Part of global financial services giant Barclays Bank, Barclaycard issued the first consumer credit card in the UK as well as the world's first payment card for commercial procurement, more than half a century ago. More recently, it was an early pioneer of contactless card technology. Issuing virtual cards provides a new opportunity in the commercial market to reach beyond the travel and entertainment segment, says David Price, Managing Director of Client Coverage at Barclaycard:
If you just think about travel and entertainment as your lane in terms of commercial payments, you're really limiting yourself. We believe very strongly that the [virtual payment] capability we have is flexible enough and agile enough to be relevant for many more spend categories.
The switch away from physical cards also makes it much easier to reach new users, he adds:
When you think about having workforces that are global, actually distributing cards and pin numbers and all of the other sort of capability globally is quite a logistical challenge. Whereas if you can do all of that digitally, there's huge advantages.
Automated payment reconciliation
The new arrangement with Barclaycard will streamline payment reconciliation for one-off purchases, by creating a unique digital Barclaycard card number directly within the Coupa application for each individual purchase. The virtual card number in effect becomes a machine-readable key that automatically ties the payment to the purchase order. It provides more security and control than issuing a conventional card account to the employee, and removes the need to reconcile payments from a monthly statement. Automation of procure-to-pay has never been as end-to-end as this, says Coupa CEO Rob Bernshteyn:
We were never really procure-to-pay, we were procure-to-'okay to pay'. Then you go back into your ERP, you wait for a bi-monthly batch job that pushes something out. Why can't we pull these things up into a business spend management platform? And then of course reconcile back with the chart of accounts in GL [general ledger].
Inserting a virtual payment card into that process introduces the potential to cut out the "90-day waste of time" between order and payment for suppliers, says Bernshteyn. Streamlining these processes to everyone's advantage is a good example of the use of technology to add value, he adds:
It just seems like a logical thing that information technology is meant to do. Just help streamline collaboration between entities.
Benefits for buyers
Price believes the much tighter integration into the Coupa procurement system will be a big driver for adoption. In the past, using virtual cards has always meant jumping out to a separate system, he explains:
There are ways we help them with that, but it still creates more friction than it needs to. This partnership changes that and it means that all the capability that we have links seamlessly into the Coupa environment.
Buyers will be attracted both by the automated reconciliation and the additional security that comes with a single-use virtual card, he believes:
It generates a one-time card that is isolated down to the organization you want to pay. It is for the amount of money that you need to pay them for, and it has a small window of time for the payment to be initiated and completed. Therefore, the ability for any fraudulent activity to happen on that is incredibly small. The controls that it gives organizations looking to have the right disciplines around payment are very, very tight.
This combination of buyer benefits is what attracted Coupa to the offering, says Bernshteyn:
We have this situation where companies are buying things all over the place. They either use a corporate card or they use an employee card. They expense it. It's a Wild West of suppliers. There's no control, lots of reconciliation. Wait a minute, why can't we just get this right at the front? ... As a use case, we thought this is perfect for us to help customers with.
What's in it for Barclaycard
For Barclaycard, it's a way of delivering extra value that drives up usage and therefore revenue, says Price:
We generate revenue when our customers use our products. It's almost the ultimate pay-as-you-go model. And frankly, if our customers don't value our solutions and they stop using them, our revenues dry up. So we have to be relentlessly focused on having solutions that customers value and that they see value in using.
What organizations want centrally is reconciliation efficiencies, working capital, benefits control, making sure there is dispute management in a really effective way ... balanced with flexibility, agility and digital for the colleagues who are using the capability.
There are "a string of banks" lined up behind launch partner Barclaycard to join the scheme, says Bernshteyn. It's a field they're eager to participate in, he explains:
When we said that we want to get involved in pay, we've had an enormous amount of inbound desire from banks, credit card issuers [and] others to get in the game with us — because they see hundreds of billions of dollars of transactional flow and they can't get their arms around it.
Two strands to Coupa Pay
In addition to virtual cards, Coupa is also recruiting a number of partners to help it deliver other elements of its Coupa Pay portfolio, including supply chain finance (SCF) specialist Demica in receivables financing and TransferMate to deliver cross-border payments. But Coupa will be building as much as of the solution as possible itself, says Ravi Thakur, Senior Vice President of Business Acceleration, with partners like TransferMate providing their payments processing under the covers.
There are two main strands to Coupa Pay, which was unveiled in May at the vendor's annual Inspire conference in San Francisco. The first is the supply chain finance strand, which already offers the ability for buyers to offer early payment terms to suppliers using their own cash balances, as well as the Demica-based receivables financing capability. Invoice financing — sometimes also called factoring — is currently in pilot on an early access program.
The second strand is the payment hub, which includes the virtual card capability announced with Barclaycard and will soon add the ability to do bank transfers and cross-border payments directly from within Coupa. Reimbursement of employee expense claims and contractor invoices on approval is another capability under development, along with several more payment offerings.
It makes sense to manage all of this from within Coupa as the existing system of record for procurement data, says Thakur, senior vice president of Business Acceleration at Coupa:
We are able to consolidate B2B payments and financing onto that single platform to provide an optimized experience ... helping you free up valuable resources by automating and removing unnecessary steps to process payments and manage financing options for your suppliers.
Enlisting a partner with the brand clout of Barclaycard underlines how serious Coupa is about its financing and payment offering — and how attractive its reach into mainstream corporate procurement is, even to a card issuer of Barclaycard's stature.
Recruiting allies like these will help Coupa drive adoption of its payment hub and supplier finance capabilities. This is an ambitious foray into territory that's traditionally been seen as the preserve of finance and ERP vendors. I'll have more to say on that in a follow-up piece based on what I heard at the event about Coupa's strategy to expand its footprint as a self-styled business spend management (BSM) vendor.