Commercial Cards Lead the Way in the World of B2B Payments

Sébastien Delasnerie

Sébastien Delasnerie,
North America Head of
Citi Commercial Cards

Commercial cards offer buyers and suppliers numerous benefits. But to realize their full potential and extend their reach, card providers must work with payment facilitators, platforms and other fintechs to offer integrated solutions that deliver incremental value to all parties, writes Sébastien Delasnerie, Head of Commercial Cards, North America at Citi Treasury and Trade Solutions.


You have read it many times before; we live in an online world, much of our interaction with banks, retailers and service providers is via our smartphones or desktops. The tremendous impact of this change is all around us, best exemplified by well-known bricks-and-mortar retailers folding under the pressure of online consumption. This trend towards dematerialization and digitization resonates powerfully in the world of B2B payments as businesses increasingly expect immediacy, process efficiencies, security, and data enrichment, all through easily accessible channels.

Firstly it is worth noting that commercial cards already addresses the aforementioned objectives; it is readily available to virtually all buyers and their suppliers, it offers buyers the ability to digitize and streamline their P2P processes (particularly the resource intensive PO-to-invoice reconciliation), it avails vendors critical speed of payment and constitutes a highly secure payment channel with customizable spend controls, and it offers the highest level of data enrichment through extra line-items, such as product or commodity code, item description and quantity, and even duty amount.

The growing adoption of virtual card accounts (card numbers delivered via digital channels as opposed to their physical plastic form) is indeed largely driven by increased transaction-level controls, with limits on the number of transactions (single- or multi- use), transaction amount limits (exact, maximum, or range) and validity periods (suppliers and merchant category codes). They also facilitate client-specified data elements for each transaction, providing enriched analysis, reconciliation and allocation. Virtual card spend for purchasing activities is projected to grow at 19% annually through 2022.i

Commercial cards have a crucial role to play in the digitization of the B2B payment experience and thus are being embraced by a growing number of companies; while commercial card spend by corporations still accounts for less than 1% of total B2B payments in the US, according to recent research from Accenture, it is growing by 10% a year: spend is expected to rise to $763 billion by 2022 from $523 billion in 2018.ii

Commercial cards continue to evolve

One of the key strengths of the commercial card product suite as a means of payment is its inherent flexibility, particularly in its virtual form. While some may see the Cards’ extensive infrastructure as a hindrance to its evolution, it is actually its extremely robust and far reaching eco-system that enables it to capture and capitalize on the trends of our digital economy. Below are three examples of how the commercials cards product leads the evolution of B2B payments:

  1. Adapting to the platform economy model, where an online network facilitates digital interactions between a variety of participants. Platform businesses are best known in the B2C world, through companies such as Uber or Amazon. But they are also rapidly gaining ground in the B2B sector. It is expected that more and more business will leverage procurement platforms and/ or e-catalogues to reduce COGS and streamline their procurement processes. One such provider is Coupa, with whom Citi Commercial Cards recently partnered in order to give its clients access to a more efficient way to manage business payments as part of a comprehensive spend management strategy. Corporates can leverage their existing banking relationship with Citi and their integration with the Coupa platform to set up, in a single instance, a best-in-class and fully integrated procure-to-pay tool. Citi’s ‘pre-integration’ of its virtual card capability into Coupa’s platform enables clients to eliminate the need for potentially complex and costly integration or process changes. Citi customers gain greater operational efficiency and transparency, richer data, enhanced flexibility to manage their cash flows and increased economic benefit from their commercial cards program. Suppliers gain access to new sales opportunities while enjoying quicker, upfront payments for goods and services and the elimination of the often cumbersome reconciliation of purchase orders and invoices.

  2. Working with payment facilitators that are helping to solve the challenge of vendors that do not want to accept cards. A wide range of companies in all regions offer services described as credit card enablement or acceptance (allowing payments or collections using a credit or debit card, where cards are not accepted). Payment facilitators take a payment instruction from a buyer, process card payments and send the proceeds to the beneficiaries in a form that they will accept such as electronic bank transfer or check. The cost is typically borne by the buyer. However, this may not be the full cost of a traditional card payment as the payment facilitator can leverage alternative models offered by the card schemes and specifically targeting B2B flows. For buyers, payment facilitators deliver the same operational efficiency benefits as regular commercial card payments. In addition, by using a card they can more efficiently manage cash flows related to certain large recurring payments (e.g. office rental or equipment leasing). Finally, by growing card throughput buyers have the potential to lift their spend volume into a higher tier.

  3. Taking a ‘fintech flex’ approach by collaborating with new entrants to develop solutions that benefit clients. When fintechs first emerged a decade ago, the assumption – both among many fintechs and banks – was that they were essentially rivals, competing for the same customer base. In recent years, this has been shown to be unfounded. The relationship between fintechs and banks is now collaborative rather than adversarial. As a result, banks and fintechs are working together to add value right across the payments chain, including in relation to cards. The number of these collaborations is only going to increase. A total of 75% of fintech executives recently said their goal was to partner with established players rather than challenge them.iii

    Citi has developed an extensive strategy to identify and collaborate with fintechs who bring meaningful value-add to the bank’s customers and demonstrate a commitment to service aligned with Citi’s own. The approach is born out of a recognition that banks and fintechs have very different strengths and that cooperation can benefit both parties and the clients. It is along these lines that Citi recently worked with a fintech that provides highly customized invoice and payment data reconciliation to one of the bank’s large global client. Upon the satisfactory outcome of its due diligence, Citi connected its virtual card product to the fintech platform via API and within 60 days the customer was able to enjoy the benefits of a fully integrated procure-to-pay tool that has helped them realize critical efficiencies in a highly competitive industry.

Commercial cards have a crucial role to play in the digitization of the B2B payment experience and thus are being embraced by a growing number of companies.

Banks’ core role in the payments space is to facilitate transactions; it is not to dictate to clients how they interact with third parties that provide other solutions relating to the purchase-to-pay process. Platform economy firms, payment facilitators and other fintechs are well placed to develop payments solutions that are customized to users’ needs – often on an industry-by-industry basis – thanks to their intense focus on solving for a specific ‘pain points’.

However, while such companies can offer valuable innovations, they often do not have the track record and proven expertise that most companies demand when it comes to operations-critical processes such as B2B payments. For that, certain clients may feel more comfortable with the pedigree, worldwide reach and established capabilities of a global leading bank. Openminded financial institutions – such as Citi – are therefore increasingly choosing to work with select platforms, payment facilitators and other intermediaries to provide enhanced, flexible and frictionless services that adapt to the changing world of B2B commerce.

Expanding the breadth of the B2B solution set

The digitization of B2B transactions is accelerating and commercial cards constitute a readily available solution that meets many of the critical requirements of settlement between buyers and sellers, including transparency, security and process efficiencies. But in order to realize the full potential of commercial cards as a payment tool, issuers must build new partnerships, focused on the development of integrated solutions that deliver value beyond the sum of their parts. As the needs of the broader B2B eco-system continue to evolve, commercial cards, and virtual cards in particular, are bound to lead the way for a new generation of B2B payment offering, whose success will be determined by its founding synergistic collaboration.

i https://bankingblog.accenture.com/slice-700b-us-commercial-card-spend-up-for-grabs?lang=en_US
ii https://bankingblog.accenture.com/slice-700b-us-commercial-card-spend-up-for-grabs?lang=en_US
iii https://www.billtrust.com/resources/blog/on-the-lookout-b2b-payments-trends-in-2019-part-4/