that payments over the last ten years has been completely transformed.

Nowadays, your card account is in embedded into your car hailing apps, your food delivey services. You rarely use checks anymore. You can Pingit a payment to your friends immediately and you can use various apps to send money around the world.

In the corporate space though, things are only now started to emerge. I think there is a spillover, if you like, from the consumer world into the business world. In the business world, let's say you want to pay payroll, yeah? You put anything you need into your pay systems. And at the end of the day, it comes in a file, that goes into your bank, and the bank makes a payroll payment, or the bank makes a supplier payment. Very simple and easy.

However, this approach is changing and travel agencies are leading the way in the business world, according to Parpou. She added:

Now, comes new business models. Think about travel agencies. Think about online travel agencies. Do you know how many thousands of payments a company like that would probably do? Or any online company for that matter. How do they pay the airlines? How do they pay the hotels? They're using new digital payments. They're called virtual card payments.

Every payment is a unique virtual card number, that accompanies that payment. For example, when you want to book a hotel, you get a card number to do this. Imagine, instead of using the same card number, every time you use a different (digital) card number. The benefit of that is they're ultra secure. They can never be used again. They are like a token.

And the benefit of it is, that every booking is automatically uploaded into one payment. So, an online travel agency can then say this traveller booked the holidays and then I, the travel agent, made the payment to the airline, to the hotel, all linked against her booking.

And so, what we are doing right now is moving what we learned in the travel space and adopting it into the wider, B2B world.

A new model

Barclaycard Precisionpay works by drawing a new virtual card for every payment, which is then automatically assigned and approved by the system (with controlled limits) and reconciliation happens autonomously. These ‘tokens’ are secure and integrated in the back-end ERP systems, with requests for them available online or on mobile, making manual payment processes redundant. No longer pulling the card out of the drawer and making payments over the phone or manually via your bank accounts.

For a visual explanation of how it works, check out this video on Barclaycard’s website. Parpou explained:

We are in the process of connecting our payments systems with ERP systems. So, let's say you want to make a payment, instead of putting the invoice in the ERP system, someone approves the ERP, approves the invoice, and then at some point in time the payment goes out. The moment you approve the ERP, the moment you approve the invoice, a payment automatically goes to your supplier.

The technology works through APIs. At the moment, where you actually approve an invoice, the API calls out a virtual card. And that virtual cards pays the person in question. It uploads automatically the full invoice, to which the payment is supposed to be made and sends that payment out.

It provides real-time data, there and then, so you no longer need to look up whether you've approved the invoice. You know the payment has been made. It creates a symbiotic relationship between the purchasing process and the payment.

Benefits and challenges

Parpou said that one of the key benefits of this technology in the B2B world is the ability to pay smaller suppliers, or make one off transactions, which would usually involve a manual workaround. She said:

A lot of companies today struggle with, in particular, the tail end of suppliers. Where you might have a lot of one off suppliers, or hundreds of smaller suppliers, it costs companies a lot of money to upload these suppliers into an ERP system just to make one payment.

Many companies struggle to pay for goods that they buy on eCommerce platforms, or buying goods online. By using Precisionpay, and using our digital payment platforms, you do not need to onboard these tail end suppliers onto an ERP system in order to make a payment. You can do that by utilizing our virtual card technology, and send them card payments, but in a fully controlled manner. All the work for approvals are happening in our Precision platform, and the information then flows back into the ERP system after the payment has been made. So, it takes away a lot of process inefficiencies by doing that.

Parpou added that Barclaycard believes that this is a “massive opportunity” because there has long been tensions between organisations and suppliers around prompt payment. Precisionpay allows for companies to give their suppliers a virtual card upfront, so as soon as something is delivered, that supplier can then immediately draw upon the card for the payment.

However, Parpou knows that adoption in the B2B world can take time and that this will be one of the core challenges for Barclaycard. She said:

I think [our biggest challenge is] adoption.It takes time in the B2B world to adopt new methods, new opportunities. It's obviously happening where either people spend a lot of time reconciling payments, like it was in the travel industry - where the largest online travel agencies used to have all these big departments [for making payments]. They are mostly gone and that's now moving into the mainstream.