Maximizing ePayables by Maximizing Supplier Acceptance of Card
Sam Sarin, CPCP Director, Senior Product Manager Bank Of America Merrill Lynch
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ePayables … Why not?
Did you know? ePayables:
� Financial benefit through improved working capital and cash flow visibility
� Efficiencies gained in accounts payables through eliminaGon of paper checks and reduced vendor follow-‐up
� Improved supplier relaGonships while maintaining controls in purchasing processes
� No IT investment and ease of implementaGon
� Reduced DSO for suppliers, freeing up working capital
Benefits: Win-‐win for all
ePayables is an AP card soluGon that enables payers to convert check payments to electronic card payments without any changes to internal AP processes.
1 Source : 2011 AFP 2011 Payments Fraud and Control Survey
Check93%
ACH Debit25%
Commercial Card15%
Fraud by Payment Type1
� Requires limited IT resources
� Has no implementaGon charge or hidden fees
� Eliminates manual processing associated with ghost cards
� Reduces fraud exposure
3
Supplier aFtudes towards card
66%
49%
34%
29%
25%
12%
68%
53%
38%
35%
29%
15%
Quick payment
Guaranteed payment
Process ease
To be "preferred"
Lower AR process cost
Reduce AR staff
Reasons suppliers give for taking cards
Frequencies are for "regularly cited" responses only. 23% of respondents were deemed to be “High Capture” with annual p-‐card spend equal to or greater than 4% of annual revenue (private sector) or budget (public sector). For taking cards, a response of "Decreases hard-‐dollar costs (e.g., banking fees, paper invoices, postage)" grouped within "Lower AR process costs." A response of "CompeLLve advantage over non-‐accepLng suppliers" grouped within "To be preferred.” For not taking cards, responses of "regularly cited" for "Cant find acquirer" and "PCI compliance" were less than 5% of overall respondents. End-‐user survey on supplier acceptance, Nov./Dec. 2009, n=146
71%
25%
19%
8%
8%
8%
7%
76%
35%
35%
4%
9%
15%
6%
Fees too high
Too hard to set up
Don't understand benefits
Few customers request
Too much to maintain
Don't understand acq contract
Don't have proper staff
Reasons suppliers resist or will not accept cards
Overall
High capture
End-‐user survey on supplier acceptance, Nov / Dec 2009, n=146
A menu of opIons to fit payee needs
ePayables
Exact Auth
One Card per Supplier
One Card per TransacIon
Push Payments
Client: ease of reporIng and reconciliaIon
Vendor: enables keeping card on file eliminaIng need to manually enter card number each Ime; vendors that cannot keep card on file may obtain the same through secure remiOance
Ideal for paying infrequently used suppliers
Client: eliminates need to set up , maintain and cancel cards for one-‐off suppliers
Vendor: Eliminates need to store card account on file for one-‐Ime payment
• Most issuers soluGons enable clients to send push payments in same file as exisGng AP card payments file.
Push Payments – Overview
Push Payments enables payers to push the exact amount to their push-‐pay “enabled” suppliers, without suppliers having to take any acGon to iniGate the payment.
ePayables Push Payment � Supplier iniGates the card transacGons.
� Supplier needs to know the card account details.
� Buyer iniGates the transacGon; funds se^le to the supplier's DDA without any acGon required by supplier.
� Supplier does not need to know card account details.
Supplier
Buyer
� PotenGal for accelerated receipt of funds by eliminaGng lead Gme for supplier to manually process payments
Push Payments– Value ProposiIon
Drive Payment Efficiencies
� Achieve auto-‐reconciliaGon by pushing exact payment amount
� Control payment Gming
Reduce Fraud
� Eliminate need to provide card account number to supplier
Rebates
� Earn rebate on push payments. Issuers differ in their treatment of rebate for push payments
Drive Receivables Efficiencies
� Eliminate need to process card transacGons
� Chargeback reducGons � No declined transacGons to contend with
Enhanced Security
� Eliminate need to house card account details
Reduce DSO
Supplier response to push pay?
Historically, suppliers response has been lukewarm…
� Push pay does not fit with accounts receivables processes � Fear of losing control over a transacGon for which they pay a fee
� Time and effort to be set up for push payments
� Inadequate awareness � Resistance to change
…but we’re beginning to see a shiY
To Push or Not to Push
Push Payments is an opIon for suppliers that:
When is Push Payments right for you?
� ProacGvely elect to enroll in push payments
� Accept push payments from another provider, if converGng from another card provider
� Decline to keep card on file AND are not willing to receive card account details through secure email
� ConGnue to be a source of significant manual reconciliaGon work
Exact AuthorizaIon
Exact Auth Override (EAO) for ePayables provide payers with greater control of the payment by restricGng the amount the supplier can process, down to the penny.
� Any vendor that is a Visa or MasterCard acceptor may be set up on EAO
Value ProposiIon
Drive greater auto reconciliaGon by controlling the amount of payment that may be processed, down to the penny.
Buyer Supplier
Drives efficiencies by eliminaGng manual errors of processing inexact amount.
One size does not fit all
Exact auth may not be a good fit for all suppliers
� May interfere with a suppliers’ accounts receivables processes
� Does not work well with cross-‐border payments
� May cause a decline due to a supplier’s terminal limits
MulIple payment opIons to fit you and your suppliers’ needs
ePayables Push Payments Exact Auth Override Supplier may charge any amount up to the amount of purchase request.
Supplier iniGates card transacGons.
Supplier needs to know card account details.
The payment delivered to the supplier matches the amount of purchase request.
Buyer iniGates the transacGon; funds se^le to supplier's DDA without any acGon required by the supplier.
Supplier does not need to know card account details.
Supplier can only get an authorizaGon for exact amount of purchase request down to penny.
Supplier iniGates card transacGons.
Supplier needs to know card account details.
Secure Email: Helping You Maximize Check to Card
Secure email to drive spend, accelerate card payments and drive efficiencies.
Smart Facts
Grow Spend Capture new spend on card with secure
remiOance template
Accelerate payments, Drive efficiencies
No more phone tag with vendors
Smart Facts
39 days
18 days
Create card First post � 79 clients used the feature in the first three months, to target 715 vendors with $19 MM in monthly spend
� Of the vendors that say no to keeping card on file, 42% accept card when presented with secure remi^ance opGon
Shaping Industry TransformaIon
We are commi^ed to leading the industry towards a more equitable value model that does not penalize the supplier.
Buyer Supplier
PROCESS EFFICIENCY
COLLABORATION
TRANSPARENCY
COST SAVINGS
PROCESS EFFICIENCY
COLLABORATION
TRANSPARENCY
COST SAVINGS
• EliminaGon of $1,000 registraGon fee, removing barriers to vendor adopGon of LTI
• More transacGons qualify automaGcally for LTI, lowering barrier to card acceptance
• Min transacGon size going up from $4,160 to $6,980
• Level II and Level III data conGnue to be a requirement to obtain LTI rates
• Opportunity: Educate vendors who decline based on merchant fee on new LTI rates
Visa Interchange Changes – April 2012
Mandatory Changes to Large-‐Ticket Interchange (LTI)
• Offers progressively decreasing, low interchange rates for Gered transacGon sizes
• Program is expected to stem de-‐enrollment and drive card acceptance
• In direct relaGon with reduced interchange, spend is expected to earn lower rebates • OpGonal for clients to parGcipate, where rates are driven by buyer, not merchant
Visa Interchange Changes, EffecIve April 2012
OpIonal Program TargeIng Large Dollar TransacIons
This program is directed at balancing the value proposiIon for suppliers.
Push pay Secure delivery of card account
Exact Auth
One card per
supplier
One card per
transacIon
Reduced merchant fee program
parIcipaIon
Accelerate cash flow
P
Process efficiency
P
P P
Reduce AR costs
P
P P
Reduce Fraud
P
P P
PCI Compliance
P P P
MeeIng Supplier Needs to Drive Card AdopIon
High capture more likely to stress importance of cards and of size
Note: groups responses of "frequently" or "someLmes" together. Excludes "seldom," "never," and "unsure.“ Q42, Q4, Q6. ©Copyright 2010 NAPCP All Rights reserved ©Copyright 2010 NAPCP All Rights reserved
Convincing Suppliers to Accept Card
18
Supplier aFtudes towards card
66%
49%
34%
29%
25%
12%
68%
53%
38%
35%
29%
15%
Quick payment
Guaranteed payment
Process ease
To be "preferred"
Lower AR process cost
Reduce AR staff
Reasons suppliers give for taking cards
Frequencies are for "regularly cited" responses only. 23% of respondents were deemed to be “High Capture” with annual p-‐card spend equal to or greater than 4% of annual revenue (private sector) or budget (public sector). For taking cards, a response of "Decreases hard-‐dollar costs (e.g., banking fees, paper invoices, postage)" grouped within "Lower AR process costs." A response of "CompeLLve advantage over non-‐accepLng suppliers" grouped within "To be preferred.” For not taking cards, responses of "regularly cited" for "Cant find acquirer" and "PCI compliance" were less than 5% of overall respondents. End-‐user survey on supplier acceptance, Nov./Dec. 2009, n=146
71%
25%
19%
8%
8%
8%
7%
76%
35%
35%
4%
9%
15%
6%
Fees too high
Too hard to set up
Don't understand benefits
Few customers request
Too much to maintain
Don't understand acq contract
Don't have proper staff
Reasons suppliers resist or will not accept cards
Overall
High capture
End-‐user survey on supplier acceptance, Nov / Dec 2009, n=146
2 1
Best PracIces To Drive Card Acceptance
Treat suppliers as partners
Make vendor enrollment ongoing process
UIlize secure email
UIlize ReporIng
Educate suppliers on benefits of card acceptance using mulG-‐pronged communicaGon plan
Submit AP file to your Issuer every six months for a vendor match; use pre-‐noGficaGon le^ers where possible
Enroll vendors unable to keep card on file
Generate & review Card status report monthly to idenGfy cards rarely or never used
Address supplier pain points around cost of acceptance, offering incenGves, as needed
Incorporate cc payments as standard payment opGon in supplier agreements, RFPs
To send card account number securely to vendors who elect to keep card on file
Pay parGcular a^enGon to undelivered email noGficaGons
Disclaimer
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